Joshua D. Detre

Internet Access and Internet Purchasing Patterns of Farm Households

The Internet is becoming an increasingly important management tool in production agriculture. Using data from the 2004 Agricultural Resource Management Survey (ARMS) and a double-hurdle estimation approach, we explore the adoption of computers with Internet access by and Internet purchasing patterns of farm households. Adoption of the Internet is positively related to age and education of the operator, off-farm work, presence of spouse, participation in government programs, farm size, and regional location of the farm. Internet purchasing patterns of farm households are positively related to the education of the operator and spouse, presence of teenagers, and regional location of the farm. Finally, farm businesses and their households are more likely to purchase a greater percentage of non-durable goods through the Internet as distances to markets increase.

Drivers of agricultural profitability in the USA: An application of the Du Pont expansion method

Purpose - The aim of this study is to use a financial approach based on the Du Pont expansion to investigate the impact of demographics, specialization, tenure, vertical integration, farm type, and regional location on the three levers of performance (ROE) – namely, net profit margins, asset turnover ratio, and asset-to-equity ratio. Design/methodology/approach - This research uses a system of equations in conjunction with 1996-2009 farm-level data from the US Department of Agricultures Agricultural Resource Management Survey (ARMS) to evaluate the factors driving farm-level profitability, namely, net profit margins, asset turnover ratio, and asset-to-equity ratio. The methodology employed in this study corrects heterogeneity and uses repeated cross-section estimation procedure to estimate the empirical models. Findings - The study finds that key drivers of net profit margins are operator education, farm size and typology, specialization, and level of government payments. Key factors affecting the asset turnover ratio component of the Du Pont model include asset turnover ratio is driven by operator age, contracting, specialization, and receiving government payments. Finally, key factors affecting asset-to-equity ratio component of the Du Pont model are farm size, farm typology, contracting, and specialization drive asset-to-equity ratio. Originality/value - Existing research does not examine the factors affecting returns to equity in faring at the farm-level. Specifically, a micro-level analysis of American farms future structure and financial performance that accounts for the spatial and inter-temporal dimensions of profitability has never been conducted.

The role of an agribusiness index in a modern portfolio

Purpose - The purpose of this research is to develop a composite agribusiness stock index and then compare the returns and volatility to other broad-based market indices. The paper then evaluates the diversification potential of agribusiness stocks in the context of an investment portfolio. Design/methodology/approach - This agribusiness index (AGB Index) is market-capitalization weighted. Only firms traded on the NYSE, AMEX, or NASDAQ and meeting ERS SIC classification for industries related to agriculture are included in the index. The paper then uses standard financial metrics to measure the historical risk, return, and correlation. Findings - Until recent years, the AGB Index has historically exhibited lower returns than the market indices. The AGB Index has also exhibited lower risk and correlation with treasury securities than broad market indices. Practical implications - In recent years, portfolio managers and large investors have invested considerably in asset classes like farmland for stable returns, an inflation hedge, and diversification tool. This agribusiness index may further this trend and lead to the development of an alternative Exchange Traded Fund (ETF). This product would make investment in agriculture possible for virtually all investors. Originality/value - Despite increasing popularity, very little research exists on the performance of agricultural stocks in an investment portfolio. This study develops a large-cap agribusiness stock price index to help fill this void in the literature.

Buying stock in value‐added companies: an alternative choice for vertical diversification?

Recent research has indicated that livestock producers who want to manage risk and diversify their operations should invest in the stock market. This research evaluates whether or not a portfolio of publicly held companies that are first handlers of pork products would provide pork producers with a means of enhancing annual returns and reducing the volatility in the annual returns. Ex ante results suggest producers can gain from investment in value-added stocks. Ex post results, however, imply producers must choose active management of their portfolio to receive the same type of benefits as the ex ante portfolio.

The influence of GM crop adoption on the profitability of farms operated by young and beginning farmers

Purpose - The purpose of this paper is to assess the impacts of GM crop adoption on the profitability of farms operated by young and/or beginning farmers and ranchers (YBFR). Design/methodology/approach - This research uses weighted quantile regression analysis in conjunction with 2004-2006 Agricultural Resource Management Survey to evaluate the impact of GM crop adoption on financial performance of farms operated by YBFR. The methodology employed in this study corrects for the simultaneity of technology adoption and farm financial performance. Findings - As expected, the impact of GM crop adoption on profitability is positively affected by the scale of operation and leverage. On the other hand, off-farm employment by “beginning” farmers has a negative impact on farms profitability if they choose to adopt GM crops. Finally, quantile regression results from a farm household study shows that the model performs better at the higher quantile of the distribution. Research limitations/implications - This study helps to determine whether the adoption of GM crops increases the profitability of farms operated by “beginning” farmers. In addition, it explores the impact of other factors (such as farm, operator, demographic, and financial characteristics) on the profitability of farms operated by “beginning” farmers. Practical implications - Computing the profitability of adoption decisions for YBFR will provide significant information to YBFR that they can use in constructing their farm operations strategic business plan and future decisions regarding farming operations. Originality/value - Existing research does not examine the impact of GM crops adoption on farm profitability of YBFR. Furthermore, YBFR operators face significant challenges in making their operations financially viable, owing to lack of access to capital and land.