Source: OHIO STATE UNIVERSITY submitted to NRP
AGRICULTURAL AND RURAL FINANCE MARKETS IN TRANSITION (NC1014, NC221, NCT-194)
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
HATCH
Reporting Frequency
Annual
Accession No.
1007613
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
NC-_old1177
Project Start Date
Sep 16, 2015
Project End Date
Sep 30, 2019
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
OHIO STATE UNIVERSITY
1680 MADISON AVENUE
WOOSTER,OH 44691
Performing Department
Agriculture, Environment and Development Economics
Non Technical Summary
The goal for this project will be to understand farmer marketing and financial decisions during farm transitions and structural changes in agriculture. The main objective of this project will be to analyze farm transitions, from one generation to the next, and for farms of different sizes. In addition, the financial condition, performance, marketing choices, and financial stress of farms in transition will be analyzed. Specifically, I will analyze: 1) farm transitions (farm strategies for entry, exit, and retention in agriculture), 2) access to credit and financial success for beginning farms, 3) local foods (farmer participation in direct marketing and sales), 4) farm income enhancement strategies, 5) farmer cooperative patronages and investments, and 6) benchmarking for Ohio farmers (farm characteristics and farm structure).
Animal Health Component
100%
Research Effort Categories
Basic
0%
Applied
100%
Developmental
0%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
60260303010100%
Knowledge Area
602 - Business Management, Finance, and Taxation;

Subject Of Investigation
6030 - The farm as an enterprise;

Field Of Science
3010 - Economics;
Goals / Objectives
Examine the impact of recent fluctuations in capital and commodity markets on the performance, management, and regulation of agricultural financial institutions Evaluate the management strategies, capital needs, and policy impacting the financial performance and long-term sustainability of firms in the food and agribusiness sector Identify financial institutions and services that benefit agricultural producers and rural communities and expand agricultural markets, especially those producers that are beginning, young, from socially disadvantaged groups, and/or involved in producing specialty crops
Project Methods
Several methods will be used to understand and evaluate recent changes in agricultural and rural finance markets. Econometrics methods will be used to evaluate the management strategies, capital needs, and policy impacting the financial performance and long-term sustainability of firms in the food and agribusiness sector. Special emphasis will be placed on identifying the successful strategies employed by young and beginning farmers. Statistical methods include transition matrices, econometric analysis, and descriptive statistics. Specifically, the project will analyze farm characteristics and farm choices about 1) farm structure - farm size, tenure positions, sales classes, 2) marketing strategies, 3) farm income and debt and asset positions, 4) government program participation, 5) farm transition strategies, and 6) cooperative involvement for Ohio producers. If sufficient data are not available to conduct analysis at the state level, then regional and national data are going to be used or data will be aggregated across years. The level of analysis will be for the whole U.S. and for the state of Ohio.

Progress 09/16/15 to 09/30/19

Outputs
Target Audience:The findings of this project have beendisseminated to Ohio producers and other farm audiences through educational materials, reports, and web-based tools. Ohio producers, agribusinesses, and state policy makersbenefited from this project by understanding regional trends and farm characteristics and the strategies that have proven successful for producers. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results were disseminated through presentations at professional meetings, outlook presentations to policymakers and agricultural audiences, and outreach materials and online information targeted for Ohio farm and agribusiness groups. Presentations were given at the OSU Farm Science Review, OSU Ag Outlook and Policy Conference and Kansas City Fed. Research has been disseminated to several media outlets including Ohio's Country Journal and Ohio Ag Net. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Several studies were conducted to understand and evaluate recent changes in agricultural and rural finance markets. In abook/report written for a National Academies study, the review panel that I was a part of established best practices for datacollection for large and complex farms. We provided specific recommendations, for example, that a large farm enterprise can be viewed as a combination of different farm establishments. These findings, if adopted, can change how USDA counts large farms' contributions to the agricultural economy. In another study, we examined and found that crop insuranceparticipation of farmers significantly affected their downside yield risk, having implications for insured farmers actually incurring yield losses. In another study, we used NDVI data to predictsoybean yields, which show improvements over the models without NDVI. These are more accurate models that can be adopted by USDA to better predict soybean yields. Inanother study, we examined how landowners share the tax burden with renters of their land in the form of higher cashrents, finding that about 30-40 cents of the tax burden is transferred from the owners to the renters of the farmland in form of higher cash rent. This is the first study to quantify these effects, and these findings are useful for landowners and farmers to plan their tax obligations for land, also accounting for higher cash rent. In another related study,we examined the impact of bank concentration on land values, finding that counties with 1% higher concentration in banks have land values that are lower by close to $300/acre on average. We show that bank diversification and fewer lender-borrower relationship reduce credit availability and consequently result in lower land values. These findings are useful to agricultural lenders and farmers in areas with less bank completion to be able to estimate their land values. We examined several cooperative capital structure theories and found that agricultural cooperatives follow the trade-off theory and not the pecking order theory, indicating that there is an optimal level of debt that cooperatives are targeting. These results were confirmed by leaders of major cooperatives as they do follow the trade-off theory when they determine their capital structure. Finally, we examined the effects of ethanol plant location on corn revenues finding that ethanol plans do not affect corn revenues, indicating that the positive relationship found by earlier studies is no longer present as ethanol markets are established. These results are useful for farmers planning to plant corn as they can no longer expect higher revenues if they are close to ethanol plants as it was earlier during the ethanol boom.

Publications

  • Type: Journal Articles Status: Published Year Published: 2019 Citation: SantAnna, A.C., and A.L. Katchova. The Impact of Bank Concentration on Land Values. Journal of the American Society of Farm Managers and Rural Appraisers (2019): 86-91. https://asfmra.dcatalog.com/v/2019-Journal-of-ASFMRA
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Cheng, Y.L. and A.L. Katchova. Testing Capital Structure Theories for Agricultural Cooperatives: Trade-off and Pecking Order Theories. International Food and Agribusiness Management Review 22, 1 (2019):1-14. https://doi.org/10.22434/IFAMR2018.0050
  • Type: Journal Articles Status: Accepted Year Published: 2019 Citation: Katchova, A.L., and A.C. SantAnna. Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers. Sustainability (2019), accepted.
  • Type: Books Status: Published Year Published: 2018 Citation: National Academies of Sciences, Engineering, and Medicine. 2018. Improving Data Collection and Measurement of Complex Farms. Washington, DC: The National Academies Press. https://doi.org/10.17226/25260 (A.L. Katchova panel member)
  • Type: Journal Articles Status: Accepted Year Published: 2019 Citation: Dinterman, R., and A.L. Katchova. Property Tax Incidence on Cropland Cash Rent. Applied Economic Perspectives and Policy (2019), in print. https://doi.org/10.1093/aepp/ppz004
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Xu, C., and A.L. Katchova. Predicting Soybean Yield with NDVI using a Flexible Fourier Transform Model. Journal of Agricultural and Applied Economics 51, 3 (2019):402-416. https://doi.org/10.1017/aae.2019.5
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Plakias, Z., I. Demko, and A.L. Katchova. How do Farmers Compose their Portfolio of Local Food Marketing Channels. Renewable Agriculture and Food Systems (2019), in print. https://doi.org/10.1017/S1742170519000085


Progress 10/01/17 to 09/30/18

Outputs
Target Audience:In addition to contributing to the research literature, the results from this project will be used to enhance current farmer education in Ohio and nationally. The findings of this project will be disseminated to Ohio producers and other farm audiences through educational materials, reports, and web-based tools. Ohio producers, agribusinesses, and state policy makers will benefit from this project by understanding regional trends and farm characteristics and the strategies that have proven successful for producers in this region. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results were disseminated through presentations at professional meetings, outlook presentations to policymakers and agricultural audiences, and outreach materials and online information targeted for Ohio farm and agribusiness groups. Presentations were given at the OSU Farm Science Review and OSU Ag Outlook and Policy Conference. Research has been disseminated to several media outlets including Columbus Dispatch and Ohio's Country Journal. What do you plan to do during the next reporting period to accomplish the goals?Future plans include continuing to work on research projects on farm and agribusiness financial topics. Studies are planned to analyze direct marketing by US farmers, incidence of tax rate on agricultural cash rents, farm income volatility and the use of crop insurance, and land values and rents trends.

Impacts
What was accomplished under these goals? Several studies were conducted to understand and evaluate recent changes in agricultural and rural finance markets. In our first study we examined the financial performance of beginning farmers during the agricultural downturn that started in 2013 and found that their financial performance although lower than that of established farmers has not been not significantly lower during agricultural downturn. These findings are useful for beginning farmers who are continuing to plan sustainable strategies during financially stressful times. In our second study, we examined farm bankruptcies and found that it is mostly factors reflecting the strength of the general economy such as unemployment rates and interest rates that affect farm bankruptcies rather than agricultural factors such as farm income. These findings are useful to agricultural lenders and farmers alike who need to manage financial stress during difficult financial times. Finally, in our third study, we examined several cooperative capital structure theories and found that agricultural cooperatives follow the trade-off theory and not the pecking order theory, indicating that there is an optimal level of debt that cooperatives are targeting which is especially important during agricultural downturn when debt can elevate financial distress for cooperatives. These results are useful for agricultural cooperatives as they are striving toward an optimal capital structure.

Publications

  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Katchova, A.L. and R. Dinterman. Evaluating Financial Stress and Performance of Beginning Farmers during the Agricultural Downturn. Agricultural Finance Review 78, 4(2018), 457-469. https://doi.org/10.1108/AFR-08-2017-0074
  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Dinterman, R., A.L. Katchova, and J.M. Harris. Financial Stress and Farm Bankruptcies in U.S. Agriculture. Agricultural Finance Review 78, 4(2018), 441-456. https://doi.org/10.1108/AFR-05-2017-0030
  • Type: Journal Articles Status: Accepted Year Published: 2018 Citation: Cheng, Y.L. and A.L. Katchova. Testing Capital Structure Theories for Agricultural Cooperatives: Trade-off and Pecking Order Theories. International Food and Agribusiness Management Review, (2018) forthcoming. https://doi.org/10.22434/IFAMR2018.0050


Progress 10/01/16 to 09/30/17

Outputs
Target Audience:In addition to contributing to the research literature, the results from this project will be used to enhance current farmer education in Ohio and nationally. The findings of this project will be disseminated to Ohio producers and other farm audiences through educational materials, reports, and newly developed web-based tools. Ohio producers, agribusinesses, and state policy makers will benefit from this project by understanding regional trends and farm characteristics and the strategies that have proven successful for producers in this region. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results were disseminated through presentations at professional meetings, outlook presentations to policymakers and agricultural audiences, and outreach materials and online information targeted for Ohio farm and agribusiness groups. During this reporting period, Katchovamade presentations to the Chicago Fed, the USDA Ag Outlook Forum, OSU Farm Science Review, OSU Extension in-service training, and the Ag Outlook and Policy Conference and had an article written for Farmer Mac. Herresearch has been disseminated to several media outlets including Columbus Dispatch, Feedstuffs, Successful Farming, etc. What do you plan to do during the next reporting period to accomplish the goals?Future plans includecontinuing to work on research projects on farm and agribusiness financial topics. Studies are planned to analyze direct marketing by US farmers, incidence of tax rate on agricultural cash rents, farm income volatility and the use of crop insurance, and land values and rents trends.

Impacts
What was accomplished under these goals? Several studies were conducted to understand and evaluate recent changes in agricultural and rural finance markets. In a series of related studies, competition strategies of food cooperatives are studied, farm exit and entry decisions are examined, beginning farmers' performance is evaluated during the agricultural downturn, and farm financial stress and bankruptcies are studied. The results inform farm businesses and agribusinesses about successful strategies that are being used to ensure financial sustainability and success. Katchovareceived an outstanding research/quality of communication award from the Agricultural Finance and Management section of the Agricultural and Applied Economics Association in 2017for her2016 AEPP article on growth rates in farmland ownership and leasing for young and beginning farmers.

Publications

  • Type: Journal Articles Status: Published Year Published: 2017 Citation: Katchova, A.L. and M.C. Ahearn. Farm Entry and Exit from U.S. Agriculture. Agricultural Finance Review 77, 1(2017), 50-63.
  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Katchova, A.L. and T.A. Woods. Competitive Advantages in Sourcing and Marketing Local Foods by Food Cooperatives. Journal of Agribusiness 34, 2(2016):121-136.
  • Type: Journal Articles Status: Under Review Year Published: 2017 Citation: R. Dinterman, A.L. Katchova, and J.M. Harris. Financial Stress and Farm Bankruptcies in U.S. Agriculture. Agricultural Finance Review, revise and resubmit.
  • Type: Journal Articles Status: Under Review Year Published: 2017 Citation: Katchova, A.L. and R. Dinterman. Evaluating Financial Stress and Performance of Beginning Farmers during the Agricultural Downturn. Agricultural Finance Review, revise and resubmit.


Progress 10/01/15 to 09/30/16

Outputs
Target Audience:In addition to contributing to the research literature, the results from this project will be used to enhance current farmer and cooperatives educational programs in Ohio. The findings of this project will be disseminated to Ohio producers and other farm audiences through educational materials, reports, and newly developed web-based tools. Ohio producers, agribusinesses, cooperatives, and state policy makers will benefit from this project by understanding regional trends and farm characteristics and the strategies that have proven successful for other producers in this region. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results were disseminated through presentations at professinal meetings, outlook presentations to policymakers and ag audiences, andoutreach materials and online information targeted for Ohio farm and agrbisuneness groups. What do you plan to do during the next reporting period to accomplish the goals?I plan to continue to work on research projects on farm and agribusiness financial topics. Studies are planned to analyze direct marketing by US farmers and farm financial stress and bankruptcies for US farmers.

Impacts
What was accomplished under these goals? Several studies were conducted to understand and evaluate recent changes in agricultural and rural finance markets. In a series of related studies, competition strategies of food cooperatives are studied, farm exit and entry decisions are examined, and growth rates in farmland ownership and leasing for young and beginning farmers are studied. The results inform farm businesses and agribusinesses about successful strategies that are being used to ensure financial sustainability and success.

Publications

  • Type: Journal Articles Status: Published Year Published: 2016 Citation: Katchova, A.L. and M.C. Ahearn. Growth Rates in Land Ownership and Leasing: Implications for Young and Beginning Farmers. Applied Economic Perspectives and Policy 38,2 (2016):334-350.
  • Type: Journal Articles Status: Accepted Year Published: 2016 Citation: Katchova, A.L. and M.C. Ahearn. Farm Entry and Exit from U.S. Agriculture. Agricultural Finance Review (2017).
  • Type: Journal Articles Status: Accepted Year Published: 2016 Citation: Katchova, A.L. and T.A. Woods. Competitive Advantages in Sourcing and Marketing Local Foods by Food Cooperatives. Journal of Agribusiness (2017).


Progress 09/16/15 to 09/30/15

Outputs
Target Audience:Target audience for this project isOhio producers, farm organizations, agribusinesses, cooperatives,policy makers and other agricultural audiences. Results and findings fromfrom this projects are delivered through individual meetings and discussions. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results were disseminated through group and individual meetings with Ohio producers, farm organizations, agribusinesses, cooperatives, and other agricultural audiences. What do you plan to do during the next reporting period to accomplish the goals?Continue to work onresearch projects on farm and agribusiness financial topics. A study is planned to analyze entry and exit rates for farm businesses.

Impacts
What was accomplished under these goals? Several studies were conducted to understand and evaluate recent changes in agricultural and rural financemarkets. In a series of related studies,financial performance and anomalies for agribusinessesare analyzed, farm profitablity of broiler farms are examined, andgrowth rates in farmland ownership and leasing for young and beginning farmers are studied. The results inform farm businesses and agribusinesses about successful strategies that are being usedto ensure financial sustainability and success.

Publications

  • Type: Journal Articles Status: Accepted Year Published: 2015 Citation: Katchova, A.L. and M.C. Ahearn. Growth Rates in Land Ownership and Leasing: Implications for Young and Beginning Farmers. Applied Economic Perspectives and Policy, forthcoming.
  • Type: Journal Articles Status: Published Year Published: 2015 Citation: Arthur, B. and A.L. Katchova. Accrual Anomaly for Agribusiness Stocks. Agribusiness: An International Journal 31, 3 (2015):372-387.
  • Type: Journal Articles Status: Published Year Published: 2015 Citation: Nehring, R., J. Gillespie, A.L. Katchova, C. Hallahan, J.M. Harris, and K. Erickson. Whats Driving U.S. Broiler Farm Profitability? International Food and Agribusiness Management Review 18,A(2015):59-78.