George F. Patrick

Analysis of Beef Producers' Risk Management Perceptions and Desire for Further Risk Management Education

Beef cattle producers were surveyed in Texas and Nebraska to investigate perceptions of sources of risk, the effectiveness of risk management strategies, and interest in further risk management education, particularly production risk, using probit analysis. Important decision variables identified are age, prior use of risk management tools, previous attendances of risk management education, and risk aversion. Severe drought and cattle price variability are identified as primary risk factors with potential to affect farm income. Extremely cold weather and disease are of less importance. Understocking pasture and storing hay are perceived most effective as risk management options. Copyright 2003, Oxford University Press.

The Impact of Managerial Ability and Capital Structure on Growth of the Farm Firm

A simulation model of farm firm behavior in a dynamic environment with elements of uncertainty was developed. The decision makers formulation of expectations regarding future prices and yields, his selection of alternative farm plans, evaluation of the expected outcomes of the plans with respect to four goals, and implementation of the plan offering the highest level of overall satisfaction are explicitly considered. The expectations, goals, and resource position of the firm are adjusted to reflect the outcome of the particular plan implemented, and the process is repeated for the next year. A case was simulated for a period of 20 years under three different levels of managerial ability and 27 different capital market structures. It is concluded that managerial ability and long-term loan limits are the major factors, among those considered, influencing farm firm growth.

Risk Perceptions and Management Responses: Producer-Generated Hypotheses For Risk Modeling

Farm level risk analyses have used price and yield variability almost exclusively to represent risk. Results from a survey of 149 agricultural producers in 12 states indicate that producers consider a broader range of sources of variability in their operations. Significant differences exist among categories with respect to the importance of the sources of variability in crop and livestock production. Producers also used a variety of management responses to variability. There were significant difference among categories in the importance given to particular responses and their use of them. These results have implications for research, extension, and policy programs.

Information sources and risk attitudes of large-scale farmers, farm managers, and agricultural bankers

Views of large-scale farmers, professional farm managers, and agricultural bankers on sources of information as well as sources of and responses to risk in agriculture are explored. The groups rated nine or more information sources at 3.0 or higher on a 5-point scale for production decisions. Fewer sources were rated as important for marketing and financial decisions. Internal information sources such as records, tenants, or borrowers were highly rated. In contrast to large-scale farmers, both farm managers and agricultural bankers rated professional colleagues as important information sources. Responses were similar with respect to sources of and managerial responses to risk, and in their self-assessment of management skills.

How Much does Risk Really Matter to Farmers

Agriculture is inherently risky. Farm production is a biological process subject to unpredictable weather, diseases, and biological pests. In addition, farming is spatially dispersed on heterogeneous soils. Weather and spatial dispersion particularly affect crops and grazing livestock. In contrast, confinement production of animals partially controls production risk. This biological uncertainty is a fundamental cause of agricultural price uncertainty. Price uncertainty in crops is mirrored in livestock and poultry feed price uncertainty, causing output price uncertainty even for confined livestock and poultry production. Over the past 40 years, a number of changes in the U.S. agricultural sector have further increased risk. Substitution of income payments for high price supports in federal commodity programs resulted in major crop prices being determined with markets rather than policy price floors. In addition, increasing international trade in U.S. agricultural commodities in the 1970s resulted in output prices being subject to supply and demand shifts throughout the world, as well as in this country. Increases in size of farm operations and the pace of technological change have increased the managerial complexity of farming and the need for farmers to manage risk. Urbanization of farming areas has increased conflicts with new neighbors. A final change is increased environmental and other regulations in farming that influence risk management and introduce other sources of risk. These themes of termination of commodity programs, globalization of markets, increased managerial complexity, increased neighbor conflicts, and increased governmental regulations are fundamental shifts in the risk environment of U.S. farmers over the past 50 years.

Use of private consultants and other sources of information by large cornbelt farmers

Farmers attending the 1991 Top Farmer Crop Workshop were surveyed on their sources and costs of information. Respondents spent an average of

Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach

2,578 per year on information sources and rated their own farm records|budgets highest for usefulness in decisions. In contrast to earlier studies, these farmers gave less importance to salesmen and other farmers as sources of information, but gave greater importance to consultants. Use of consultants tended to be greater on larger, more diversified farms with more complex financial structure. Younger farmers and those using computers also tended to make use of consultants.

Farmers' Marginal Propensity to Consume: An Application to Illinois Grain Farms

A multinomial logit is utilized to model the choice of whether to purchase yield or revenue insurance using subjectively elicited survey data. Our results indicate that the demand for crop insurance is inelastic (-0.40), consistent with most earlier yield elasticity estimates, but the elasticity for choices between yield and revenue insurance is found to be relatively more elastic (-0.88).

Costs and Returns of Education in Five Agricultural Areas of Eastern Brazil

The marginal propensity to consume (MPC) for a sample of eighteen Illinois farms over the 1979–86 period is determined. Four consumption models were estimated using disposable household income plus depreciation as the measure of income. Estimated short-run MPCs ranged from 0.007 to 0.020, while long-run MPCs varied between 0.143 to 0.381. These results indicate farm family consumption responded little to changes in income and that the life cycle hypothesis model explains consumption significantly better than the other models. Robustness of the results is demonstrated using a larger sample of farms for 1986&87.

Hog Producers' Risk Management Attitudes and Desire for Additional Risk Management Education

This study tests the hypothesis that education has a major role in agricultural development by estimating costs and returns of schooling and extension in areas at various modernization levels. Public and private costs are estimated from secondary information and farm surveys. Value-added and auxiliary equations, estimated from farm-level data, are used to derive annual returns of education. Although based on weak statistical results, schooling returns are negative or low, but increase with modernization level. Extension returns are generally high for individuals, but cover social costs in only two geographic areas. This suggests educations role in development may be limited.