Financial Analysis of On-Farm Grain Drying

Kiker, Clyde F.; Lieblich, Mark S.

doi:10.1017/s0081305200006129

Cited by 2 publications

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“…Previous studies of on-farm drying and storage systems for grain (Holmes, Klemme and Lindholm 1985;Kiker and Lieblich 1986;Gempesaw and Gunasekaran 1988) have largely focused on the profitability of investing in such systems. Weather data have been used to simulate drying conditions and energy costs of different drying technologies.…”

Section: Review Of Related Literaturementioning

confidence: 99%

The Effect of Producers' Risk Attitudes on Sizing the Harvest and On‐farm Drying System

Davis

Patrick

2002

Canadian J Agri Economics

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A simulation model of an on‐farm grain harvest and drying system was used to determine net returns associated with alternative sized systems. The physical processes of corn and soybean planting, growth, harvest and drying were simulated under historical weather conditions for 33 years. Weather data determined the number of field days, physiological maturity date, harvest grain moisture, yield losses and dryer energy costs. Guidelines developed by agricultural engineers and agricultural economists were used to initially size the combine and dryer for three sizes of farms. Capacities of the combine and dryer were increased and decreased by 10, 20, 30, 40 and 50%, independently. Net returns to labor and management, reflecting yield and price correlations, were determined for each of the equipment combinations. Stochastic dominance was used to evaluate the distributions of net revenue and determine the risk efficient combine and dryer sets. It was found that there were small differences in net returns for systems that completed harvest and drying in the 27B32 day range for all three farm sizes. For a given size of farm, risk averse producers were found to prefer smaller capacity combines and dryers. Les auteurs se sont servis d'un modèle simulant la récolte et le séchage du grain à la ferme pour calculer le revenu net de systèmes de production de taille variable. Les aspects physiques de la plantation, de la croissance, de la récolte et du séchage du maïs et du soja ont été reproduits en fonction des données météorologiques relevées pendant 33 ans. Ces données ont permis d'établir le nombre de jours de croissance, la date de la maturité physiologique, la teneur en eau du grain, les pertes de rendement et le coût de l'énergie nécessaire au séchage. Ensuite, les auteurs ont suivi les recommandations des agronomes et des économistes agricoles pour déterminer les dimensions initiales de la moissonneuse et du séchoir pour trois exploitations de taille différente. La capacité de la moissonneuse et celle du séchoir ont été augmentées ou réduites indépendamment de 10, de 20, de 30, de 40 et de 50 pour cent, puis on a calculé le revenu net venant du travail et de la gestion du producteur en tenant compte de la corrélation entre le rendement et les prix pour chaque combinaison. La dominance stochastique a permis d'estimer la distribution du revenu net et d'identifier les ensembles moissonneuse/séchoir rentables en fonction du risque. Les systèmes où la récolte et le séchage sont terminés au bout de 27 à 32 jours entraînent de légères variations du revenu net, pour les trois types d'exploitation. Peu importe la taille de la ferme, l'aversion pour le risque incite le producteur à choisir une moissonneuse et un séchoir de dimensions plus modestes.

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Section: Review Of Related Literaturementioning

confidence: 99%

The Effect of Producers' Risk Attitudes on Sizing the Harvest and On‐farm Drying System

Davis

Patrick

2002

Canadian J Agri Economics

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Investment Analysis of Agri-Food Ventures: What Risk Premia are Appropriate? The Silence of the Literature

Unterschultz

Quagrainie

1998

SSRN Journal

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Financial principles of project investment analysis deal with the cost and benefit flows over time. Invariably, the correct future cash flows and exact risks are unknown. The agricultural academic literature devotes substantial energy to discussing the estimation of the cash flows but it is relatively silent on applied estimation of risk. Empirical studies on agri-food ventures have made little or no attempt to estimate appropriate risk adjusted discount rates or other risk measures. Choice of discount rate has been arbitrary. Thus little guidance has been given to practitioners analysing agri-food investments as to the appropriate risk adjusted discounts rates. The Capital Market Line provides a relatively straightforward way to calculate risk premiums for project investments by non-diversified investors. These risk premiums can then be used in Net Present Value investment analysis.

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Financial Analysis of On-Farm Grain Drying

Cited by 2 publications

References 5 publications

The Effect of Producers' Risk Attitudes on Sizing the Harvest and On‐farm Drying System

The Effect of Producers' Risk Attitudes on Sizing the Harvest and On‐farm Drying System

Investment Analysis of Agri-Food Ventures: What Risk Premia are Appropriate? The Silence of the Literature

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