Factors of success of small farms and the relationship between financial success and perceived success

Virginie Youkoujouo Nanhou

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This study investigates the factors of farm success, determines the profile of small successful farmers and also explores the factors affecting farmers' perception of success. Farm size was measured in terms of gross sales and a profit index (equal to ratio of gross profit over gross profit minus management return) was used as a measure of financial efficiency and also as a proxy for farmers' profitability. A sample of seventy-three farmers, further divided in four groups based on a combination of farm size and profit levels, was used in the analyses. Means comparisons using t-tests to identify success factors, a multiple regression estimating the effects of main success factors identified through t-tests and a logistic regression estimating the contribution of profitability and other factors on farmers' success perception were based on data from Farm Business Association (1991-1996 period) and from survey. Results indicate that farms' profitability is affected negatively by farmer's age but positively by farmer's education, crop yields, machinery and labor efficiency, percent of rented acres and percent of revenue from livestock.;Farm size appeared to positively affect net farm income. Small successful farmers are young farmers with high education levels who rent most of the land they use and probably also rent high proportions of their equipment and machinery, given their high proportion of rent expenses and low proportion of depreciation and interest expenses. They have a low financial leverage. Overall, management appears an essential ingredient to farm success, as important as hard work, even more so in some instances. It appears that two fifths of profitable farmers do not feel successful while one third of non-profitable farmers feel successful indicating that profitability doesn't necessarily translate into success perception. Farmers highly value being viewed as a good neighbor, spending time with family and being one's own boss as well as making money. Farmers' success perception is affected positively by farm profitability, farm size and the farmers' value for intrinsic objectives (i.e. being one's own boss, working outside) but negatively by the farmers' value attributed to intergenerational transfer objectives (i.e. passing farm on to children, passing on a family tradition).

Date: 2001-01-01
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