We examine how farm characteristics affect marketing contract decisions. We relax the restrictive assumptions of Tobit, Poisson, and multinomial logit models and consider the quantity, frequency, and contract type decisions conditional on, rather than jointly with, the contract adoption decision. In contrast to earlier studies on marketing contract decisions, we estimate a two-step econometric model using Agricultural Resource Management Study data and find that farm characteristics affecting decisions to adopt marketing contracts differ from those affecting decisions regarding quantity, frequency, and contract type. Copyright 2004, Oxford University Press.

Structured Abstract:Purpose -Agribusinesses represent a fundamental link in connecting farmers with retailers and consumers, yet little research has been done to examine the historical financial performance of these food processing firms.Design/methodology/approach -Our research examines how publicly-traded agribusinesses perform financially compared to all firms over the period from 1961 to 2011. We utilize several indicators of company success, including financial ratios and balance sheet/income statement items, to compare agribusiness firms to all firms in the market. We perform the analysis over time and also for companies with low-, median, and high-performance. We also perform DuPont analysis to compare return on equity components between agribusinesses and all firms.Findings -We find that agribusinesses outperform at the median the sample of all firms in terms financial ratios related to profitability, liquidity, and market ratios, but have slightly lower liquidity and debt ratios. The DuPont analysis shows that the higher return on equity for agribusinesses is mostly due to higher asset turnover ratios, indicating higher operating efficiency of agribusinesses. The strong financial performance of food manufacturing agribusinesses makes them valuable companies in an investment portfolio.Originality/value -Our study provides a basic overview of financial ratios used to examine the financial performance of publicly-traded agribusinesses. Our findings show that agribusinesses outperform all firms in terms of key financial indicators.

This study considers the transition into farming and growth of new farmers in U.S. agriculture by examining land ownership and leasing trends. Our approach is to characterize the entire distribution by farmer age and farmer experience rather than using young versus old and beginning versus established farmer categories. We also use a linked‐farms longitudinal approach to show trends over time in farmland expansion and contraction. We find that farms operated by older beginning farmers tend to be smaller and do not tend to grow over time. Our results show that it is mostly young farmers as opposed to all beginning farmers who rapidly expand their farm operations after entering agriculture. Our findings inform policy makers about the strategies that young and beginning farmers use to start their businesses and expand over time, and suggest more effective approaches for targeting loan programs to both young and beginning farmers.

We evaluate farm financial stress within the U.S. over the past twenty years and the agricultural and economic factors which have impacted farm businesses. We further evaluate the effect of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) on farm financial stress. In particular, Chapter 12 bankruptcies-which can only be filed by farmers-were only a temporary measure until BAPCPA made Chapter 12 a permanent fixture in bankruptcy law. We utilize filings of Chapter 12 bankruptcies from 1997 until 2016 as a proxy for farm financial stress. Panel fixed effects models are used to determine relevant factors affecting financial stress for farmers from agricultural and macroeconomic perspectives. Further, models incorporating pre-and post-BAPCPA regimes are utilized. We find that macroeconomic factors (interest and unemployment rates) are strong predictors of farm bankruptcies for farms while agricultural land values are the only consistent strong predictor among the agricultural factors. When evaluating the post-BAPCPA regime, only agricultural land values continue to be a significant predictor of farm bankruptcies. Our findings also indicate a dynamic relationship with agricultural land values, where current year values are negatively related but previous year land values are positively related to bankruptcies. We provide an analysis of the post-BAPCPA regime on farm bankruptcies that was not previously evaluated. Further, our findings illuminate discussion on a potentially dynamic relationship with financial stress and agricultural land values.

This study examines farm financial performance and stress for all farmers versus beginning farmers in the U.S. with emphasis on the agricultural downturn experienced since 2013. Using the USDA's Agricultural Resource Management Survey (ARMS) data, probit models are estimated to study the personal and farm characteristics that affect whether or not the financial ratios fall into critical zones as defined by the Farm Financial Standards Council. The financial ratios involve liquidity, solvency, profitability, efficiency, and repayment capacity. Beginning farmers are at a greater risk of financial stress on average, with higher likelihood of financial stress in liquidity and efficiency. Further, the recent agricultural downturn has negatively affected liquidity, solvency, and profitability for farmers while repayment capacity does not appear to be affected. During the downturn, beginning farmers are better positioned than the general farming population with respect to liquidity and repayment capacity. This paper applies current lending practices to a nationally representative sample of farms over a time of changing economic conditions for the agricultural sector.