Journal 2007

2014 Letter from the Editor [July 10, 2007]

Approximately twenty papers were submitted to the ASFMRA Editorial Committee for consideration of publication in our 2007 Journal. This collection of papers provided our Committee with a wide assortment of topics to review and evaluate for your reading pleasure.

The Impact of Increased Planting Flexibility on Planting Decisions Across Texas 

By J. Marc Raulston, Steven L. Klose, Joe L. Outlaw, and James W. Richardson

Increased acreage planting flexibility granted through the last three farm bills has allowed agricultural producers to make production choices without government programs driving their decisions. Planted acre data for program crops in seven Texas regions is used to describe producers’ responses to the increased flexibility. 

Fuel and Fertilizer Price Impacts on Crop Mix and Returns in the Louisiana Delta

By Michael A. Deliberto, Michael E. Salassi, and Kenneth W. Paxton

Fuel and fertilizer price increases in 2006 have had a significant impact on crop production costs and net returns. Analysis of crop returns and enterprise selection for the Louisiana Delta, a mixed cropping area in the northeastern part of the state, indicates that increased diesel and nitrogen fertilizer prices would be expected to shift acreage away from crops with relatively high diesel and nitrogen requirements as well as increase the risk or variability of net returns above variable costs for crop enterprise combinations. Michael A. Deliberto is a Research Associate in the Department of Agricultural Economics and Agribusiness, Louisiana State University. Michael E. Salassi is a Professor in the Department of Agricultural Economics and Agribusiness, Louisiana State University. Kenneth W. Paxton is a Professor in the Department of Agricultural Economics and Agribusiness, Louisiana State University. 

Economic Analysis of Avoiding a Potential Health Hazard on an Individual Farm 

By Robert O. Burton, Jr., Ross M. Key, Bryan W. Schurle, and David L. Regehr

A ten-year linear programming model of a representative dryland crop farm in North Central Kansas is used to develop and illustrate procedures for analyzing economic impacts of the elimination of one or more pesticides on an individual farm. Atrazine is used as an example pesticide because of its widespread use and because concerns about atrazine have been expressed in the United States and in other countries. An important outcome is that impacts on grain sorghum would likely be greater than impacts on corn because more alternative and effective herbicides are available for corn. 

Determinants of Farmland Values In the Rapidly Developing Boise, Idaho Metro Area: Applying Mathematical Modeling to Highest and Best Use Analysis 

By April Beasley, James Nelson, Ruby Stroschein, and Joel Hamilton

In areas where urban development is threatening quality farmland, zoning policies that encourage development on low productivity land have a significant influence on market forces, resulting in upward pressure on the prices of low productivity farmland. This helps identify potential permanent changes of use to a different highest and best use. Identifying the highest and best use of land is fundamental in estimating a vacant land value and identifying comparable sales of vacant land. 

The Effect of Early versus Normal Calf Weaning on Feedlot Performance and Herd Management: A Northern Plains Case Study 

By Dr. Scott Fausti, Douglas G. Landblom, Dr. Patricia S. Johnson, Dr. Martin K. Beutler, Dr. Roger N. Gates, RobinR. Salverson, Dr. H. Patterson, and Dr. Steve I. Paisley

A two-year study of early vs. normal weaning of steer calves was conducted in the western Dakotas in 2003-04. The analysis concludes that early weaning improves feedlot production efficiency and reduces per-day and per-pound feedlot production costs. However, early weaned steers are lighter at slaughter; therefore, early weaning lowers carcass revenue relative to normal weaning. The early weaning effect on the profitability of retaining calves through the feedlot stage was not statistically significant. However, the analysis indicates that early weaning does have a positive effect on cow health, pasture utilization rates, and that it therefore has the potential to be an effective drought management tool for grazing cattle during periods of inadequate precipitation. 

Non-Local Purchases of Agricultural Land for Hunting Purposes 

By Steven Shultz, Ph.D.

Agricultural land purchases by non-local buyers for hunting purposes (106 sales) were compared to nearby (comparable) land purchases of local agricultural producers (318 sales) in the Southwest and Prairie Pothole Regions (PPR) of North Dakota from 2000 to 2004. In the PPR (dominated by waterfowl hunting), it was demonstrated that non-locals do not pay a premium for agricultural land that they purchase for hunting purposes. In the Southwest Region (dominated by pheasant hunting), it was found that nonlocals pay between 23 and 24 percent more for agricultural land based on mean differences, but that if median differences are evaluated, these premiums range from 19 (nearby sale comparisons) to -4 percent (county-wide comparisons). These discrepancies in mean and median price premiums are shown to result from the existence of several statistical outlier sales. These results imply that recent surges in agricultural land prices across the entire state of North Dakota cannot be attributed solely to non-local hunting purchases. It was also noted that most non-local purchasers of hunting land do restrict public hunting access and that they also usually lease their land to local producers.

Valuation of Bare Forestland and Premerchantable Timber Stands in Forestry Appraisal

By Thomas J. Straka

Rural appraisers often use Discounted Cash Flow (DCF) analysis to value timber and timberland. Land expectation value (LEV) is a standard DCF analysis technique that is applied to many timberland situations. LEV is used to calculate the value of bare land in perpetual timber production and is often used in the valuation of even-aged pine plantations. However, it can also be useful in the valuation of premerchantable timber stands and uneven-aged timber stands cut periodically. The analytical techniques appropriate to these applications are illustrated. These models have wide applicability in timberland appraisal situations. Thomas J. Straka is a professor in the Department of Forestry and Natural Resources at Clemson University, Clemson, SC. He has a B.S. and M.S. in forestry from the University of Wisconsin-Madison and a Ph.D. in forest management from Virginia Tech. His specialty is forest resource management and economics and he teaches and researches in the area of forest valuation. He has numerous publications on forest valuation. 

Financial and Economic Analysis of Producing Commercial Tomatoes for Fresh Market in Georgia 

By Esendugue Greg Fonsah and Joel E. Hudgins

This study examines the financial and economic viability of producing commercial tomatoes for the fresh market in Georgia. Historical data on yields, prices received by growers, and actual production input prices were collected and used to develop an enterprise budget. Specifically, the study was aimed at analyzing profit margins and break-even conditions, and presents various operating scenarios under a risk-rated return framework. Analysis of enterprise cost and return estimates indicated that commercial tomato production is a lucrative business enterprise worth investing.The result will be useful to Georgia and the neighboring southeast and deep-south states that adopt similar agricultural production practices. 

Real Estate Appraisers Who Share Sales Information: Are Appraisers Unique or Just Weird? 

By James D. Libbin, Christopher A Erickson, and Van A. Bullock

Real estate appraisers represent a unique and very interesting form of business organization characterized by both cooperation and competition that is quite unlike any of the normal models of competition (such as perfect competition, oligopoly, or monopoly) that were studied in introductory economic theory courses. The interesting part for an economist is that appraisers are competitors and yet seem to depend on each other. Appraisers are clearly competitors; that is, they all compete for the same set of business opportunities available in the marketplace, just like farmers or barbers or dentists compete for a share of their perspective markets. At the same time, appraisers cooperate through the sharing of information about comparable sales, both through informal networks as well as formally through a sales data bank. 

Factors Affecting Succession Decisions in Family Farm Businesses: Evidence from a National Survey

By Ashok K. Mishra and Hisham S. El-Osta

Succession planning is a component of a household’s risk management strategy for its farm business in as much as it is aimed at continuity of the business’ management team. The family farm sector relies heavily on intergenerational succession. Succession and retirement are inter-linked and are reflective of the life cycles of the farm household and the farm business. This study uses Agricultural Resource Management Survey (ARMS) of the USDA to examine farm, operator, and family characteristics that affect farm succession within the family. Results indicate that large farms are more likely to be transferred within families. Level of farm debt, education, and being engaged in farm enterprises like other crops and dairy, affect within-family transfers of the farm business. 

Investment Analysis—Purchasing Cows and Heifers in a Strong Cattle Market 

By Norman L. Dalsted, Rodney L. Sharp, Jeffrey E. Tranel, and James Pritchett

Many cow/calf producers struggle with what is a fair price to pay for cows or heifers in an up cattle market. This article is designed to demonstrate the important relationship between profitability and debt serving capacity. With high calf prices, it is important for each producer to analyze the investment and financial feasibility of purchasing breeding animals. Only after determining the profitability of the investment can a sound decision be made. 

Financial Stages of a Farmer’s Life: Effects on Credit Analysis Measures 

By Paul N. Ellinger, Freddie L. Barnard, and Christine Wilson

Farm financial performance measures are evaluated for producers across five age groups. The debt-to-asset ratio is highest for farmers in the less than- 30 age group, 45.5 percent, and decreases across age groups. Repayment capacity is strongest for farmers in the less-than-30 age group, 2.1:1, and weakest for farmers in the 50-59 age group, 1.3:1. Operating profit margins tend to increase as farmers become more experienced. A key element in the financial evaluation of farmers through the life cycle is differing degrees of land ownership. 

An Agricultural Survey Assesses Clientele Program Needs 

By Etaferahu Takele, Peggy Mauk, and Ihab Sharabeen

An agricultural survey to assess program needs of farmers in Riverside and San Bernardino counties was conducted in 2004. Demographics, production systems, farm management methods, and clientele issues and concerns were analyzed and program needs evaluated.

A Financial Analysis Program That Will PASS the Farm Manager “Interest Test” 

By Christine Wilson, Freddie Barnard, and Michael Boehlje

This paper discusses a farm financial analysis program, along with four features of the program that have facilitated its use by farm managers. The four features that appear to increase farm manager interest in the program are Performancebased, Accrual-adjusted income statement, System of financial analysis, and Simple to use. We illustrate this program with application to a farm firm case study. 

Precision Fertilization of Wyoming Sugar Beets: A Case Study 

By Sully Taulealea, Larry J. Held, Bart Stevens, and Edward Bradley

Field studies were conducted on a farm in northwest Wyoming to compare variable-rate fertilization (VRF) with uniformrate fertilization (URF) of sugar beets. Results from this study failed to show an economic advantage from VRF compared to URF, implying producers should be very cautious to adopt VRF technology, unless field fertility needs are highly variable. 

Price Premiums from a Certified Feeder Calf Preconditioning Program 

By Clement E. Ward, Chandra D. Ratcliff, and David L. Lalman

Preconditioning calf programs add value for buyers. Models estimated with data collected for calves certified under the Oklahoma Quality Beef Network (OQBN) in 2001- 2003 generally found premiums paid for certified, preconditioned calves versus calves neither weaned nor vaccinated. Larger premiums were found when also marketing certified, preconditioned calves in sale lots of 10 head or more. 

Value of an Extended Grazing Season and Value of Monensin Supplements for Stocker Cattle Grazing Winter Wheat Pasture 

By Karen W. Taylor, Francis M. Epplin, Derrell S. Peel, and Gerald W. Horn

This study was conducted to determine the value of two monensin supplementation strategies for steers and heifers pastured on fall/winter wheat relative to the value of a freechoice mineral supplement containing no monensin. A second objective was to determine the value of extending the fall/winter wheat pasture grazing season by either one or two weeks. 

Facilitating Beginning Farmers Purchase of Farmland 

By Charles B. Dodson and Steven R. Koenig

The Farm Service Agency’s (FSA) Farm Business Plan was used to compare the characteristics of beginning farmers receiving direct Farm Ownership (FO) loans in fiscal 2005 by the type of delivery mechanism. Regular FO loans were commonly used by small and intermediate size family farming operations while FO loans made in participation with commercial lenders were used by larger commercial-sized family farming operations. Startup beginning farmers in the Corn Belt were more likely to utilize FO downpayment loans. Regardless of the delivery mechanism, nearly all beginning farmers receiving direct FO loans had credit shortcomings that could inhibit them from commercial credit. 

An Economic Study of Loss of Use of Indian Lands: A Case Study of Saskatchewan, Canada 

By R.A. Schoney, Ph.D., P.Ag.

In a series of treaties from 1871 to 1876, Canadian prairie aboriginal claims were extinguished and Indian First Nations were confined to reserves scattered throughout the prairies. In recent years, a number of First Nation claims have been brought forward based on unfair or illegal surrender or exchange of the original land. There are a number of possible economic losses stemming from such cases, but the largest source of economic loss likely stems from the loss of farmland and its associated loss of agricultural use. This paper reviews a procedure for estimating historical agricultural loss of use, discusses several key issues and presents an application based on a hypothetical case example. R.A. Schoney is Professor of Agricultural Economics, University of Saskatchewan. He teaches farm management, agricultural finance and agricultural management science. Dr. Schoney’s research interests include farmland values, multiple agent simulation models, international cost of production and competitiveness.