Ralph W. Bierlen

Financial Structure of Farm Businesses under Imperfect Capital Markets

Recent finance studies have considered whether gaps between a firms costs of internal and external sources of investment funds, arising from capital market imperfections, influence its investment behavior and funding preferences. This study tests the applicability of the pecking order and partial adjustment theories of financial structure to farm businesses by fitting a set of simultaneous financial equations with farm panel data from Illinois. Model results indicate that Illinois farms adjust to long-run financial targets for equity, debt, and leasing, but that additional financing needs follow a pecking order that is stronger for farms with greater asymmetric information problems Copyright 2000, Oxford University Press.

Credit Constraints, Farm Characteristics, and the Farm Economy: Differential Impacts on Feeder Cattle and Beef Cow Inventories

A recurrent topic in the macroeconomic literature is the financial accelerator—the notion that informational asymmetries introduce inefficiencies to financial markets which amplify and propagate the effects of real or monetary shocks. With the purpose of finding empirical evidence that is consistent with a financial accelerator operating in the cattle sector, inventory investment models are estimated with an appended cash flow variable. The inclusion of cash flow is motivated by the notion that investment by credit-constrained farms should be sensitive to movements in internal funds. Results are consistent with the financial accelerator operating in the feeder cattle but not in the cow-calf sector. Copyright 1998, Oxford University Press.

How cropland contract type and term decisions are made: evidence from an Arkansas tenant survey

This study examines land contract decision-making with the use of an eastern Arkansas data set. Estimated probit models used to test contract choice hypotheses support a credit constraint hypothesis, indicating that contract choice is based on: 1) the tenants financial position and operating expense levels, 2) the size of the operation; 3) alternative uses of agricultural land; and 4) the supply of contracted land. Results indicate limited support for the agency problem hypothesis and reject the risk aversion and farmers managerial ability hypotheses. Regression equations used to select lease term hypotheses indicate that cash rent levels are sensitive to land quality, supply of contract acres, irrigation, and crop produced. Tenant shares of the crop and variable costs are less sensitive to land quality than cash rents. Other variables that influence tenant shares of the crop and variable costs include tenant/landlord social capital, the supply of contracted acres, and crop selection.

Price Incentives for Commercial Fresh Tomatoes

Hedonic price models are estimated to determine if there are incentives to supply higher quality tomatoes. Price premiums are associated with extra-large tomatoes originating from shipping points located closer to consumption points. Price differences between mature-green and vine-ripe tomatoes are not significant. Vine-ripe tomatoes are favored by consumers in the summer while mature-green tomatoes are favored the rest of the year. The U.S. Department of Agriculture should consider changing the present tomato grading system, which is based on shape and smoothness, to include a flavor indicator based on harvest maturity.

Unilateral reforms, trade blocs, and law of one price: MERCOSUR rice markets

The current study tests for the law of one price (LOP) in MERCOSUR rice markets and between the MERCOSUR and major rice exporters in the light of recent Argentinean and Brazilian unilateral reforms and regional integration. Johansens multivariate cointegration testing procedures support the existence of the LOP in both instances in the post- (but not the pre-) unilateral reform and regional integration period. This is consistent with the notion that bloc and nonbloc members can both enjoy the benefits of unilateral reforms by a bloc member when the external bloc tariff is not prohibitive.

Impacts Of Financial Characteristics And The Boom-Bust Cycle On The Farm Inventory-Cash Flow Relationship

The sensitivity of farm inventory investment to movements in cash flow is tested. Inventories should be sensitive to shifts in cash flow because inventory investment is readily reversible and inventories are a significant portion of assets. Investment models estimated with Kansas farm panel data indicate that: (a) farms absorb internal finance shocks by adjusting inventories, (b) the inventory investment of livestock and high-debt farms are more sensitive to movements in cash flow than crop and low-debt farms, and (c) inventory investment is more sensitive to cash flow during the 1981-86 bust and the 1987-92 recovery than during the 1975-80 boom.

Landlord Satisfaction with Arkansas Agricultural Land Agreements

Landlord satisfaction levels with agricultural land-leasing agreements are examined with a 1998 sample of Arkansas landowners. Ordered probit models are estimated identifying which factors significantly affect satisfaction levels. Results indicate that the type of lease is not a significant determinant of landlord satisfaction levels. Proportion of landlord’s income from leasing, tenant educational background, social capital variables, presence of irrigation equipment, and perceptions about the FAIR Act were found to significantly affect lease satisfaction in at least one of the three satisfaction models estimated. A comparison with an earlier study of Arkansas tenants indicates landlords have generally higher satisfaction levels.

Cattle cycles: is there a role for a financial accelerator?

The hypotheses that endogenous credit constraints based on fluctuating asset values and cash flow prolong and accentuate US cattle cycles; and that more diversified cow-calf firms are less affected by this phenomenon are tested. Breeding cattle inventories are an interesting example to study credit constraints because they are among the most cyclical of economic time-series, firms have heterogeneous diversification levels, and they avoid many of the problems with previous investment-cash flow sensitivities studies noted by Kaplan and Zingales. The results are consistent with earlier credit constraint studies, i.e. breeding cattle inventories are sensitive to shifting credit constraint regimes and cow-calf firms with higher diversification levels are less affected by credit constraints.

Domestic reforms and regional integration: Can Argentina and Uruguay increase non-MERCOSUR rice exports?

Argentina, Brazil, Paraguay, and Uruguay are currently undergoing national economic reforms and regional economic integration. This has caused fundamental shifts in rice production and marketing in the region. Since the late 1980s Brazil has moved from self-sufficiency to consistently being one of the worlds largest rice importers. In supplying the meteoric increase in Brazilian import demand, Argentina and Uruguay have more than doubled their production levels since 1990. Industry personnel in Argentina and Uruguay are interested in diversifying their exports away from the Brazilian import market that they now dominate. This article reviews factors that indicate that both nations have the potential to substantially increase rice exports to high-quality non-MERCOSUR markets.