Progress 10/01/09 to 09/30/14
Outputs
Target Audience: The nature of the collective research undertaken in this project places a premium on communicating and disseminating research results to academic professionals, policymakers, farmers, financial institution managers, agribusiness managers, and leaders in local communities. In addition to the usual channels through extension and professional publications, NC-1177 is connected to government and industry leaders, which will provide an immediate transfer of knowledge beyond normal academic outlets. This is evident by the 2013 annual NC-11774 meeting being coordinated with the National Agricultural Credit Committee at the Federal Reserve Bank of Kansas City. Coordinating future meetings by both NC-1177 and the National Agricultural Credit Committee was discussed by participants at this previous meeting and, if schedules work, something planned for future meetings. In addition, information bulletins in non-technical language as well as two-page summaries of research results will be prepared and disseminated. Sessions will be organized for professional meetings of the American Agricultural Economics Association and several regional science associations. Project annual reports, symposia programs, and related materials will be provided to the public via the NC-1177 website along with summaries of research results. Another component of the outreach plan is the development of an agricultural finance community of practice for eXtension.org. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided? The impact of the first article has been the inclusion of the results in numerous outreach presentations to lenders, farmers, and commodity brokers. The studies that will be completed will provide lenders and farmers a better understanding of how to manage risks during commodity downturns. How have the results been disseminated to communities of interest? The results for these studies have been disseminated via departmental reports, academic publications, and professional presentations. 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 outputs of this project are focused on the first and third objectives which are to determine the effects of changes in international competitive balance and federal and state policies affecting agriculture on the financial and economic performance of farms, agribusinesses and rural financial markets and evaluate the management strategies, capital needs, and financial performance required for the long-term sustainability of firms in the food and agribusiness sector. Two journal articles have been published or submitted for publication.
Publications
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Progress 10/01/12 to 09/30/13
Outputs
Target Audience:
Nothing Reported
Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided? 12 lenders from through North Dakota and Minnesota were able to complete the online lender training that was funded by a grant received in 2012. How have the results been disseminated to communities of interest? The results have been published in research journals and the department has posted the articles on the departmental website. What do you plan to do during the next reporting period to accomplish the goals? During the next reporting period I will complete the FarmSimulation project. This will provide an opportunity to train farmers and managers on strategic decision making and financial analysis.
Impacts
What was accomplished under these goals?
During this reporting year, two journal articles were published. The research articles were focused on the second goal of this project. The first articles examined machinery investment as it relates to tax policy. The research found that a significant contribution to a farmer's investment strategy is the underlying tax policy. Changes in tax policy could dramatically impact machinery purchases which in turn would have an impact on local equipment dealers and others providing service to those industries. The second research article was focused on diversification strategy and how farmers should think strategically about geographcially diversifiying. This research helps farmers to develop a long term strategy to mitigate possible production risks. The online lender training became available during 2013. 12 lenders have completed the training as of the end of this reporting period. It is expected in 2014 to have 20-30 more lenders complete the training.
Publications
- Type:
Journal Articles
Status:
Published
Year Published:
2013
Citation:
Hadrich, J.C., Larsen, R., Olson, F. Impact of the Section 179 tax deduction on machinery investment . Agricultural Finance Review, Vol. 73(3), 2013, p. 458-468.
Larsen, R., Mjelde, J.M., Klinefelter, D., Wolfley, J.L. The Use of Copulas in Explaining Crop Yield Dependence Structures for use in Geographic Diversification . Agricultural Finance Review, Vol. 73(3), 2013, p. 469-492.
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Progress 10/01/11 to 09/30/12
Outputs
OUTPUTS: The outputs during this past year have been focused on the first and third objectives associated with this project. Two grants have been awarded to help teach management strategies to farmers and also to train beginning agricultural lenders. The first grant is being funding by the North Dakota Corn Council. The purpose of the grant is to develop a farm simulation to teach both students and farmers different management strategies. The second grant is funded by four different Farm Credit Associations. The purpose of the grant is to develop an online training tool for beginning agricultural lenders. Workshops and online curriculum will be done during the upcoming year. Two journal articles have been published or accepted for publication. The results of the studies have been disseminated at conferences and also via departmental publications. Two additional studies that will be submitted for publication during this upcoming year were presented at national conferences and also to lenders throughout the state. 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
The outcome of the grant writing activities resulted in 83,000 dollars in grant funds. This money is being used to fund two graduate students who are working on both grants. The results of the grants will be disseminated in 2013 and 2014. The machinery investment study found that tax incentives played a strong role in determining how much machinery a farmer was willing to invest in. The implications of changing this policy could have dramatic impacts on farmers and participants in the machinery industry. The cooperative finance study found that macroeconomic uncertainty negatively impacted how a cooperative managed their cash flow and ultimately their liquidity. It is expected that there will be close to forty beginning lenders throughout North Dakota that will begin to use the online training tool beginning in 2013.
Publications
- McKee, G. and Larsen, R. 2012. The effects of uncertainty and capital source on cooperative firm leverage, Journal of Rural Cooperation Vol. 40, #2.
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Progress 10/01/10 to 09/30/11
Outputs
OUTPUTS: This project has transitioned from Cole Gustafson to Ryan Larsen in October of this past year. The outputs of this project are focused on the fourth objective of the project which is to analyze the economics of biofuel production. Two journal articles have been published or accepted for publication. The results of the study have also been disseminated via presentations in numerous North Dakota locations by the principal investigator. Additionally, data has been gathered and will be analyzed this coming year to understand the impact of systemic risk on North Dakota Banks. The data contains financial information about the banks both before and after the financial crisis. The objective is to evaluate the difference in reactions to systemic shocks by large banks and small banks. 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
The cellulosic biofuel study found insufficient wheat stover in the targeted region to sustain a biofuel plant. Moreover, a significant economic challenge was identified with respect to density and distance of feedstock location. As a result the company sponsor modified their plant design to also include corn stovers. Plant construction is expected to begin in 2013 and be in operation one year later. The energy beet biofuel economic feasibility study concluded a 20mgy plant would provide competitive economic returns and a new rotational crop in the state. Developers of the project used these results to obtain additional industry and state support for the next project development phase. The first commercial plant is expected to be capitalized in 2013 and constructed in 2014. The banking study will provide lenders within North Dakota how to best prepare and respond to systemic risk shocks. By analyzing the time period covering the most recent financial crisis, it will allow lenders to understand how worldwide financial shocks impact them locally.
Publications
- Muang, T., et. al. Market Information on Sourcing Cellulosic Feedstock for Biofuel Production in the Northern Plains Region of the United States, Journal of Agricultural Science and Technology. 2011, forthcoming.
- Muang, T., Gustafson, C. The economic feasibility of sugar beet biofuel production in central North Dakota, Biomass and Bioenergy, 2011.
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Progress 10/01/09 to 09/30/10
Outputs
OUTPUTS: Two primary activities of this project last year were to collaborate with other states in submitting CAP grant proposals for project funding to USDA/NIFA and to conduct a study delineating the impact of creditor policies on constrained financial capital to the biofuel industry. The outputs of the first activity were submissions of five multistate and interdisciplinary grant proposals. These projects propose to develop new biofuel industries in the northern plains utilizing perennial grasses and new oilseeds as feedstock. My specific contribution to the projects is to complete financial and lifecycle analyses. These activities would fulfill Objective 4 of regional project. Results of this step were disseminated to peers and industry partners collaborating on each proposal. The output of the second activity was a journal article describing the impact of lender credit policies on financial constraints presently constraining growth of the biofuels industry following the collapse of national financial markets in 2008 to 2009 and the ensuing recession. Results of this study were shared to peers with publication of the journal article. Results were shared with the lenders during an invited presentation to the 2010 National Ag. Credit Council. Over a dozen regional presentations were made to lenders via NDSU's Agricultural Outlook Conference and the biofuel industry. Study findings were also summarized for lay audiences with topics included in my bi-weekly news release. PARTICIPANTS: The grant proposal activity partnered with several biofuel industry members including Renewable Fuels Association, Poet, ICM, and North Dakota Ethanol Council. Partners in the lender study included the Farm Credity System. TARGET AUDIENCES: Biofuel and agricultural credit industies. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The outcome of the grant writing activity is unknown as the proposals are still under USDA/NIFA review. This is a positive development because authors of many competing proposals have been informed of rejection. If funded, the additional monies will leverage existing program efforts and afford greater collaboration among regional partners and the biofuel industry. In particular, the regional project will gain access to proprietary industry financial metrics and technical performance data. The impacts of the biofuel lender study were that the addition of a lender-imposed sweep, whereby a percentage of free cash flow is used to pay off extra debt in high profit years, reduces the firm's ability to build equity and increases bankruptcy risk under investment. However, the sweep increases long-run equity because total financing costs are reduced with accelerated debt repayment. Practically, these results show that while ethanol firm profits are uncertain, imposition of a lender sweep combined with increased profit from dry fractionation technology helps the firm increase long-run financial resiliency. Biofuel lenders are now in the process of reviewing their sweep policies. This study is quite novel because examination of ethanol plant financial structures and investment capabilities has received scant research attention.
Publications
- Fewel J. and C. Gustafson. Do Lender Imposed Sweeps Affect Ethanol Technology Investment Agricultural Finance Review, 70 2 2010 p.169 183
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