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Beginning farmer status and financial performance differentials

Rebecca Weir (Department of Applied Economics, University of Minnesota, Saint Paul, Minnesota, USA)
Joleen Hadrich (Department of Applied Economics, University of Minnesota, Saint Paul, Minnesota, USA)
Alessandro Bonanno (Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, Colorado, USA)
Becca B.R. Jablonski (Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, Colorado, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 19 September 2023

Issue publication date: 5 December 2023

79

Abstract

Purpose

Beginning Farmer and Rancher programs are available for operators with ten years of experience or less on any farm. These programs support farmers who are starting operations, often without an initial asset allocation. However, some beginning farmers acquire operations that are already established, with substantial assets in place. The authors investigate whether a profitability gap exists between beginning farmers entering the industry ex novo and those operating a preexisting operation and if so, what factors contribute to the gap.

Design/methodology/approach

The authors utilize the Blinder-Oaxaca decomposition to determine what drives financial differences between first-generation beginning farmers, second-generation beginning farmers and established farmers using a unique farm-level panel dataset from 1997 to 2021.

Findings

Results indicate that first- and second-generation beginning farmers have similar operating profit margins, but first-generation beginning farmers have a statistically higher rate of return on assets than second-generation beginning farmers. Established farmers outperform second-generation beginning farmers on both the operating profit margin and rate of return on assets. These results suggest that economic viability for beginning farmers differs depending upon the initial status of their operation, suggesting that heterogenous policies may be more impactful in supporting various pathways to enter agriculture.

Originality/value

This analysis is the first to identify beginning farmers that enter the industry without an asset base and those that take over a principal operator role on an established farm through an assumed farm transition. The authors quantify differences in financial performance using detailed accrual-based financial data that tracks farms over time in one dataset.

Keywords

Acknowledgements

This research was funded through the USDA-ERS Coop Agreement, grant number USDA-ERS 58-6000-0-0074.

Citation

Weir, R., Hadrich, J., Bonanno, A. and Jablonski, B.B.R. (2023), "Beginning farmer status and financial performance differentials", Agricultural Finance Review, Vol. 83 No. 4/5, pp. 762-782. https://doi.org/10.1108/AFR-05-2023-0054

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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