ST. PAUL, Minn. (6/28/2010) --Farmers, lenders, educators and many others in agriculture have a long history of wondering why some farmers perform better than others. Since conditions vary over time, we need to keep asking the question in order to have the best answers.
A University of Minnesota Extension survey of farmers in southwest Minnesota collected nonfinancial characteristics in addition to the farm's financial information. The survey included questions on formal education, farmers' attitudes toward management, their situation, and other potential reasons that are frequently mentioned by farmers when discussing performance.
For our data analysis, the farms were ranked on the basis of net farm income per operator and on rate of return on assets (ROA-market basis), and then divided into the top 25 percent and the remaining 75 percent groups for each measure. The scores and measures for many answers and measures were then estimated by group and compared to see where the top group was significantly different from the other 75 percent of farmers.
Our preliminary analysis points out several interesting factors which farmers potentially can control or change.
Factors which have an overall positive impact on either net farm income per operator or ROA include having a positive attitude: the farmers' attitude that they control their own destiny and that farming has a bright future. Other positive factors include setting and striving for goals, paying a higher wage (for good people), and being involved in a custom work enterprise to increase the efficiency in using their machinery. Farmers in the top group were more likely to agree with the statement that their concern for the environment affected their decisions. More profitable farmers were more likely to own more crop acreage and have more employees, but this may be more of a result of profitability than a cause of higher profitability.
Overall negative factors related to being in the top group included the value they placed on an income statement (which may be a reflection of the top being more interested in leading indicators of income production versus an after-the-fact statement of income). A nonfarm job held by the primary decision maker was negatively related to being in the top group (but this does not mean that a farmer should resign from his/her nonfarm job to become more profitable automatically).
One apparent contradiction was the positive impact on net farm income per operator of a farm having a successor contrasted with the negative impact of the importance placed on having a future generation farming. This contradiction disappears though when we consider that a successful farm with higher profits is more attractive to a successor being ready to take over the farm, and the realization that actively putting that future generation in place may likely have a negative impact on income per operator during the transition.
This is only a preliminary perspective on some interesting findings. More factors and variables are being measured and analyzed. For more Extension resources on farm management, visit www.extension.umn.edu/AgBusiness.
Others involved in this work are Extension educators C. Robert Holcomb, Gary Hachfeld, Jim Kurtz, and David Bau. Victor Gauto, graduate student in Applied Economics, did the statistical analysis.
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Kent Olson is a University of Minnesota Extension economist.
Media Contact: Catherine Dehdashti, U of M Extension, (612) 625-0237, firstname.lastname@example.org