 Returns to Equity Capital by Economic Class of FarmJ. Bruce Hottel and Robert D Reinsel No 307617, Agricultural Economic Reports from United States Department of Agriculture, Economic Research Service Abstract: Estimates of returns to equity capital invested in U.S. farm production are developed by using 1970 census benchmark data, which are the latest data available on farm finance. The rate of returns ranged from negative on farms with less than $10,000 gross farm sales to near 7 percent on the largest economic class farms. Only one-third of the farms had gross sales over $10,000, but accounted for 71 percent of all assets and earned returns above the composite average of 2.1 percent. This illustrates the problem inherent in using a composite average for "all farms" to represent the entire industry. The importance of off-farm income and additional returns to equity due to land appreciation probably explains why smaller farm units can exist on low farm returns. The difference in returns may help explain the increase in farm size, particularly for commercial units. Demands for loan funds will also substantially increase with the upward mobility in size classes and the tendency for larger farms to incur more debts. Higher capital requirements on larger units could also bring more equity financing in agriculture. Keywords: Agricultural Finance; Financial Economics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ags:uerser:307617 Access Statistics for this paper More papers in Agricultural Economic Reports from United States Department of Agriculture, Economic Research Service Contact information at EDIRC. |
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