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What is driving economic and financial success of US cow‐calf operations?

What is driving economic and financial success of US cow‐calf operations? Purpose – The purpose of this paper is to determine the drivers of economic financial success of US cow‐calf operations. Design/methodology/approach – This research uses a system of equations (DuPont analysis) in conjunction with 2008 farm‐level data from the US Department of Agriculture's Agricultural Resource Management Survey to evaluate the factors driving cow‐calf profitability, namely net profit margins, asset turnover ratio, and asset‐to‐equity ratio. Findings – The study finds that the main drivers of return on equity are region, number of harvested acres on the farm, diversification of the farm, operator off‐farm work, spousal off‐farm work, and adoption of technologies. Of these factors, those for which producers can make short‐term adjustments include off‐farm work decisions and adoption of technologies. Longer‐term adjustments can be made for farm diversification. Originality/value – To the authors’ knowledge, no existing research has used farm‐level data across US production regions to examine the factors affecting returns to equity of US cow‐calf operations. These research results may be used to identify strategies producers can use to improve their farm's economic viability, areas where extension services can assist farmers in making better financial decisions and economic factors that are likely to lead to structural changes in the beef industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

What is driving economic and financial success of US cow‐calf operations?

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Publisher
Emerald Publishing
Copyright
none
ISSN
0002-1466
DOI
10.1108/AFR-02-2013-0007
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to determine the drivers of economic financial success of US cow‐calf operations. Design/methodology/approach – This research uses a system of equations (DuPont analysis) in conjunction with 2008 farm‐level data from the US Department of Agriculture's Agricultural Resource Management Survey to evaluate the factors driving cow‐calf profitability, namely net profit margins, asset turnover ratio, and asset‐to‐equity ratio. Findings – The study finds that the main drivers of return on equity are region, number of harvested acres on the farm, diversification of the farm, operator off‐farm work, spousal off‐farm work, and adoption of technologies. Of these factors, those for which producers can make short‐term adjustments include off‐farm work decisions and adoption of technologies. Longer‐term adjustments can be made for farm diversification. Originality/value – To the authors’ knowledge, no existing research has used farm‐level data across US production regions to examine the factors affecting returns to equity of US cow‐calf operations. These research results may be used to identify strategies producers can use to improve their farm's economic viability, areas where extension services can assist farmers in making better financial decisions and economic factors that are likely to lead to structural changes in the beef industry.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: Aug 26, 2014

Keywords: Asset turnover; Asset‐to‐equity; Cow‐calf operations; DuPont analysis; Profit margin; US beef industry

References