Warren F. Lee

Nonfarm Equity in Agriculture: Past, Present, and Future

The issue of nonfarm equity is inherently a structural issue. This relationship has long been understood. However, the older view generally concentrated on the potentially negative consequences of nonfarm equity capital for the structure of agriculture (Ottoson and Vollmar), while the emerging view, shaped by recent events that have highlighted the vulnerability of that structure, suggests the potential for nonfarm equity capital as a solution to financial stress (Brake and Boehlje). The structural characteristics of agriculture imply the existence of barriers to the flow of equity capital between the farm and nonfarm sectors as well as inducements to that flow. Most important, these characteristics have hampered the development of an efficient equity market in agriculture. Thus, the most significant flows of nonfarm equity capital have largely circumvented existing farm businesses, flowing instead into direct ownership of farm assets or shared ownership of newer and generally larger and more technologically innovative farm businesses.