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Returns and Risks of Expanding Pennsylvania Dairy Farms with Different Levels of Equity

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  • H. R. Hinman
  • R. F. Hutton

Abstract

An accepted theory of farm firm behavior was incorporated into an abstract computerized simulation model to evaluate the returns and risks involved to Pennsylvania dairy farm firms expanding at different levels of equity. In addition, management efficiency was treated as a parameter to test for interaction of the policies and situations with this characteristic. The base of the analysis was a dairy farm situation having crop yields and production levels approximating that of an efficient Central Pennsylvania farm. The variations and trends in yield, production, and price were intended to approximate those experienced by Pennsylvania farmers during the previous ten years. Under the given environmental and economic assumptions, the results of this study strongly indicated that the payoff for taking the risk of thinning equity below present conventional levels during farm expansion is quite high in most situations.

Suggested Citation

  • H. R. Hinman & R. F. Hutton, 1971. "Returns and Risks of Expanding Pennsylvania Dairy Farms with Different Levels of Equity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(4), pages 608-611.
    • Handle: RePEc:oup:ajagec:v:53:y:1971:i:4:p:608-611.
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    File URL: http://hdl.handle.net/10.2307/1237824
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    Cited by:

    1. Musser, Wesley N. & White, Fred C., 1975. "The Impact Of Management On Farm Expansion And Survival," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 7(1), pages 1-7, July.
    2. Malcolm, Bill & Sinnett, Alex, 2007. "Future Productivity and Growth in Dairy Farm Businesses in New Zealand: the Status Quo is Not an Option," Papers 234175, University of Melbourne, Melbourne School of Land and Environment.
    3. Walker, Odell L. & Hardin, Mike L. & Mapp, Harry P., Jr. & Roush, Clint E., 1979. "Farm Growth And Estate Transfer In An Uncertain Environment," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-12, July.
    4. Baker, C.B. & Barry, Peter J. & Lee, Warren F. & Olson, Carl E. & Hochman, Eithan & Rausser, Gordon S. & Kottke, Marvin W., 1977. "Economic Growth of the Agricultural Firm," Western Region Archives 260636, Western Region - Western Extension Directors Association (WEDA).
    5. Schnitkey, Gary D. & Taylor, C. Robert & Barry, Peter J., 1989. "Evaluating Farmland Investments Considering Dynamic Stochastic Returns And Farmland Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-14, July.
    6. Johnson, James William, 1985. "Land prices: changes and variability: the effect on Iowa grain farms," ISU General Staff Papers 1985010108000017533, Iowa State University, Department of Economics.

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