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What is driving economic and financial success of US cow-calf operations?
- Nehring, Richard, Gillespie, Jeffery, Hallahan, Charles, Harris, James Michael, Erickson, Ken
- ARS USDA Submissions 2014 v.74 no.3 pp. 312
- Agricultural Resource Management Survey, USDA, assets, beef industry, cow-calf operations, economic factors, economic sustainability, equations, extension education, farmers, farms, innovation adoption, off-farm employment, profitability, profits and margins, United States
- The purpose of this paper is to determine the drivers of economic financial success of US cow-calf operations using a system of equations (DuPont analysis) in conjunction with 2008 farm-level data from the US Department of Agriculture’s Agricultural Resource Management Survey to evaluate the factors driving cow-calf profitability, namely net profit margins, asset turnover ratio, and asset-to-equity ratio. We find that the main drivers of return on equity are region, number of harvested acres on the farm, diversification of the farm, operator off-farm work, spousal off-farm work, and adoption of technologies. Of these factors, those for which producers can make short-term adjustments include off-farm work decisions and adoption of technologies. Longer-term adjustments can be made for farm diversification. To the authors’ knowledge, no existing research has used farm-level data across US production regions to examine the factors affecting returns to equity of US cow-calf operations. These research results may be used to identify strategies producers can use to improve their farm’s economic viability, areas where extension services can assist farmers in making better financial decisions and economic factors that are likely to lead to structural changes in the beef industry.