Factors affecting the profitability of limited resource and other small farms

Abstract

This study investigates the factors affecting profitability of limited resource and other small farms. Profitability is measured by net farm income and operators' labor and management income. The empirical model is estimated by a weighted least squares procedure using data from the USDA's 1996 Agricultural Resource Management Study survey. Results indicate that profitability of limited resource farms depends on operator's age, soil productivity, debtto-asset ratio, and ratios of variable and fixed costs of production to value of agricultural production. Profitability of other small farms depends on operator's age, farm size, farm diversification, and crop insurance. Further, a major source of variation in the performance measures of both limited resource and other small farms is the ratio of variable costs to value of agricultural production.

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