How Do Net Farm Returns Compare with Returns from Stocks or Bonds?

Bill Brown

No 346512, 12th Congress, Durban, South Africa, July 18-24, 1999 from International Farm Management Association

Abstract: Net returns from farming as measured as income less expenses as a percentage of asset value have traditionally been low. However, when capital gain from land is added in, the rate of return is competitive with other investments available in the economy. In addition, rates of return from farming have been shown to fluctuate significantly different from net returns of other investments. This means that farmers may be able to gain by reducing their risk when investing in stocks and bonds. It has also been shown that grain farmers may be able to gain by reducing their risk by investing in specialty crops, and large scale hog and cattle operations. History has shewn that bigger is almost always better when it comes to agricultural production. The number of farms in Saskatchewan has decreased since 1936. The average size of Saskatchewan farms has increased since the first census in 1906. Overtime Saskatchewan farms have shifted from small mixed farms producing many products such as grain, cattle, milk, hogs, and poultry to more specialized and larger operations producing only 2 or 3 different crops or 1 kind of livestock. Should Saskatchewan farms get bigger and specialize more or should they diversify into specialty crops, hogs, cattle, stocks, or bonds? There is no definitive answer to this question, but the information should prove to be interesting and helpful.

Keywords: Agricultural Finance; Financial Economics (search for similar items in EconPapers)
Pages: 16
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ifma99:346512

DOI: 10.22004/ag.econ.346512

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