Article2017

Following beginning farm income and wealth over time

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12 citations0/0 files storedAgricultural Finance Review

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Agricultural economics and policies Financial Literacy, Pension, Retirement Analysis Agricultural Innovations and Practices

Abstract

Purpose The paper examines the evolution of beginning farms’ income statement and balance sheet items over a 15-year period. The purpose of this paper is to gain insight into the diversity of beginning farms from a financial point of view. Design/methodology/approach Using the USDA’s Agricultural Resource Management Survey (ARMS), the author constructs a synthetic panel of data consisting of age cohorts of beginning farmers and follow them over time. Baseline financial information for the farm income statement and balance sheet is examined in 1999 and again in 2014 for each cohort. Findings Overall, there is a marked contrast in the evolution in the income statement between beginning farmers who are under 45 years old and those over 45. The gross cash income of the youngest cohorts grows tremendously, as do their expenses, indicating rapid expansion in production on the part of the youngest cohorts. The change in the balance sheets of the cohorts also provides a glimpse into the changing roles of beginning famers over time. The youngest cohort of beginning farmers increase the current and non-current assets on their balance sheets by a substantial amount, more than doubling both. Furthermore, the youngest cohort is the only group to take on more current liabilities, indicating increased financing of the production expenses. Practical implications Differences in the evolution of financial profiles of beginning farms may predict differences in future output, and it could be a predictor of the farm’s operational goals or intentions, as well as predictor of future financial needs and challenges. Originality/value Knowing and understanding likely trajectories of beginning farmers may provide an opportunity to better tailor farm programs, outreach, and support to beginning farmers.

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References

1985Panel data from time series of cross-sections 1993Identification and estimation of dynamic models with a time series of repeated cross-sections 1992Can Cohort Data be Treated as Genuine Panel Data?1992Can cohort data be treated as genuine panel data?2004Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions 2003Asymptotic theory for heterogeneous dynamic pseudo-panels 2004Productivity, Economies, and Efficiency in U.S. Agriculture: A Look at Contracts 1973The Entry-Growth-Exit Processes in Agriculture

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