Journal 2016

Dedication Letter 2016 Journal of ASFMRA

By Brian Stockman, EVP and CEO

It is with a great deal of pride and thankfulness that ASFMRA dedicates the 2016 Journal to
Don Fisher, ARA for his past 18 years of stewardship over this esteemed publication…

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Letter from the Editorial Committee Chair

By Donald Fisher, ARA

The 2016 Journal of the ASFMRA is ready for viewing! The ASFMRA Editorial Committee is proud to
present this year’s Journal with fourteen papers on more than a dozen topics involving farm management, rural
appraisal and agricultural consulting issues. The manuscripts that were submitted for consideration provided
our Committee with a wide assortment of subject matter to review and evaluate for your reading pleasure.

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Determining the Economically Optimal Level of Control on Sprayers and Planters

By Craig M. Smith & Kevin C. Dhuyvetter

The capabilities of planter and sprayer technologies that link GPS navigation with application control continue to expand. Current technology permits varying levels of control for sprayers and planters down to the individual nozzle and row. The economics of various levels of control have not been reported in the literature. This research incorporates over 1,400 real-world cropland fields to examine the effects of region, crops grown, and acres covered on the returns to investment in these technologies. There were found to be stark differences in returns and payback for these technologies across these factors.

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Have Farm Custom Rates Kept Pace with Machinery Costs?

By William M. Edwards

Average custom rates for eight common farming operations as reported in surveys done in Iowa and Kansas in 1995 were inflated to 2015 values (Iowa) and 2013 values (Kansas) using the Prices Paid indices gathered by the National Agricultural Statistics Service (NASS).  The projected rates were generally higher than the average rates reported in surveys completed in the corresponding years, except for planting. Possible explanations for the lag in custom rates include uncertainty about fuel prices, improved fuel efficiency, improved field efficiency, adoption of larger equipment where economies of size exist, and extension of field hours per season.

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Analyzing the Costs and Returns of US Meat Goat Farms

By Berdikul Qushim, Jeffrey M. Gillespie, and Kenneth McMillin

This paper analyzes the costs and returns of meat goat farms for the U.S., Southeastern U.S., Northern U.S., and Western U.S. regions. We compare components of costs and returns of meat goat production based on operation size (small and large) and targeted marketing segment (slaughter, breeding/show, and mixed). Our costs and returns analyses show that input expenses decrease substantially with increasing scale of operation. Increasing the number of meat goats for small meat goat farms can lead to reduced input expenses per doe and per acre. 

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Economics of Transitioning from a Cow-Calf- Yearling Operation to a Stocker Operation

By Shane P. Ruff, Dannele E. Peck, Christopher T. Bastian, and Walter E. Cook

One alternative to a cow-calf-yearling operation is a stocker operation. Relative profitability of cow-calf-yearling versus stockers is well documented. Little is known, however, about the economics of the transition process itself. We analyze benefits, costs, and risks of switching from cow-calf-yearling to stockers over a one-year versus seven-year transition period. Results show a gradual transition is superior to an abrupt transition. A gradual transition to stockers generates more net present value than cowcalf-yearlings, given a sufficiently high discount rate or short planning horizon. Farm managers and consultants should include transition-period benefits and costs when analyzing alternative enterprises.

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Economic Feasibility of Converting Center Pivot Irrigation to Subsurface Drip Irrigation

By Bridget Guerrero, Steve Amosson, Lal Almas,Thomas Marek, and Dana Porter

Advancements in irrigation technology have increased water use efficiency. However, producers can be reluctant to convert to a more efficient irrigation system when the initial investment costs are high. This study examines the economic feasibility of replacing low energy precision application (LEPA) center pivot sprinkler irrigation with subsurface drip irrigation (SDI). Specifically, the changes in net investment, variable costs, and total costs related to the conversion of irrigation systems are estimated. Then, these costs are used to evaluate the necessary increase in crop yields with a SDI system under alternative crop scenarios for conversion to be economically feasible.

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An Economic Analysis of Harvesting Biomass from Sorghums and Corn

By Jeffery Williams, Jon Brammer, Richard Llewelyn, and Jason Bergtold

This study examines the economic potential of harvesting cellulosic biomass from corn and three types of sorghum rotated with soybeans using enterprise budgets constructed with experiment field data. The results show that harvesting of crop residue from grain sorghum, corn, and biomass from an energy sorghum that does not produce grain is economically feasible. Net returns from corn that produced grain and corn stover has the highest net return per acre. Dual purpose sorghum which produces sorghum grain and sorghum stover has the second highest net return per acre. Net returns from the other two sorghums were substantially less.

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A Two-Tiered Benchmarking Analysis for Cost Management

By Jordan M. Shockley, William A. Osborne, Carl R. Dillon, and Jerry S. Pierce

The ability of operators and managers to benchmark farm performance with those in their region is a great starting point for cost management. This study expands on the traditional one-tier stratification of farm-level data and uses a two-tier approach using farm income and expense allocation as categories of performance. Farm managers, consultants, and landowners can utilize this framework to provide more insights and management opportunities for their self or their clientele. More specifically, they can dentify expenditure characteristics and the capital allocation of the top managers for benchmarking against their own operations.

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Meat Goat Production in the United States: Adoption of Technologies, Management Practices, and Production Systems

By Surendra Osti, Jeffrey Gillespie, Narayan P. Nyaupane, and Kenneth McMillin

In the United States, meat goat production has increased as the demand for goat meat has expanded due to immigration from Central and South America, Africa, Asia, and the Middle-East. Mail survey data were collected from US meat goat farmers during the summer of 2012, to examine the current status of US meat goat farms. Results obtained from the survey provide a snapshot into meat goat farmers’ adoption of technology, management practices, and production systems in the United States.

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Costs of Using Unmanned Aircraft on Crop Farms

By Nancy Ireland-Otto, Ignacio A. Ciampitti, Mark T. Blanks, Robert O. Burton, Jr., and Travis Balthazor

Excitement is high about the potential uses of unmanned aerial systems (UAS) in agriculture. We budgeted the costs of high-yield, non-irrigated corn production on two fields on a “representative” farm located in Northeastern Kansas. One complete pass over each field was completed. The representative farm will use a manned aerial system (MAS) or UAS and visual inspection and soil/tissue tests to determine whether and where a nitrogen deficiency is occurring. Our analysis suggests that UAS is less costly than MAS. The authors expect the costs of UAS and MAS to decrease in the future.

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Potential Profitability of Strip Intercropping with Corn and Soybeans

By Barry Ward, Brian E. Roe, and Marvin T. Batte

Strip intercropping of corn and soybeans can result in improved corn yields but at the cost of reduced soybean yields. Additionally, machinery and labor costs may be increased with strip cropping due to the use of smaller equipment. We present a systematic comparison of the relative net revenue differences for a large-scale corn-soybean operation under conventional and strip intercropping production practices. Although strip intercropping resulted in greater gross receipts than monoculture within a field, costs of machine ownership and operation and labor were much higher, resulting in lower net returns.

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Big Data Considerations for Rural Property Professionals

By Terry W. Griffin, Tyler B. Mark, Shannon Ferrell, Todd Janzen, Gregory Ibendahl, Jeff D. Bennett, Jacob L. Maurer, and Aleksan Shanoyan

The promise of “big data” has been praised by the popular media. Concepts and impediments surrounding big data are discussed relative to both the current status and anticipated direction of the industry. Rural property professionals, such as farm managers and rural appraisers, have an opportunity to position themselves and their clients to make effective use of big data. Topics relevant to big data in agriculture include farmland values, lease arrangements, data ownership, data as an asset and its valuation, and the ramifications of wireless connectivity. The challenges that rural property professionals may encounter when integrating big data into their portfolio of services are described.

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An Overview of the Decisions and Changes Made in the 2014 Farm Bill

By Nicholas D. Paulson, Gary D. Schnitkey, Jonathan Coppess, and Carl Zulauf

Changes to farm program support in the 2014 Farm Bill was driven by budgetary concerns and desire to place more emphasis on risk management. As a result, farmers and landowners in the US were faced with a set of decisions. Landowners were able to update payment yields and reallocate the base acres. Farm operators were given the choice of three different farm programs, with either price-based or revenue-based risk protection. These decisions led to some fairly significant changes in the way federal support will be provided to farmers of program crops. These decisions will impact all current and future landowners, farmers, farm managers, appraisers, and other downstream parties such as lenders and input suppliers.

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Using Solvency Ratios to Predict Future Profitability

By Gregory Ibendahl

Solvency ratios are normally used as an indicator of the long-term viability of the farm business. Farms with high leverage have a greater likelihood of going bankrupt. Bankruptcy occurs because a farm loses its equity. However, for a farm to lose equity, it must generate negative profits or family living withdrawals must exceed profits and any equity increases. In either case, low profitability is likely a major factor in a farm losing equity. This might imply that highly leveraged farms, which pay more in interest expense, are earning less profit than those farms without debt. Thus it might be possible to predict future profitability based on solvency ratios. This paper tests that hypothesis but finds a naïve model of looking at past profit to predict future profits works better than using solvency ratios.

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Strategies and Time Allocation of Large, Commercial Agricultural Producers

By Josiah Ringelberg, Michael Gunderson, and David Widmar

This research assesses how managers of farms with more than one million dollars in gross annual revenue evaluate strategies and allocate time. We find that farm managers place greater emphasis on controlling costs and managing production as strategies for success. Interestingly, very few producers spend most of their time controlling costs. As farmers get larger, managers are more apt to find managing people an important strategy and use of time.

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