What farmer types are most likely to adopt joint venture farm business structures?

Joint venture (JV) farm structures have the potential to increase the productivity and profitability of traditional family farms. However, such structures are not widely adopted within the farm business community. Furthermore, knowledge on the relative attractiveness of different JV models to farmers is limited. We use a choice experiment to explore what JV structures are preferred by Australian farmers, and how farmers’ socio‐demographic and attitudinal characteristics influence the type of JV structure preferred. A latent class analysis revealed significant unobserved preference heterogeneity amongst the population. We identify four latent classes that differ in their preferences regarding the number of JV partners, access to new machinery, and/or the opportunity for additional annual leave. All classes of farmers displayed positive preferences for operational decision‐making with other JV partners, although they varied in their preferences towards final operational responsibility. The diversity in preferences shows that there is no ‘one size fits all’ JV design, leaving opportunities for a range of JV decision models. Such flexibility in JV design is likely to have advantages when seeking JV partners, with a significant proportion of the sampled population open to collaborative decision‐making models.     

On the nature and magnitude of cost economies in hog production

In this article, we assess the impact of farm size on production cost and evaluate the marginal costs and margins by considering that input prices may change with the scale of production. By using French hog farm data, we estimate a system of equations including a feed price function, input demand functions, and an output supply function based on a technology approximated by a combined generalized Leontief‐Quadratic form. Our results suggest that the marginal costs are over‐estimated when the adjustment of the feed unit prices to a change in farm size is not controlled for. More specifically, the cost economies for large farms (enjoying the highest profits) arise primarily from lower feed prices, with technological scale economies having little impact. In contrast, farms with no hired labor exhibit technological scale economies and reach higher price‐cost margins compared to larger farms.     

Adaptation and Climate Change Impacts: A Structural Ricardian Analysis of Farm Types in Germany

Based on farm census data, we explore the climate‐dependent incidence of six farm types and the climate‐induced impacts on land rental prices in Germany. We apply a structural Ricardian approach by modeling the dominant farm type at 9,684 communities as depending on temperature, precipitation and other geographic variables. Rents per farm type are then modeled as depending on climate and other conditioning variables. These results allow the projection of the consequences of climate change as changes in our climate variables. Our results indicate that permanent‐crop farms are more likely to dominate in higher temperatures, whereas forage or mixed farms dominate in areas of higher precipitation levels. Land rental prices display a concave response to increases in annual precipitation, and appear to increase linearly with rising annual temperature. Moderate‐warming simulation results for future decades benefit most farm types but seem to penalise forage farms. Rental prices are projected to increase, ceteris paribus, for all farm types.     

Price and Profit: Investigating a Conundrum

Corn and soybean prices do not differ significantly among farms participating in the Illinois farm business farm management (FBFM) program from 1996 through 2005. While consistent with the literature, the finding is inconsistent with farmers' opinion of the importance of price. A conundrum exists. However, the study also finds that price and profit per acre are positively related when a given farm is examined over time. Thus, the conundrum can be explained as a difference in perspective: researchers examine variation between price and profit across farms at a point in time while farmers examine this variation within his/her farm over time. Nevertheless, the relationship a farmer observes is likely due to market supply and demand factors, not the farmer's managerial control over the price received.     

Scale Economies and Inefficiency of U.S. Dairy Farms

This study employs data drawn from the 2000 Agricultural Resource Management Survey, a U.S. Department of Agriculture-sponsored farmers' survey. The article estimates returns to scale relationships across dairy farms of different sizes and across different regions, incorporating variables hypothesized to influence farm performance. Results point to significant scale economies in U.S. dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies. Contrary to previous research, the preferred cost function specification does not show a region of decreasing returns to scale. This finding helps explain why the average size of dairy farms has been increasing.     

A LINEAR PROGRAMMING STUDY OF FAMILY-RUN DAIRY FARMS IN NORTHERN IRELAND

The paper presents the results of a study in which multiperiod linear programming models were used to examine the probable responses of small and medium sized dairy farms in Northern Ireland to various policy, farm indebtedness and development options and to project consequent structural change in the dairy sector. The introduction of quotas has curtailed the considerable potential for expansion of output on these farms while having a less detrimental effect on farm profits and the survival of the smaller dairy herd than the price cut necessary to produce the same reduction in output.     

A Comparison of the Economic Well-Being of Farm and Nonfarm Households

This study compares the economic well-being of farm and nonfarm households using data from the Agricultural Resource Management Survey and the Survey of Consumer Finances. Comparisons are made in terms of income and wealth using parametric and nonparametric tests, regression analyses, and inequality measures. The results show that the economic well-being of households differs based on their degree of involvement in business activities and their life-cycle stages. The main conclusion is that the income of rural residence and intermediate farms is comparable to that of wage-earning nonfarm households, while commercial farms are similar in well-being to nonfarm households with businesses.     

Farm Business and Household Expenditure Patterns and Local Communities: Evidence from a National Farm Survey

Farm operators are an integral part of some rural economies. The businesses they operate support jobs and purchase goods and services from local implement and input suppliers. Farm household spending on food, furniture and appliances, trucks and automobiles, and a range of consumer goods also supports local jobs and retail businesses. Based on the 2004 Agricultural Resource Management Survey, the linkages between farm household and business expenditures and communities are explored. Farms in urban areas purchase household goods in markets closest to the farmstead, but traveled further to purchase farm business items. The opposite pattern was observed in rural locations.     

Do the Largest Firms Grow and Diversify the Fastest? The Case of U.S. Dairies

We analyze growth and diversification of U.S. dairy farms by examining changes in ten size cohorts and new entrants through three successive censuses. We reject Gibrat's law and the mean reversion hypothesis of growth. Growth rates appear bimodal where the smallest and largest farm cohorts grow fastest. All cohorts diversify but the largest farms do not diversify as rapidly as medium-sized farms. New entrants are generally large, and they diversify more rapidly than comparably sized incumbents do. These data suggest that scale economies persist even for the largest cohort of U.S. dairy farms and scale economies dominate scope economies for large farms.     

Evolution of the Amazonian frontier: Land values in Rondônia, Brazil

Patterns in property values provide strong signals about the future and sustainability of land use. This paper analyzes the determinants of land value in an Amazonian frontier settlement. We estimate hedonic price functions to identify factors that affect the value of farm properties in the western Brazilian Amazon. Distance to market explains nearly one-third of the variation in farm value, as predicted by the von Thünen model. After controlling for location relative to the central market and for municipality, we find that investment in the farms (as reflected in the stocking rate of pastures and the establishment of home gardens) has the next largest impact on land value. The value per hectare of land is negatively related to total lot size, suggesting that any economies of scale are outweighed by the cost of accessing remote corners of large properties. We do not find that land values are related to available measures of biophysical factors or to historic or current land use. Our results do not identify any premium for forest cover or for land uses considered to be more sustainable than pasture on the property itself. However, farm values are affected by neighboring land cover, specifically, the extent of barren land. Thus, local knowledge of factors contributing to future productivity, as summarized in land values, confirms that soil exhaustion can lead to a general decline in property values, while investments in a property both as a homestead and as a farm can help sustain frontier settlements.     

Farm Size Growth and Participation in Agri‐environmental Schemes: A Configural Frequency Analysis of the Swiss Case

This paper examines the relationship between farm growth and participation in agri‐environmental schemes, using the example of meadow extensification schemes in Switzerland. As a result of small farm sizes in Swiss agriculture, theory would suggest that economies of scale are considerable for market production activities, so that for growing farms it would be rational to intensify. Configural frequency analysis is used to identify and describe combinations of farm size development and proportion of meadows placed under agri‐environmental schemes. In the Swiss case, growing farms are likely to reduce their participation, whereas shrinking farms have a growing share of their meadows under extensification schemes.     

Professional urban agriculture and its characteristic business models in Metropolis Ruhr,Germany

‘Low-cost specialization’, ‘differentiation’, and ‘diversification’ are three overarching business models of professional urban agriculture in developed countries. Manifold city-adjusted farm activities belong to these business models resulting in the characteristic farm heterogeneity of urban areas. This paper makes use of the business models as tool for a geo-statistical analysis to spatially investigate farming patterns in reference region Metropolis Ruhr, Germany. Additional farm interviews substantiate findings of the geo-statistical analysis by focusing on horticulture as a common farm activity towards ‘low-cost specialization’, direct marketing and participatory farming belonging to ‘differentiation’, and equestrian services as a representative of the ‘diversification’ business model. These farm activities and underlying business models concentrate and tend to spatially cluster in the metropolitan’s center where population density is highest and farmland proportion is lowest. Agriculture plays a significant role in Metropolis Ruhr cultivating about one-third of the metropolitan area, but on-going loss of farmland and short-term lease of land affect farms considerably by complicating access to land. Most differentiated and diversified farms require certain amount of farmland to be successful, which is threatened by further farmland losses along with increased competition for the remaining farmland. Long-term planning security is crucial for farms focusing on high added value crops and organic farming. Progressively emerging participatory farming activities demonstrate urban farms’ abilities to innovatively adapt to societal demands. Better knowledge on professional urban agriculture’s farm activities and business models is of importance for farms and their related advisory services to address the urban context in farm development strategies more accurately, but also for public authorities’ planning and policies in land-related decision making. Economic viability of professional urban agriculture is the key requirement for additional social, environmental, and landscape functions within urban areas.     

Off‐farm work and technical efficiency on U.S. dairies

In this study, we investigate the impact of an increase in farm households’ off‐farm work on technical efficiency (TE) of U.S. dairies. We present a theoretical framework that implies that an increase in farm household off‐farm work decreases TE. We use two nationally‐representative samples of U.S. dairies (2010 and 2005 Agricultural Resource Management Surveys) and a parametric approach (stochastic frontier analysis) to empirically test the hypothesis. Results are generally consistent with the hypothesis and show that an increase in off‐farm work by the farm household is associated with a significant decrease in TE. In addition, results show that there is a statistically significant difference in TE between small, medium, and large farms. Small farms are associated with significantly higher off‐farm work and have lower TE than large farms, which implies that less off‐farm work by households with larger farms is at least partially responsible for the evidence of economies of scale in the U.S. dairy industry.     

Effects of machinery‐sharing arrangements on farm efficiency: evidence from Sweden

The effects of partnerships, in the form of machinery‐sharing arrangements, on farm efficiency are analyzed using data for Swedish crop and livestock farms. Efficiency scores are obtained using Data Envelopment Analysis and the findings suggest that efficiency is, on average, higher among partnership farms compared to nonpartnership farms. Moreover, partnership farms that are characterized by the most extensive form of collaboration, that is, that share all machinery with one or several other farms, display the highest average efficiency. In a two‐stage procedure in which efficiency determinants are analyzed in the second stage, the bootstrap procedures suggested by Simar and Wilson (2007) are applied in addition to the conventionally used Tobit regression. Participation in partnership arrangements is found to have a positive and statistically significant impact on farm efficiency.     

Specialization,diversification, and productivity: a panel data analysis of rice farms in Korea

This article examines the microeconomics of productivity associated with specialization/diversification in production activities, with an application to Korean rice farms. Korean rice farms tend to be very small and highly specialized. Our analysis examines the productivity effects associated with both farm size and farm specialization/diversification in Korean agriculture. Relying on farm‐level panel data, the analysis studies farm productivity in a multi‐input multi‐output context, accounting not only for changes in inputs and technical change in rice production, but also for the role of diversification in the production of other crops in current and previous periods. We find positive but small productivity gains from farm diversification. These gains come mostly from complementarity effects across farm outputs, with minimal effect of scale economies. The positive complementarity effects work against nonconvexity effects, which provide strong productivity incentives for rice farms to specialize.     

THE ECONOMIC STUDY OF AFRICAN SMALL FARMS; SOME KENYA EXPERIENCES

As a basis for both planning and evaluation, improved statistical information is required on the peasant section of developing economies. Developments made in Kenya since 1960 are discussed, covering the trial of various methodological approaches to the economic study of small farms, and the evolution of satisfactory procedures which can be applied in a large government research organisation in which technical accuracy and efficiency must be combined with administrative simplicity and the quick production at reasonable cost of specific information that is required for economic planning. Consideration is given to full farm business studies, enterprise studies and the collection of agricultural statistics in conditions where the complexities of mixed farming systems create unusual problems.     

The Doha Round of the World Trade Organization and Agricultural Markets Liberalization: Impacts on Developing Economies

We investigate the impacts of multilateral removal of all border taxes and farm programs and their distortions on developing economies, using a world agriculture partial equilibrium model. We quantify changes in prices, trade flows, and production locations. Border measures and farm programs both affect world trade, but trade barriers have the largest impact. Following removal, trade expansion is substantial for most commodities, especially dairy, meats, and vegetable oils. Net agricultural and food exporters emerge with expanded exports; net importing countries with limited distortions before liberalization are penalized by higher world prices and reduced imports. We draw implications for current World Trade Organization negotiations.     

Climate change impacts on investment in crop sowing machinery*

A model of investment in crop sowing machinery is applied to wheat production under current and projected climatic conditions at several locations in south‐western Australia. The model includes yield responses to time of sowing at each location given current and projected climatic conditions. These yield relationships are based on wheat growth simulation modelling that in turn draws on data from a down‐scaled global circulation model. Wheat price distributions and cost of production data at each location, in combination with the time of sowing yield relationships are used to determine a farmer's optimal investment in crop sowing work rate under each climate regime. The key finding is that the impacts of climate change on profit distributions are often marked, yet mostly modest changes in investment in work rate form part of the profit‐maximising response to climate change. The investment response at high versus low rainfall locations mostly involves increases and decreases in work rates, respectively. However, changes to investment in work rate within a broadly similar rainfall region are not always uniform. The impacts of climate change on investments in work rate at a particular location are shown to require knowledge of several factors, especially how climate change alters the pattern of yield response to the time of sowing at that location.     

Estimating Farm Productivity Differentials using Panel Data: The Hausman‐Taylor Approach

This paper investigates the relation between unobserved farm productivity and other production factors in a system of netput equations for specialised pig breeding farms in the Netherlands. In order to estimate the system, a Hausman‐Taylor panel data estimator is developed for a system of equations with unbalanced panel data. Tests on the correlation between model variables and farm‐effects are performed, yielding an insight into the sources of differences in total factor productivity and its components (e.g. managerial ability and scale economies). Results indicate that specialised pig breeding farms that are characterised by high total factor productivity have more buildings and machinery than farms with low total factor productivity.     

Diseconomies of Size with Fixed Managerial Ability

Managerial ability has important implications for farm growth. In this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits. Next, we discuss the effect that managerial ability has on economies of size. In the empirical part, economies of size are estimated for a sample of dairy farms using a proxy for managerial ability, which is calculated as a technical efficiency index. The results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size.