What Is Driving Economic and Financial Success of U.S. Cow-Calf Operations?. Issue 3 (19th August 2014)

• Record Type: Journal Article
• Authors: Nehring, Richard; Gillespie, Jeffery; Hallahan, Charles; Harris, James Michael; Erickson, Ken
• Editors: Turvey, CalumG; Turvey, CalumG
• Is Part Of: Agricultural finance review. Volume 74:Issue 3(2014)
• Publication Date: 2014-08-19
• Subjects: Agriculture -- Finance -- Periodicals; Agriculture -- Finance -- Statistics -- Periodicals; Agricultural insurance -- Periodicals; Agriculture -- Taxation -- Periodicals; 332.71
• DOI: 10.1108/AFR-02-2013-0007
• Languages: English
• ISSNs: 0002-1466

Abstract

Abstract : Purpose: The aim of this study is to determine the drivers of economic financial success of U.S. 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 (ARMS) 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 our 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.