2015 Journal of ASFMRA

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2015 Letter from the Editor/Editorial Committee 

The ASFMRA Editorial Committee is proud to present the Society’s 2015 Journal. More than a dozen papers were submitted to the ASFMRA Editorial Committee for consideration of publication in our 2015 Journal. This collection of papers provided our Committee with a wide assortment of topics to review and evaluate for your reading pleasure.

Comparative Costs of Onboard Module Building Cotton Harvest Systems in the Mid-South

By Michael E. Salassi, Michael A. Deliberto, and Lawrence L. Falconer

Onboard module building cotton harvesters currently offer cotton producers the potential to improve harvest efficiency and reduce harvest costs as a means of supporting cotton as an economically viable option in many farm crop rotation production systems. Using data provided by producers currently using this technology in a few southern cotton states, this study estimates current capital and operating costs of onboard module cotton pickers based on field experience and makes comparisons with the costs of using traditional basket pickers. Total per acre cotton harvest cost for the onboard module system was estimated to be approximately $26 less expensive than harvesting cotton with comparable sized basket pickers. This article outlines key elements necessary to ensure an estate planning process is successful.

Assessing the Required Risk Premium for North American Farmland Investment

By Marvin J. Painter

In recent years, as North American farmland prices have continued to rise, a number of North American public farmland investment trusts have been formed to offer investors a liquid and marketable farmland investment vehicle. How risky are these farmland REITs? This paper compares the investment risk with other popular investment options such as bonds, stocks, gold, oil and real estate using several well-known
and accepted methods of risk analysis, including overall yield variance, CAPM, Value at Risk (VAR), and Drawdown. North American Farmland REIT has less risk than gold, oil, REITs and stock markets.

Access to Agricultural Banks in Rural Counties in the Face of Changing Demographics, Evolving Social Preferences, and Increasing Bank Regulations

By Freddie L. Barnard & Elizabeth A. Yeager

Two-thirds of rural counties in the United States lost population from 2000 to 2010. At the same time, consumers are changing the way they like to receive bank products and services. With many in the younger
generation having smart phones, the need to step inside a bank facility is almost nonexistent. When those two trends are combined with additional costs associated with recently passed bank regulations, there will initially be a negative impact on the profitability of agricultural banks and ultimately on the ability of those banks to continue to serve those counties.

Old is New Again: The Economics of Agricultural Gypsum Use – Part one | Part Two

By Marvin T. Batte & D. Lynn Forster

Gypsum use on cropland offers a number of potential benefits. We surveyed a sample of farmers to learn more about their experiences with gypsum. Respondents’ evaluations of gypsum suggest significant benefits in a number of areas related to soil fertility and condition, water management, and crop performance. Most estimated their gypsum use to be profitable, and their mean partial benefit to cost (B/C)
ratio was 1.68. Benefits from gypsum usage were not instantaneous, but rather increased over time. Also, substantial off-farm benefits were likely realized with their gypsum use.

Determining Land Values Using Ordinary Least Squares Regression

By Mykel Taylor, Bryan Schurle, Brady Rundel, and Bill Wilson

Agricultural land values have increased by an average of 21 percent each year since 2010 until recently when commodity prices dropped substantially. The accompanying decrease in profitability raises concerns that current land prices are not sustainable. This study presents a regression analysis of land prices in Kansas using data from 2012 through June 2014. Regression allows valuation of individual characteristics of land parcels as well as time adjustments. Prices projected by the model trended upward through 2013, but decreased between the last quarter of 2013 and the first quarter of 2014, suggesting that prices for land may have peaked in 2013.

What to Do with a Gift of Farmland – Part One | Part Two

By Michael H. Hauger & Robert O. Burton, Jr.

Many people are given farmland and this phenomenon will continue. People who receive the gift of farmland may want to retain ownership for a variety of reasons: the land is already paid for; it may increase in value; it may have been in the family for a long time; or it may allow participation in production agriculture. Lack of land ownership costs may reduce the risk of land ownership. The purpose of this manuscript is to determine whether a person who has been given farmland can afford to retain ownership. A twelve year analysis was used to determine the net income and risk associated with three strategies for retaining ownership.

How Spatially Clustered are State-level Farmland Values?

By Terry Griffin, Gregg Ibendahl, and Tyler Mark

Farmland values are influenced by productivity levels, prices of pertinent crops, farm incomes, urban sprawl, and external investment pressure. Since cropping systems in a given region are similar to adjacent regions and soil productivity indexes change slowly across regions, it was expected that farmland values are spatially clustered even at the state level. We tested spatial correlation on US state-level farmland values from 1950 to 2014. Spatial correlation was detected in farmland values and percent changes in farmland values. These results indicate that traditional analysis techniques that ignore values of neighboring states may be dominated by advanced spatial analysis. Evaluation of state-level farmland values provide appraisers with insights into how a shock to farmland values impact values in surrounding states. Future analyses will validate these results by examining available sub-state and county-level data.

The Effects of Machinery Costs on Net Farm Income

By Gregg Ibendahl

Farmers have many options for choosing equipment that is required to grow and harvest a crop. Farmers may own their own equipment, lease it, or have the field operations completed using custom operators. For those farmers who choose to own most of their equipment, there are additional decisions about the size and quantity of equipment needed. This paper uses a 15-year dataset of farm financial data from the Kansas Farm Management Association (KFMA) to examine how depreciation, machinery repairs, and the use of custom operators
vary by farm profitability quintiles. Results indicate that the most profitable farms also have the highest levels of depreciation but that the machinery level is probably not excessive.

Trends in Farm Size and Potential Demand for Farm Management Association Services

By Nicholas D. Paulson & Todd H. Kuethe

According to the 2012 Census of Agriculture, the number of farm operations in the United States has declined by more than 4.3 percent since 2007. This supports the common notion
that US farms are consolidating and increasing in size. A key issue facing the professional farm management industry is how the changing structure of US agriculture might impact future demand for their services. This article uses farm-level data from Illinois and from various years of the US Census of Agriculture to look at this issue more closely, focusing on the services offered by farm management associations. Farm types or sizes which are more likely to be members of a management association are identified, and trends in the number
of these farm operations are examined at regional and national scales. The data suggests that the number of farms across the US who are more likely to demand services from farm management associations is likely increasing, but these changes are highly regional in nature.

Economic Returns and Risk Analysis of Forage Wrapping Technologies

By R. Curt Lacy, J. Ross Pruitt, and Dennis W. Hancock

Using stochastic simulation, we evaluated the cost savings a cow-calf operation may experience by adopting high-moisture baleage with an in-line wrapper. The results of this analysis indicate the baleage technology is economically viable for high-quality forages such as winter annuals, alfalfa or legumes, especially at higher feed prices. Break-even herd size
is between 50 and 150 cows, depending on a producer’s current machinery complement. There is no apparent economic advantage to purchasing baleage equipment strictly based on
reducing storage or feeding losses for beef cattle producers.

Profitability of Glyphosate-Resistant Sugarbeet Production in Whole Farm Systems

By Brian Lee, John Ritten, Christopher Bastian, and Andrew Kniss

A Linear Programming model coupled with Monte Carlo simulation compares the profitability of glyphosate-resistant (GR) and conventional sugarbeet systems for a case farm in Southeast Wyoming. The optimal combination of cropping mixtures maximizing total farm profitability is determined based on varying crop and input prices as well as rotational constraints impacting the potential acres of GR sugarbeet. If restrictions on GR sugarbeet occur, producers are better off to grow at least some conventional sugarbeet in their rotation. Profitability reductions would likely not be as great as partial budget analyses might indicate if no sugarbeet were available, although much more variable.

Estimating the Contribution of Groundwater Irrigation to Farmland Values in Phillips County, Colorado

By G. D. Swanepoel, Joleen Hadrich, and Christopher Goemans

Hedonic price analysis is applied to farmland sales in Phillips County, Colorado to examine trends in farmland values across different land types from 1999-2012. Results demonstrate that irrigated acres resulted in the highest farmland value while well depth decreased this value. The marginal value of an acre foot of water on irrigated farmland ranged from $3-$36 depending on well depth and the discount rate used. This highlights the potential long-term negative impacts that lowering groundwater tables have on agricultural enterprises that rely
on wells for irrigation.