Progress 10/01/09 to 09/30/14

Outputs
Target Audience: The work on renewable energy technologies and biochar production was directed towards farmers and public policy makers. The value of working for the family business was directed towards entrepreneur counselors. The agricultural credit results will be useful to both academics and practitioners who work on credit risk. The multiplier impact of agriculture businesses was directed towards policy makers to determine the economic gains of economic development activities. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? A PhD student completed research and laterhis PhD dissertation under this project. How have the results been disseminated to communities of interest? Results were disseminated by presentations at conferences and to extension agents and the public. Reports, papers and journal articles were prepared reporting the research results. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? The potential for methane emission reductions and renewable energy on dairy farms was analyzed. Many of the barriers to the adoption of these renewable energy technologies can be overcome by policies and programs designed to improve the understanding of the financial situation associated with adoption of these technologies, and establishing markets that reward livestock operations for achieving the benefits associated with installation of methane digesters. The economic benefits of a bio char system were estimated using various feed stocks and was found to be the greatest with switch grass. The value that family members place on working for the family business as compared to working in a non-family business was estimated for New York dairy farms. That value was estimated to be $22,000 per year per individual, reflecting the value that individuals place on working for the family business. Various methods were used to determine economic loss in an agricultural lender loan portfolio. Expected loss estimates were determined by estimating the four components of probability of delinquency, probability of loss, loss given default and exposure at default. The results show the importance of accounting for the timing of delinquency and thus the use of survival models when considering delinquency risk Methodology was determined to measure the economic impacts of agricultural and food systems in New York and to estimate state level multipliers on employment, output, and value added metrics for agriculturally-based sectors in New York. Preliminary work was done on a survey to collect information on milk producer's participation the milk margin insurance includedin the 2014 Federal Farm Bill.

Publications

Progress 10/01/12 to 09/30/13

Outputs
Target Audience: Lending organizations that have agricultural loan portfolios, such as the Farm Credit System, Insurance Companies, and Commercial Banks. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? A PhD student completed his PhD dissertation under this project. How have the results been disseminated to communities of interest? Results are being disseminated this current year. What do you plan to do during the next reporting period to accomplish the goals? Draft and submit a journal article and prepare a report for the agricultural finance community.

Impacts
What was accomplished under these goals? A sample of agricultural mortgages from 2003 – 2011 across four agricultural sectors (i.e. annual crops, livestock production, permanent crops and agribusiness) were used to assessmethods and determine estimates of economic capital as defined by The Basel Accords. To accommodate the sample data, the Basel definition of probability of default is augmented to include a measure of delinquency. Specifically, loan-level delinquency data was used to model probability of delinquency in Survival Analysis and generalized estimating equations models. Coupled with an estimate of the probability of loss, a delinquency based probability of default estimate was obtained for each of the four portfolio sectors. Loss given default was modeled using loan-level data in linear regression and beta regression models. Fixed (i.e. default weighted average) and stochastic estimates from a beta distribution of loss given default were also estimated. Exposure at default was estimated as the principal balance outstanding at time of expected loss calculation. Combining these four predicted values (i.e. probability of delinquency, probability of loss, loss given default and exposure at default), one year ahead expected loss estimates were obtained. The loan-level expected losses was determined for each combination of models and was aggregated at the sector level. Aggregated expected loss estimates were then used in determining estimates of economic capital. The one year ahead predicted expected losses for each sector are combined with the historical 2003 – 2011 loss rates to create a ten year time series of sector loss rates. From this time series a t-copula was estimated and simulated to determine an empirical loss distribution for each of the model combinations. From the loss distributions estimates of Value-at-Risk and expected shortfall was determined, and used in determining estimates of economic capital.

Publications

Progress 10/01/11 to 09/30/12

Outputs
OUTPUTS: Family members often accept lower than market returns for their contributions to the family business because the family business provides additional socioemotional wealth to those members. The value of that socioemotional wealth as an annualized return is derived for a group of family farm managers by estimating the implied return from their contributions to the business and comparing these estimates to market returns of non-family farm managers. The estimate of socioemotional wealth for family farm managers averaged $22,000 per year on New York family farms over the period 1999-2008. Agricultural loan risks are being estimated for loans in the portfolio of a major agricultural lender to further develop models to determine necessary risk capital for lenders based upon the underlying risks of the agricultural portfolio. Data from multiple state and local sources have been analyzed to identify employment and industry concentrations, highlight areas of specialization relative to state and national metrics, assess inter-industry linkages, and calculate economic multipliers. The focus to date has been on up-to-date baseline economic information on the current status and trends of New York State agricultural and food system economic activity. By integrating multiple data sources, we were able to provide more detailed sub-industry level estimates of total output, employment, and value added than previously published. Longer term trends in farm and food production have also been summarized. In addition, forward and backward linkages between farm commodity production and the wider economy are estimated and discussed to better inform priorities on development initiatives and industry performance. The first of a series of three project reports has been published as a departmental extension bulletin and has been distributed widely among stakeholder audiences. In addition, several outreach presentations have been given on the research, including at Cornell Cooperative Extension's Ag and Food System In-service, the New York Farm Viability's Partners Summit, and the American Farmland Trust's Harvesting Opportunities in New York-Growing Local Food Economies and Protecting Farmland conference.  PARTICIPANTS: Jonathan Dressler, a PhD student in Applied Economics and Management at Cornell University worked with Dr. L.W. Tauer in estimating socioemotional wealth in the family farm business and is further working on estimating required risk capital for agricultural lenders. Dr. T.M. Schmit led research efforts in developing a methodological framework to measure the economic impacts of agricultural and food systems in NYS, and estimated state-level multipliers on employment, output, and value added metrics for agriculturally-based sectors in NYS. Dr. N.L. Bills coordinated data collection and led efforts on updating baseline economic information on the status and trends in NYS agribusiness economic activity. Dr. R.N. Boisvert provided technical expertise in economic impact analysis and leadership into beginning development of inter-regional modeling efforts for the northeast U.S. Dr. Boisvert also led research efforts on a detailed analysis of input-output tables to get a clearer picture of the structure of the NYS economy, with an emphasis on ag-based sector transactions. TARGET AUDIENCES: The project is partially designed to provide meaningful and applicable guidance to the appropriate estimation, utilization, and interpretation of economic impacts of the agricultural and food systems to the state of New York. Primary audiences include NYS stakeholders and industry advocates within the agribusiness industry in understanding agricultural sector roles within the agricultural economy and its relative economic contributions with respect to other agricultural and non-agricultural economic sectors. Secondary audiences include public policy makers and economic development agencies for which such information would be useful in understanding the economic contributions and to develop policies or initiatives that better support efficient agribusiness industry development. PROJECT MODIFICATIONS: Given the immediate necessity of assessing the role and impact of agricultural agricultural and food systems to the economy of the state of New York, research tasks have been added to the project to identify employment and industry concentrations, highlight areas of specialization relative to state and national metrics, assess inter-industry linkages, and calculate economic multipliers.

Impacts
A presentation is scheduled at the United States Association for Small Business and Entreprenuership annual meeting in early 2013, an association of family business researchers and conselors, to present and discuss the value that family members place on working for the family business as compared to working in a non-family business, a concept often referred to as socioemotional wealth in the family business literature. The impact of agriculture and agriculturally-related economic activity in New York State are being made available to stakeholders for use within their own organizations and to facilitate broader communication and outreach of resutls. Project reports and presentation of materials have been made at several industry conferences. New York State's agriculture and food sectors account for a small percentage of the state's total gross output. However, the multiplier estimates in this study confirm that food and agriculture exerts a relatively large generative effect on the New York economy. This means that efforts to enhance production in these sectors produce relatively large secondary and tertiary benefits for industries linked to farm and food production. Working with Cornell Extension faculty and staff, having industry relevant, accurate, and informative materials is a key outcome of this project. This includes utilization of results towards the formation of appropriate policy instruments or economic development strategies aimed at taking advantages of opportunities identified. Having project results available in a wide variety of formats will promote a broad distribution to a variety of audiences and promote a better understanding of the economic impacts and industry inter-relationships within and across the agricultural and food system industry

Publications

• Dressler, J.B. and L.W. Tauer. 2012. An Estimate of Socioemotional Wealth in the Family Business. Working Paper 2012-11. Charles H. Dyson School of Applied Economics and Management, Cornell University.
• Schmit, T.M. and Bills, N.L. 2012. Agriculture-based economic development in NYS: trends and prospects. EB 2012-11, Charles H. Dyson School of Applied Economics and Management, Cornell University.  

Progress 10/01/10 to 09/30/11

Outputs
OUTPUTS: Results from studying allocation of farm partnership income to the unpaid production factors of labor, managment, and equity investment have been preliminary reported. Feedback will be used to prepare a scholarly paper and develop outreach material for professionals who work with farm families. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
In family farm partnerships a major decision is how to allocate the business income when family members provide unequal amounts of equity, labor, and management to the business, and unequal amounts of contributions is the norm in agriculture as parents begin to provide less labor and management, but still often have a significant ownership of the business while they transfer the business to the next generation. This study addresses the dilemma of income allocation by estimating the earned returns to unpaid factors of production using a panel of dairy farm partnerships with various amounts of income, and unpaid factors of equity, labor, and management. Results imply that the opportunity costs of these factors are similar to market rates and thus should be paid appropriately, although there are years when business income is insufficient to pay market wages and equity returns.

Publications

• Dressler, J. B. and L. W. Tauer (2011). Revealing an Equitable Income Allocation among Dairy Farm Partnerships.
• Presentation at the Agricultural and Applied Economics Meetings, Pittsburgh, Pennsylvania, July 24-26, 2011. Working Paper 11-11, Charles H. Dyson School of Applied Economics and Management, Cornell University.

Progress 10/01/09 to 09/30/10

Outputs
OUTPUTS: Methane emission reductions have the potential to be an important source of carbon dioxide offsets under cap and trade climate legislation. Anaerobic digestion allows farmers to create renewable energy and significantly reduce manure methane emissions. Estimates of the aggregate supply curve for CO2 offsets were developed based upon dairy farm data collected by the USDA/ERS Agricultural Resource and Management Survey. Because anaerobic digestion of livestock waste is capital intensive, lenders will play a key role in the adoption. Some of the barriers that currently make lenders reluctant to finance were evaluated. Biomass pyrolysis with biochar returned to soil is a possible strategy for climate change mitigation and reducing fossil fuel consumption. Lifecycle assessment was used to estimate the energy and climate change impacts and the economics of biochar systems. Recent turmoil in financial markets heightened awareness of the importance of credit availability. Many of the nation's largest financial institutions have experienced severe financial stress, so the availability of agricultural credit was explored. PARTICIPANTS: Jonathan Dressler, PhD student in Applied Economics and Management at Cornell University TARGET AUDIENCES: Agricultural Lenders PROJECT MODIFICATIONS: Tauer, L joined the project 10/01/2010.

Impacts
The potential for methane emission reductions and renewable energy generation on U.S. dairy farms imply that offset prices in excess of $15 per ton of carbon dioxide equivalent would be required to reduce methane emissions from manure storages on dairy farms by 50 percent from 2005 levels. Many of the barriers to the adoption of anaerobic digestion can be overcome by adopting policies and programs designed to improve the understanding of the financial situation associated with adoption and establishing markets that reward livestock operations for achieving the benefits associated with installation. The net energy of a biochar system is greatest with switchgrass, while the net greenhouse gas emissions for both stover and yard waste are negative. Of these total reductions, 62-66% are realized from C sequestration in the biochar. The economic viability of the pyrolysis-biochar system is largely dependent on the costs of feedstock production, pyrolysis, and the value of carbon offsets. The transportation distance for feedstock creates a significant hurdle to the economic profitability of biochar-pyrolysis systems. Biochar may at present only deliver climate change mitigation benefits and be financially viable as a distributed system using waste biomass. The amount of uncertainty that exists in financial, commodity, and agricultural markets makes for a difficult lending environment. Nevertheless, agricultural lenders have changed to cash flow-based lending, have high and stable earnings, have raised capital above 1980s levels, and have borrowers that have undergone similar changes. The financial health of agricultural lenders appears to be positioned to weather a tumultuous environment.

Publications

• Gloy, B.A. (2010). Carbon Dioxide Offsets From Anaerobic Digestion of Dairy Waste. Working Paper Department of Applied Economics and Management, Cornell University.
• Roberts, K.G., B.A. Gloy, S. Joseph, N.R. Scott, and J. Lehmann. (2010). Life Cycle Assessment of Biochar Systems: Estimating the Energetic, Economic and Climate Change Potential. Environmental Science and Technology, 44(2):827-833.
• Briggeman, B.C., M.A. Gunderson, and B.A. Gloy. (2009). Financial Health of Agricultural Lenders. American Journal of Agricultural Economics, American Journal of Agricultural Economics, 91(5):1406- 1413.
• Gloy, B.A. and J.B. Dressler. (2010). Financial Barriers to the Adoption of Anaerobic Digestion on U.S. Livestock Operations. Agricultural Finance Review, 70(2):157-168.