Journal 2012

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2012 Letter from the Editor/Editorial Committee [June 13, 2012]

Twenty papers were submitted to the ASFMRA Editorial Committee for consideration of publication in our 2012 Journal. This collection of papers provided our Committee with a wide assortment of topics to review and evaluate for your reading pleasure. Read the entire letter.

The Influence of Auto-Steer on Machinery Selection and Land Acquisition [June 13, 2012]

By Jordan M. Shockley, Carl R. Dillon, and Timothy S. Stombaugh

With the growing advancements in technology increasingly available to farmers, there is a need to recognize this influence when making farm management decisions. This study investigated the influence of auto-steer navigation on machinery selection and land investment decisions by developing a multifaceted machinery management model. (Vol 75, No. 1, Pg 1-7)

Seasonality of Diesel Fuel Prices [June 13, 2012] 

By Gregory Ibendahl

Diesel fuel is a major expense for most farmers. Diesel fuel prices do exhibit some seasonality so farmers can try to lower their fuel expenses by buying their fuel in months when prices are lower. However, purchasing fuel before it is needed results in a carrying charge to the farmer. This paper examines the optimal purchase month for diesel fuel for both spring planting and fall harvest. Both risk neutral and risk-averse farmers are considered. Higher interest rates discourage advance purchasing, but in many cases farmers would be better served by purchasing diesel in advance of use.
(Vol 75, No 1, Pp 8-19)

The Value of Water In Agriculture Land Markets: The Nebraska Case [June 13, 2012]

By Chris L. Thompson and Bruce B. Johnson

The true value of the water in agricultural production is determined by its perceived contribution to productive capacity. This analysis is concerned with determining an estimation of the value, or “worth,” of the water from the 2010 Nebraska Farm Real Estate Survey. This survey allows the interpretation of the value of water from an aggregated expert panel of rural appraisers. (Vol 75, No 1, Pp 20-28)

Cotton Thermal Defoliation Economics [June 13, 2012]

By Paul Funk, Carlos Armijo, Gerald Hawkes, and James D. Libbin

Cotton harvest-aid chemical and application expenses are justified by increased quantity and value of harvested fiber and decreased harvest costs. Chemical use may be restricted in certain production situations. Harvest preparation costs and producer returns were compared for thermal defoliation in organic and chemical harvest aids in conventional Pima cotton using a crop cost and return estimator. A positive return to land and risk can be reached for organic Pima with yields greater than 600 pounds per acre and prices over $2.43 per pound. Thermal defoliation allows early harvest without the chemicals deemed necessary to produce a high-quality conventional crop.(Vol 75, No 1, Pp 29-42)

An Analysis of On-Farm Feed and Fuel from Dryland Camelina [June 13, 2012]

By Thomas Foulke, Milton E. Geiger, and Bret Hess   

Concern over rising and volatile energy prices, the desire for personal energy independence, and the promotion of cleaner energy sources has led many farmers to consider oilseed crops as a source of biodiesel. Analysis of the economics of on-farm biodiesel from dryland camelina (Camelina sativa) shows that camelina meal is the primary product. The cost savings of using meal as livestock feed accounts for most of the value. Both individual and group ownership perspectives are addressed. Combining resources to achieve maximum output results in a more efficient process and allows each producer to have less capital outlay. (Vol 75, No 1, Pp 43-56)

Rising Farmland Values: An Indicator of Regional Economic Performance or a Speculative Bubble? [June 13, 2012]

By Steven C. Blank, Kenneth Erickson, and Charles Hallahan   

Farmland values have recently increased dramatically in the Midwest, attracting investors from outside of agriculture and causing many inside agriculture to question whether a speculative bubble has formed. This article addresses that question by presenting an economic assessment of the facts related to farmland values across regions of the United States to give a more complete outlook for Midwestern farmland prices. After presenting an analysis of farmland values, this article concludes with a discussion of some often-ignored factors that should be at the center of the current debate.
(Vol 75, No 1, Pp 57-67)

Determinants of Profitability in Niche Swine Production [June 13, 2012]

By Dwight R. Sanders, Ira J. Altman, Gary A. Apgar   

Production records for swine producers specializing in niche markets (e.g., natural) are analyzed to determine the factors impacting profitability. The data span a cross section of 42 niche pork producers and record their 2006 production costs. Profitability was measured by the net margin (adjusted for inventory and after all costs) per hundred pounds of pork produced. In comparing the 10 most and 10 least profitable producers, there were statistically significant differences in production costs (feed, labor, and other operational costs) and efficiency (feed conversion, labor intensity, and farrowing frequency). Notably, there was not a statistically significant difference in the price received for market hogs. (Vol 75, No 1, Pp 68-79)

Managing the Economics of Soil Salinity in the Red River Valley of North Dakota [June 13, 2012]

By Joleen C. Hadrich   

Saline soils result in decreased crop growth and yield with the potential for losing productive farm land. Enterprise budget analysis was extended to include the fixed costs of installing tile drainage to manage soil salinity in the Red River Valley of North Dakota for corn, soybeans, wheat, sugar beets, and barley. Installing tile drainage decreased per acre crop profitability from 19 to 49 percent. Lost revenues were estimated to be $150 million due to 1.2 million acres of slightly saline soils and 275,000 acres of moderate soil salinity. (Vol 75, No 1, Pp 80-88)

Economic Analysis of Biomass Production Utilizing Winter Wheat Double-Cropping [June 13, 2012]

By Julia Isabel Navarro, Samantha Shoaf, Dr. Lori Snyder, Dr. Craig Dobbins, Dr. Herbert Ohm   

This study estimates the profitability of double-cropping systems as a source of livestock feed and the cost per ton of dry matter as source of lingocellulosic feedstocks for ethanol production. Crop yields were measured from full season and winter wheat double-crop plot trials at the Purdue University Agronomy Center for Research and Education during 2008 and 2009. Enterprise budgets were constructed to estimate annual net returns and cost of production per ton of dry matter. Results indicate wheat grain double-crop systems have the potential to allow farmers to serve both markets.
(Vol 75, No 1, Pp 89-97)

Landowner Preferences for Conservation Easements: Responses from Two Intermountain States [June 13, 2012]

By Graham H. McGaffin, Donald M. McLeod, Christopher T. Bastian, Catherine Keske Hoag, and Dana L. Hoag   

Interest in conservation easements has grown, but relatively little is known about agricultural landowner preferences for conservation easements. Survey data are collected, segmented by landowner respondents’ states of residence, and analyzed. Responses indicate landowners are interested in preserving agricultural lands, but the majority of respondents were not interested in choosing conservation easement scenarios. Results suggest that interaction with conservation organizations, mistrust of land trusts, knowledge of easements, and less financial dependence on agriculture impacts preferences for conservation easements. The authors suggest that increased educational information and tradable income tax credits may improve landowner acceptance of conservation easements. (Vol 75, No 1, Pp 98-111)

Pasture Rental Rates for Fall-Winter Grazing of Winter Wheat [June 13, 2012]

By Brandon T. Varner, Francis M. Epplin, Damona G. Doye, R. Joe Schatzer, and Jeffrey T. Edwards   

Winter wheat can be managed to produce a substantial quantity of high quality fall-winter forage. Wheat producers may lease the grazing rights to livestock producers. This system generates income from both forage and grain, but results in a lower expected grain yield than wheat managed to produce only grain. The rental rate in terms of cents per pound of livestock weight gain required to offset the additional costs and lower grain yield depends on the market price of wheat. This study was conducted to determine the minimum pasture rental rate necessary for dual-purpose wheat to breakeven with grain-only wheat. (Vol 75, No 1, Pp 112-123)

Economic Comparison of Weaning and Feeding Strategies for Beef Production [June 13, 2012]

By Kendall Eisele, John Ritten, Christopher T. Bastian, Steven Paisley, and Scott Lake   

The current market environment for corn prices place many firms involved with cattle feeding in financial distress. Producers are looking for ways to ease the burden of higher feed costs and uncertainty associated with the grain market. Some options include altering weaning dates and implementing low cost feeding strategies that only utilize high cost feedstuffs at critical life stages. Profitability comparisons are made across alternative feeding and weaning strategies using a Monte Carlo simulation replicating both input and output prices for distributions based on historical data to assess overall profitability of the alternative management strategies analyzed. (Vol 75, No 1, Pp 124-134)

Asset Bubbles, Inflation, and Agricultural Land Values [June 13, 2012]

By Bryan Schurle, Christine A. Wilson, Allen M. Featherstone, Hugo Remaury, and Jacob Harmon   

This article discusses asset bubbles, the Kansas and Illinois land markets, estimates land values, and develops a land price/earnings ratio. Current land sales data are also examined. Finally, we examine relationships between land values and interest rates, inflation rates, and cash rents. Results show that real land values increase substantially when inflation increases. Recent land values are explored for both Kansas and Illinois with somewhat differing results. Development of land price bubbles could be enhanced if inflation becomes more widespread and land values are viewed as having good protection from inflation. Market fundamentals would suggest that an increase in land prices due to inflation occurs because of an increase in cash rental rates and not through a dramatic change in the price earnings ratio. (Vol 75, No 1, Pp 135-147)

Factors Influencing Farm Operator Expectations on Future Levels of Government Support [June 13, 2012]

By Tyler B. Mark, Joshua D. Detre, Jeremy D’Antoni, and Ashok K. Mishra   

Using the 2001 ARMS, we investigate farm operator expectations regarding the continuation of government payments. Given the farmer expects payments to continue, we further investigate the expected direction of changes in payments. The 2001 Farm Bill was being debated at the time of the survey while the previous Farm Bill, the 1996 FAIR Act, was more marketoriented than previous legislation. Following the significant changes in the previous bill, this data provides an interesting glimpse into how the changing nature of the previous legislation influenced expectations for future agricultural policy. (Vol 75, No 1, Pp 148-164)

Revisiting Flexible Cash Leases [June 13, 2012]

By Nicholas D. Paulson   

This paper discusses the recent increases in the returns to crop production as well as trends in land rental rates and the types of rental agreements used in the Midwest. The concept of a flex cash lease and an approach to defining the terms of such a lease, relative to the current fixed cash or share arrangement, are outlined within the context of an example Midwestern corn farm. The resulting flex lease results in returns to the tenant and landowner which are a hybrid of those realized under the more traditional fixed cash and share rent agreements. Using these alternatives as benchmarks, the approach to defining a flex lease could be applied to other specific farm scenarios. (Vol 75, No 1, Pp 165-177

Measuring the Financial Health of U.S. Production Agriculture [June 13, 2012]

By Brady E. Brewer, Christine A. Wilson, Allen M. Featherstone, J. Michael Harris, Ken Erickson, and Charles Hallahan   

With farm income at record, or near record levels, the overall agricultural production sector has fared well. However, in the current economic climate, instability and volatility in certain agricultural input markets caused by the U.S. macro-economy has put increased pressure on some sub-sectors of the agricultural economy. This paper analyzes the probability of default for USDA Agriculture Resource Management Survey (ARMS) farm operator households over time using a synthetic credit rating model. The probability of default was estimated for each ARMS farm sampled. The farms are classified according to farm type, gross sales class and by region to assess the financial health of each sector. Results indicate that the financial sector at the end of 2010 was exceptionally strong, although there are still certain farms that are vulnerable. (Vol 75, No 1, Pp 178-193)

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