Credit Constraints, Farm Characteristics, and the Farm Economy: Differential Impacts on Feeder Cattle and Beef Cow Inventories

Abstract

A recurrent topic in the macroeconomic literature is the financial accelerator—the notion that informational asymmetries introduce inefficiencies to financial markets which amplify and propagate the effects of real or monetary shocks. With the purpose of finding empirical evidence that is consistent with a financial accelerator operating in the cattle sector, inventory investment models are estimated with an appended cash flow variable. The inclusion of cash flow is motivated by the notion that investment by credit-constrained farms should be sensitive to movements in internal funds. Results are consistent with the financial accelerator operating in the feeder cattle but not in the cow-calf sector. Copyright 1998, Oxford University Press.

Off‐farm labor supply responses to permanent and transitory farm income

“…In contrast to the tests based on the consumption patterns of agricultural households, tests that focus on the capital investment or livestock inventory decisions of farm households have generally found evidence of liquidity constraints, at least in trough periods of the business cycle and for younger farm households (Benjamin and Phimister, 2002; Bierlen and Featherstone, 1998; Bierlen et al, 1998a, b). Particularly intriguing is that the findings of Bierlen and his colleagues supporting credit constraints are based on the same households that Langemeier and Patrick use to demonstrate the lack of credit constraints.…”

Accounting for Risk and Stability in Technology Adoption

“…The RSSEU approach could benefit decision modeling in inventory management and consumption‐saving decisions. Rosenzweig and Wolpin (1993) and Bierlen et al (1998) have shown that stochasticity of income has an important effect on the inventory and durable input use. Their work has shown how cattle inventories are used to absorb financial shortages and to smooth income flow, and consequently, consumption.…”

Impact of Weather and Herd Size Management on Beef Cow Profitability

“…The average cattle cycle, defined as the time span between sequential inventory lows, typically lasts from 8 to 12 years (Mathews et al, 1999) as a function of (1) beef export/import conditions with fluctuating exchange rates, disease outbreaks, and/or trade restrictions; (2) cattle and feed prices; (3) weather events; (4) producer credit constraints (Bierlen et al 1998); and (5) a biological production lag where an added heifer retained at 7 months of age and bred at 15 months of age leads to an extra calf born and finished as early as 36 months after the retained heifer was born. Hence, national herd expansion is slow compared with possible contraction via the slaughter of mature cows.…”