Journal 2006

2006 Letter from the Editor/Editorial Committee [August 3, 2006]

ASFMRA Chapter Strategic Planning: Iowa Chapter Case Study 

By Larry D. Trede, Ph.D.

This paper summarizes the strategic planning process used by the Iowa Chapter of the American Society of Farm Managers and Rural Appraisers to develop a new vision, mission statement, and chapter objectives. Procedures included the use of a focus group and a quantitative survey. The results indicated a strong need for chapter member continuing education, a chapter member services program, and a strong outreach/public relations program. As a result of the strategic planning process, a new chapter vision and mission statement was adopted by the chapter membership in 2004. 

Cow-calf Expansion with the Removal of Transportation Subsidies in East Central Saskatchewan, Canada 

By Tim M. Highmoor, Andrew Schmitz, William J. Brown, and Ken Rosaasen

Ninety farm households located in East-Central Saskatchewan were surveyed to determine the characteristics that affected their decision to enter into, expand, or not expand cow-calf production between 1995 and 2001. Of the 90 farm households, 36 had increased, 40 had maintained, and 14 had decreased the size of their beef cowherd between 1995 and 2001. The study found first that given the effect of age on the probability of beef cowherd expansion, new entrants to farming will be needed if beef cattle numbers are to significantly expand. Second, in order to cover the high switching costs involved with shifting from grain to cow-calf production, the farm household typically needs to borrow money. Third, farm households that owned beef cows in 1995 are the group of farm households that have been predominantly responsible for the expansion of the beef cowherd in the research area between 1995 and 2001. Fourth, farm households with farm operators earning income from off-farm employment were hindered from expanding their beef cowherd between 1995 and 2001. Farm advisors should realize farm households consider many other factors in their decision making than just on-farm economics. 

Field Pea and Lentil Marketing Strategies for Northern Plains Producers 

By George Flaskerud

Marketing strategies are analyzed for field pea and lentil producers in the Northern Plains. Seasonal price patterns were derived for the 1999-2003 marketking years. Correlations indicate that corn futures may provide risk reduction for cross-hedging pea prices. Relationships were too weak to consider a cross-hedge for lentils. Combining a preharvest strategy with a marketing loan strategy offered the best total net price for the pea crop in 2004. No one marketing loan strategy performed best during the two crop yers examined and no one month stood out as the best time for selling field peas and lentils. Earlier generally was better than later for selling the 2004 crop, whereas the middle of the marketing year worked best for the 2003 crop. 

A Case Study on the Impact of an Ethanol Plant on Corn Price 

By Christin Fort and Dr. Joe Parcell

An increase in corn prices of the local area tend to occur when an ethanol plant begins operation. The objective of this research is to evaluate the impact of a corn processing ethanol plant on corn price levels. Results indicate that farmers in the nine-county area surrounding Macon, Missouri have seen increased farm evenues to $4.12 million annually, or a weighted average corn price increase of $0.12/bushel. This is an increase of about $0.10/bushel for all corn sold in the surrounding region, and a $0.19/bushel increase for corn sold directly to the ethanol plant. For the case of a $0.12/bushel weighted average corn price increase, a land value increase of $161/acre to reflect the increase in returns per acre was estimated. Thus, landowners are the actual benefactors of an increase in corn price form ethanol production. 

Financial Efficiency of Methyl Bromide Alternatives for Georgia’s Bell Pepper Industries 

By Mark M. Byrd, Cesar L. Escalante, Esendugue G. Fonsah, and Michael E. Wetzstein

Georgia vegetable farmers are pressed for time to make the transition to new fumigation methods as use of methyl bromide (MeBr) will be completely banned soon. This study focuses on alternative fumigatin methods for Gergia’s bell pepper production with production efficiency matching MeBr. Analyses of enterprise cost and return estimates indicate the comparable financial feasibility of certain technically efficient fumigant systems vis-a-vis the conventional production plan involving MeBr. 

The Financial Benefits to Investors in a Canadian Farmland Mutual Fund 

By Marvin J. Painter

An analysis of Canadian farmland risk and return on investment shows that a Farmland Mutual Fund (FMF) would have been a reasonably good investment over the past 15 years. Investors at the very low or very high end of the risk spectrum would not include FMF in their portfolios. Financial gains from a FMF result from low level risk with an expected yield that is greater than bonds and low correlation with other financial asset returns. Non-farm families gained from improvemements to their pension and non-pension investment portfolios. Farm families gained from having more external non-farm equity entering the agricultural industry. 

Forward Contracting Costs for Illinois Corn and Soybeans: Implications for Producer Pricing Strategies 

By Chris Stringer and Dwight R. Sanders

The implied costs of forward contracting Illinois corn and soybean prices at planting-time are estimated. Thirty years of basis data are collected for seven regions in Illinois. Forward basis quotes are collected at planting-time (May) and actual basis levels are recorded at harvest time (October). Costs embedded in the forward basis quote are estimated and the implications for producer marketing strategies are examined. The results suggest that elevators’ embedded premium-producers’ cost of forward contracting-are rather small, especially for corn. Forward contracting costs vary significantly across the state. Implications for producer risk management strategies are explored. 

Developing Insurance Protection for Stored Grain 

By Jesse M. Dowell, A.F.M., ARA

At least 30 states have some type of grain insurance fund to protect the owners of stored grain against bankruptcies. This article provides some historical perspective on how the legislation originated and how it still provides protection for those who contract storage in licensed facilities in those states with insurance funds. 

An Examination of the Relationship Between Overall Inefficiency and Farm Characteristics 

By Michael Langemeier and Kelly Bradford

This paper examined the relationship between overall inefficiency and farm characteristics such as farm size, years of farm experience, percent of time devoted to farming, educational level, record keeping system, percent acres owned, organizational structure, and farm type. Overall inefficiency was significantly related to farm size, years of farm experience, percent of time devoted to farming, and percent acres owned. Farms in the top quartile in terms of overall inefficiency had lower levels of inefficiency, were larger, had less experience, devoted more of their time to farming, and owned relatively fewer acres. 

Packer versus Feeder Cattle Live Animal Value Based on Phenotypic Characteristics 

By R. T. Ervin, L. N. Patterson, and A. D. Herring

Data are pooled and analyzed to differentiate the value between “packer” and “feeder” type cattle. Results indicate the the value of animals entering the stocker and feeding stages of the industry are sensitive to gender, color, breedtype, body condition, and the presence or absence of brands and/or horns.

Factors Impacting Farm Growth 

By Mario Villatoro and Michael Langemeier

This paper examined the relative importance of farm size, farm type, managerial ability, capital structure, operator age, family size, and off-farm income in explaining farm growth rates. Farm type, managerial ability, and operator age were significantly related to farm growth rates. Farms that grew faster obtained a higher percent of their farm income from crops, had above average managerial ability, and had younger operators. 

An Appraisal Tool for Valuing Forest Lands 

By Thomas J. Straka and Steven H. Bullard

Forest and natural resources valuation can present challenging analysis and appraisal problems. Calculations range from specialized problems like bare land value to standard criteria like net present value and internal rate of return. Financial calculators are fine for simple analyses but forestry problems tend to be complex and often require the use of a computer investment analysis program. FORVAL is a user-friendly, free, menu-driven forestry and natural resources investment analysis program. It contains all the standard tools used in discounted cash flow analysis, plus financial criteria and valuation procedures that are unique to forestry. We describe the program, how to use it for forestry and timber valuation analysis, and explain the basic forestry valuation theory behind the procedures. Formulas and financial criteria are footnoted back to the basic appraisal literature. FORVAL is appropriate for any general appraisal valuation problem. 

Economic Feasibility of Carbon Sequestration with Alternative Tillage Systems 

By Dustin L. Pendell, Jeffery R. Williams, Daniel W. Sweeney, Richard G. Nelson, and Charles W. Rice

Sequestration of carbon has gained increased attention in recent years because of environmental and economic motives This study examined the economic feasibility of using reduced-tillage (RT) and no-tillage (NT) rather than conventional-tillage (CT) to sequester soil carbon with the use of either anhydrous ammonia (NH3), urea-ammonium nitrate solution (UAN), or urea for a grain sorghum-soybean rotation. The results show that RT with NH3 had the highest net return but not the highest level of carbon sequestration. Carbon credits ranging from $0.00 to $77.23/ton of C/year were needed to entice producers to adopt either RT Urea or NT NH3, the systems that sequestered the highest and second highest amount of carbon per year, depending upon the farming system originally being used.

Shopping at the Farm Office: What is the Future of Farm e-Commerce? 

By Marvin T. Batte

Farmers are expanding their use of the Internet, including e-commerce. Larger, younger, and better educated farmers are leading the charge. This article identifies factors that influence how likely particular markets are to form on the Internet and identifies example Internet sites already used by farmers for e-commerce.

Precision Agriculture Equipment Ownership versus Custom Hire: A Break-even Land Area Analysis 

By Jean-Marc A. Gandonou, Carl R. Dillon, Scott A. Shearer, and Tim Stombaugh

Identifying the least-cost strategy of obtaining a technology is important. This study determined the break-even cropped area necessary to economically justify the purchase of Precision Agriculture (PA) equipment versus the custom hiring of the PA services. The results suggest that a commercial Kentucky grain farmer would purchase the PA equipment. 

Status of Irrigation Water Use on Pecans in Georgia: Lesson for Growers, Extension Specialists, Extension Agents, Professional Farm Managers, and Appraisers

By Esendugue Greg Fonsah, Kerry Harrison, and Peter Foster

This study examines recent irrigation water use by pecan farmers in Georgia. Data on yields, total water use, and irrigation cost was collected. In total, data from 10 systems was obtained and analyzed. Data was acquired via a survey instrument that was mailed to likely participants. Yearly averages were calculated for water use, irrigation cost, and crop yield. Irrigation water use numbers were combined with rainfall data to produce total water application numbers for each year from 1999 to 2003. Our analysis showed that on the average, pecan farmers in Georgia are not supplying their trees with enough total water needed for optimum yield based on the recommended 48 inches per year. 

Impact of Milk Income Loss Contract (MILC) and Section 179 Expensing on Rates of Return for Alternative Dairy Systems

By Phillip R. Eberle, Darren E. Moody, C. Matthew Rendleman, and William C. Peterson

The impact of the Milk Income Loss Contract (MILC) and Section 179 expensing on internal rate of returns (IRR) for three dairy systems, a 120-cow grazing, a 120-cow conventional, and 600-cow concentrated was evaluated. With MILC, the grazing and conventional systems had higher IRRs. Without MILC, the 600-cow dairy had the highest IRR. Without Sec. 179, IRRs declined proportionally more for grazing and conventional systems. 

Precision Application of Herbicide for Control of Skeletonleaf Bursage in Winter Wheat 

By Matthew R. Fleming, David A. Claypool, Stephen D. Miller, and Larry J. Held

Skeletonleaf bursage is a good candidate for precision herbicide application (PHA), because it is a perennial and grows in dense patches. Net present value was positive for most combinations of field size and infestation rates. Higher net present values were observed with larger fields and lower infestation rates.

Strategies for Dairy Farm Preservation 

By Nathan de Boom, Jon C. Phillips, and Gwen Urey

The objective of this article is to promote the adoption of farmland preservation strategies that minimize the conflicts between urban land uses and dairy agriculture land use. In order to accomplish this, a survey was developed and implemented which contributes knowledge and understanding of dairy farmers’ perceptions. Farm consultants can use the results to develop strategies to address urban/agriculture conflicts. 

Differences Between Agricultural Land Value Surveys and Market Sales 

By Dr. Steven Shultz

Statewide agricultural land values from 3,243 arms-length market sales in North Dakota between 2001 and 2004 were 6 percent higher than estimates derived from the June Agricultural Survey (JAS) of National Agricultural Statistics Service (NASS), and 9 percent higher than values from the North Dakota Land Value Survey (NDLVS). These survey-market sale differences varied substantially in particular regions and counties and over time. The geographic information system (GIS) technique of ‘kriging’ was used to interpolate point-based market and JAS land values statewide in a continuous (raster) format. Few counties contained homogenous land values and differences between market sales and the JAS were quite large in several specific (sub-county) areas. Opinion-based surveys are therefore considered reasonably accurate and useful for statewide or regional applications but are likely insufficient for county and more site specific valuation analyses unless such survey data is spatially interpolated (kriged) and disseminated using GIS technologies.