Inflation, Cash Flows, and Growth: Some Implications for the Farm Firm

Lindon Robison and John R. Brake

Journal of Agricultural and Applied Economics, 1980, vol. 12, issue 2, 131-137

Abstract: As farm sector prices continue to increase at rates higher than any since World War II, attention is being given to the cause of the price increases and their structural impacts on the farming sector. Land, a major component of farm assets, has been the focus of many studies examining the effects of inflation. Melichar showed current increases in land prices to be consistent with productivity gains. Lee and Rask illustrated that even though current levels of land prices may be justified, firms may have negative cash flows, especially if loans are repaid on level repayment plans. Current inflationary conditions led Robison to conclude that though current land prices may be justified, the benefits and costs are unequally distributed and that, increasingly, persons who in earlier years made land purchases are more able to afford to purchase more, thereby accelerating the trend toward fewer and larger farms.

Date: 1980
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