Journal 2008

2008 Editorial Committee [September 08, 2008]

Thank you to each of the member of the ASFMRA Editorial Committee who make this publication possible. 

Contracting for Biomass: Supply Chain Strategies for Renewable Energy 

By Ira J. Altman, Chris Boessen, and Dwight R. Sanders

Cellulosic-based ethanol production is a cornerstone of current and proposed U.S. renewable fuels policy. Indeed, some recent proposals include a nearly five-fold increase in renewable fuels production, the majority of which would have to come from cellulosic ethanol. U.S. farmers will clearly play a significant role in the development and success of this industry. Aside from the technological hurdles, a number of supply chain barriers must also be overcome. One such barrier includes the marketing of cellulosic feedstock (e.g., wheat straw and corn stover) by farmers and the procurement of this feedstock by biofuels refineries. The exchange mechanism for cellulosic feedstock may develop in a number of alternative ways. This research specifically examines some early contracting and procurement strategies by an industry leader, the Iogen Corporation. An understanding of how biomass marketing may evolve will help farm managers better prepare for entering this emerging industry. 

Producer-Level Hedging Effectiveness of Class III Milk Futures 

By Ira J. Altman, Dwight Sanders, and Jonathan Schneider

Mailbox milk prices from a representative dairy operation in Illinois are used to gauge the farmlevel hedging effectiveness of Class III milk futures traded on the Chicago Mercantile Exchange. Predominantly used by manufacturers and end users to price cheese, the Class III milk futures are not frequently utilized by producers. The presented analysis shows that the Class III milk futures do provide an effective producerlevel hedge: a hedge ratio of 0.85 can reduce price risk by over 90 percent. The importance of seasonal basis components for individual producers is highlighted. 

Record-Keeping Technology Adoption among Dairy Farmers 

By Elisabeth Grisham and Jeffrey Gillespie

Louisiana farmers were surveyed to determine their adoption of information and record-keeping technologies, including the Internet, Dairy Herd Improvement Association membership, use of financial measures, and frequency of use of computerized records. Factors influencing adoption included having a family successor, overall technology adoption propensity, diversification, off-farm income, college degree, and others. 

Recreational Leases as Means to Increase Landowner Income 

By Phillip R. Eberle and Russ Wallace

Recreational leases for hunting, fishing, and wildlife watching provide a means by which landowners can supplement their income from land ownership. Illinois professional farm managers were surveyed regarding recreational leases held by their clients. Information was collected on lease rates, recreational uses, wildlife types, land management practices, and property characteristics. Results indicated that 38 percent of managers had recreational leases on about 6 percent of their managed properties. Lease rates ranged from $1-75 per acre. Results of a hedonic lease rate model indicated adoption of land management practices and location positively affected lease rates.

The Impact of Beef Price and Hunting Pressure on Pasture Values in North Dakota 

By Cheryl S. DeVuyst and Eric A. DeVuyst

Anecdotal evidence suggests that agricultural land values are influenced by recreational demands, in particular hunting. This study estimated that the impact that hunting pressure, beef prices, and lagged land values had on county-level pasture values in North Dakota. Using panel data from 1989-2006, a fixed effects model was specified and estimated. Results showed that on average, hunting pressure increased pasture land values by $16.27 per acre or about nine percent of total pasture value. 

Starting an Independent Rural Appraisal Business 

By Harold D. Guither, Ph.D., AAC

This article reports the responses from a survey of 45 independent rural appraisers in 18 states and 1 Canadian province who have started their own independent business. All were members of the American Society of Farm Managers and Rural Appraisers in 2006 and held the ARA designation. When they started their own business, the respondents ranged from 25 to 62 years of age. Most engaged in some other services along with appraising. This purpose of this report was to gain insights into starting a rural appraisal business through a survey of independent rural appraisers who had started their own appraisal business and usually did not engage in farm or ranch management. 

The Impact of the Conservation Reserve Program on the Sale Price of Agricultural Land 

By Nick Schmitz and Steven Shultz

Hedonic price modeling of 1,951 non-pasture agricultural land sales across North Dakota indicates that land enrolled in the Conservation Reserve Program (CRP) sold for 14 percent less than otherwise similar cropland over the 2000 to 2004 time period. This price discount is assumed to result from the increasing opportunity costs associated with maintaining agricultural land in conservation, particularly in light of the steadily increasing commodity prices over the study period. Similar findings have recently been reported in the adjacent state of Minnesota. These multi-state results explain why many landowners nationwide are actively lobbying the USDA to allow voluntary opt-outs of remaining CRP contracts. This may also indicate the need to either shorten the length of future CRP contracts and/or to have CRP payment values tied to commodity and/or land price indices. Continued research on this topic would be facilitated and improved with the inclusion of parcel-specific (GIS based) CRP enrollment data. 

Controlled versus Continuous Calving Seasons in the South: What’s at Stake? 

By Damona Doye, Michael Popp, and Chuck West

This paper analyzed the financial ramifications of differences in seasonal input requirements of cowcalf operations by comparing a defined 90-day calving season to year-round calving. Assuming the same calving rate and labor requirements for both production systems, as well as no premiums for larger, more uniform lots of calves with the controlled calving season, uncontrolled calving resulted in slightly higher returns primarily due to better seasonal forage utilization. However, minimal changes to calving rate, expected calf price premiums, and changes in labor requirements favored controlled calving with returns deemed insufficient for small operators to switch from their current practice. 

The Economic Viability of Orchard Production on Small Acreage

 By Karen Klonsky, Janine Hasey, and Rich DeMoura

This study explored the difference in costs of production among different size orchards in California. Costs differ with respect to pruning, pest control, harvest, equipment ownership, and land cost per acre. The results show that while 100- acre orchards are profitable, 5-acre and 20-acre orchards cannot cover land ownership costs.

Chile Production in New Mexico and Northern Mexico 

By Jerry Hawkes, James D. Libbin, and Brandon A. Jones

The chile pepper has long been a part of the history and culture of the Southwest, and now is an important horticultural crop in New Mexico. Recently the industry has faced many challenges including cheaper imports and rising production costs, which have reduced chile acreage in New Mexico by almost half. To compare production costs in southern New Mexico and northern Mexico, representative cost and return estimates for the two regions were prepared. Even though U.S. producers have higher gross returns, the overall return to land and risk is greater for producers in Chihuahua because of lower production costs (largely due to lower wage rates). This study found advantages and disadvantages for producers on both sides of the border.

Is Canadian Farmland Overpriced? 

By Marvin J. Painter, Ph.D.

Farm lobby groups in Canada have consistently argued that there is a farm income crisis. However, the average net worth of Canadian farm families has been two to three times the average net worth of all families. If farm incomes are so persistently low, how and why do farmers continue to farm and purchase farmland at such high prices? A discounted earning model was employed to estimate farmland value in Canada. The overall conclusion is that there is no strong evidence that Canadian farmland is overpriced, as would be expected from the low levels of net farm income. 

Letter from the Editor 

Dear ASFMRA Members and Friends of Agriculture: Are you ready for something new? Keep reading – there are many new things for you to consider in the following papers.