Factors affecting variability in farm and off‐farm income

Abstract

The purpose of this paper is to examine the factors affecting the relative variability in farm and off-farm income for Canadian farm operators. Previous attempts have been limited by the lack of available data combining both farm and off-farm income levels for farm operations over time. Statistic Canada's Farm Micro-Longtidinal Dataset of 17,000 farm operators from 2001 to 2006 allowed such an analysis. The coefficient of variation (CV) in farm income is significantly greater than that for off-farm income but both measures are inversely related to the permanence of the income source to the operation. The greater the reliance on farm income and the greater the labour demand within the farm, the lower (greater) the relative variability in farm (off-farm) income. Larger commercial operations tend to experience larger farm income volatility either because they are less risk averse and/or have the ability to manage more risk. Diversification and off-farm employment appear to be substitute for risk management strategies for commercial operations. Pension and lifestyle farms have lower coefficient of variation for both farm and offfarm income compared to business-focused farms since they are possibly more risk averse and benefit from a permanent stream of off-farm revenue. Government payments have mixed effects on the relative variability of both income sources, which may be due the lag between the time of the income reduction and the time at which the aid is received. Résumé Cet article examine les facteurs qui influent sur la variabilité relative des revenus agricoles et hors ferme des exploitants agricoles canadiens. Les tentatives précédentes ont été limitées par le manque de données chronologiques combinant les revenus agricoles aux revenus hors ferme des exploitations agricoles. Notre analyse utilise de la banque de données de Statistiques Canada Farm Micro-Longtidinal Dataset qui compile de l'information sur 17000 exploitants agricoles de 2001 à 2006. Le coefficient de variation (CV) du revenu agricole est nettement supérieur à celui du revenu hors ferme, mais les deux mesures sont inversement proportionnelles à la permanence de la source du revenu considéré. Plus grande est la dépendance à l'égard du revenu agricole et plus grande la demande de travail au sein de la ferme, plus faible (grande) sera la variabilité du revenu agricole par rapport au revenu hors ferme. Les grandes exploitations commerciales ont tendance à afficher une plus grande volatilité du revenu agricole, soit parce qu'elles sont moins sensibles au risque et/ou ont une capacité accrue de gestion des risques. La diversification et un emploi hors ferme semblent être des substituts pour des stratégies de gestion des risques pour les fermes commerciales. Les fermes appartenant à un retraité et les fermes d'agrément ont un plus faible coefficient de variation pour les revenus agricoles et non agricoles par rapport aux fermes commerciales possiblement parce que les opérateurs sont plus riscophobes et bénéficient d'un flux permanent de revenus hors fe...

The single farm payment and income risk in Irish farms 2005–2013

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Farm income sources, farm size and farm technical efficiency in Slovenia

“…Off-farm income is likely to be more important for smaller farms as a way to improve economic performance by compensating for the farm business scale disadvantages. Off-farm income is likely to determine farm performance and farm business decisions (Poon and Weersink 2011). It can improve adoption of innovations and increase household-level technical efficiency (TE) of smaller farm operations (Fernandez-Cornejo et al 2007).…”

Determinants of farm income

“…Thus, we would expect off-farm income to have confounding scale effects with farm income. In addition, Poon and Weersink (2011) show that volatility in farm income is greater than that for off-farm income.…”