Investment in the stock market and value-added agricultural businesses as portfolio investment alternatives to farm expansion

Joshua David Roe

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

Abstract: In the past decade, farmers have increasingly invested in value-added agriculture. Analysis of these investments compared to farm expansion by farmers was conducted from a portfolio optimization standpoint. Farms with similar investment patterns were identified by cluster analysis. When individual farm characteristics were analyzed to determine how these attributes affected investment choices, clear influences were found. In general, value-added agricultural investments were found to be an efficient investment alternative to farm expansion. Because of their larger risk, stock market investments play a smaller role in an optimized producer portfolio.

Date: 2005-01-01
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