Quantifying the sources of revenue variation in the Northern Great Plains

The purpose of this paper is to determine the sources and factors affecting farm revenue variation on crop and livestock farms in the Northern Great Plains.

A two method approach is used. Variance decomposition analysis is completed on an 18-year balanced panel data set of North Dakota producers to determine the sources of farm revenue variation. The second component of this research uses a random effects estimator to determine the effect of farm characteristics on farm revenue variation measured by coefficient of variation.

Crop revenue is the largest source of farm revenue variation, with crop insurance being the largest source of revenue variation diversification. Small market crops and corn were found to increase revenue variation compared to those operations that received the largest sum of their revenue from wheat. Government payments and insurance payments were also found to increase farm revenue variation indicating they may provide an incentive to plant more risky crops.

This analysis examined specific enterprises that affect farm revenue variation, which has not been examined in earlier work. This distinction allows for focus on potential policy implications of small market crops and new crops in “transitional planting zones”.