Carmen L. Sandretto

Profits, Costs, and the Changing Structure of Dairy Farming

U.S. dairy production is consolidating into fewer but larger farms. This report uses data from several USDA surveys to detail that consolidation and to analyze the financial drivers of consolidation. Specifically, larger farms realize lower production costs. Although small dairy farms realize higher revenue per hundredweight of milk sold, the cost advantages of larger size allow large farms to be profitable, on average, even while most small farms are unable to earn enough to replace their capital. Further survey evidence, as well as the financial data, suggest that consolidation is likely to continue.

Stability of Farm Income and the Role of Nonfarm Income in U.S. Agriculture

This study measures the variability in real net farm income in the U.S. agricultural sector and per farm and determines if variability has diminished over 1933 to 1999. Second, the role of nonfarm income in reducing the variability in total farm household income is examined. Results indicate that the variability in real net farm income in the sector and at the farm level has not diminished and that nonfarm income has helped to reduce the variability in total farm household income.

Factors affecting farm enterprise diversification

Enterprise diversification is a self‐insuring strategy used by farmers to protect against risk. This study examines the impact of various farm, operator, and household characteristics on the level of onfarm enterprise diversification. Evidence exists that larger farms are more specialized. Also, farmers who participate in off‐farm work, farms located near urban areas, or farms with higher debt‐to‐asset ratios are less likely to be diversified. In contrast, evidence suggests there is a significant positive relationship between diversification and whether the farm business has crop insurance, is organized as a sole proprietorship, or receives any direct payments from current farm commodity programs.

Effects of Farmer Response to Nitrogen Fertilizer Management Practices on Groundwater Quality

This research investigates the validity of efforts to protect groundwater quality for a variety of beneficial uses by using a widely accepted nitrate-accounting procedure as the mechanism to obtain reductions in farmer-applied nitrogen fertilizers. A dynamic model of nitrogen fertilizer use, incorporating critical elements of the nutrient cycle, is employed to demonstrate that recommended nitrogen fertilizer application rates based on this nitrate-accounting procedure underestimate nitrogen fertilizer use. These results occur because the nitrate-accounting procedure inadequately represents farmer responses to nitrates available from irrigation water. An optimal tax rate on nitrogen fertilizer use is derived which, if implemented, would lead to the reduced levels of nitrogen fertilizer use intended by the nitrate accounting procedure.

Forage Outsourcing in the Dairy Sector: The Extent of Use and Impact on Farm Profitability

The extent of forage purchasing behavior in milk production and its impact on profitability are analyzed using data from the 2000 and 2005 dairy versions of the Agricultural Resource Management Survey. Forage outsourcing is more common with hay than with silage and haylage, and is more prevalent in the western United States. Though silage and haylage outsourcing is found to impact profitability, the major profitability drivers appear to be farm size and efficiency. Evidence of significant forage contracting is found in the western United States.