What is driving economic and financial success of US cow-calf operations?
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.
Keywords
Acknowledgements
©Published 2014. This article is a US government work and is in the public domain in the USA.
The authors gratefully acknowledge the helpful comments and contributions made by Dr Darrell Peel, Oklahoma State University, Department of Agricultural Economics and Dr Hisham El-Osta, USDA-ERS. Their suggestions significantly improved the manuscript. The authors are indebted the Editor and two anonymous reviewers for providing many constructive comments during the review process. Their comments helped significantly to improve the manuscript. The views expressed are the authors and should not be attributed to the Economic Research Service or USDA.
Citation
Nehring, R., Gillespie, J., Hallahan, C., Michael Harris, J. and Erickson, K. (2014), "What is driving economic and financial success of US cow-calf operations?", Agricultural Finance Review, Vol. 74 No. 3, pp. 311-325. https://doi.org/10.1108/AFR-02-2013-0007
Publisher
:Emerald Group Publishing Limited
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