Research Program for Farm Income Enhancement Program
The Farm Income Enhancement Program, led by Ani Katchova, conducts research and outreach related to agricultural economics issues aiming to enhance farm income and promote long-term stability for farm businesses. Areas of research include agricultural finance, agribusiness management and marketing, and applied econometrics. Recent research projects include farm income and finance, farm financial performance and stress, farmland ownership and leasing, farm entry and exits, young and beginning farmers, and direct marketing.
Katchova’s research has been published in leading journals such as the American Journal of Agricultural Economics, Applied Economic Perspectives and Policy, Agricultural Finance Review, and Agribusiness. She recently received an Outstanding Research Award from the Agricultural Finance and Management section of the Agricultural and Applied Economics Association.
Research Publications and Presentations
- Farm income and finance for U.S and Ohio farmers
- Financial performance of farms and agribusinesses – financial statements and ratios analysis
- Financial stress, farm bankruptcies and ag loan delinquencies
- CAUV values and tax issues for farmland
- Farmland ownership and leasing – farmer farmland purchasing and leasing decisions, life-cycle farmland decisions
- Young, and beginning, and small farmers – capital needs of young, beginning, and small farmers, government programs supporting beginning farmers, farm transitions from one generation to the next
- Farm entry and exits from agriculture – farmers entering agriculture, farm growth, and exits from farming
- Structural changes in agriculture – consolidation and competition issues for agribusinesses
- Direct marketing and local foods – farmers using direct marketing channels to market production, local and regional food systems
- Marketing and production contracts – farmer use of marketing and production contracts, farmer interactions with agricultural processors
- Agricultural credit and lending institutions – evaluating farmer credit needs and risk, agricultural loan performance, capitalization of agricultural lenders
Highlighted Recent Research Studies
Farm entry and exit from US Agriculture (Katchova and Ahearn, Ag Finance Review 2017)
This study uses a linked-farm approach and a cohort approach to estimate farm entry and exit rates using the U.S. Census of Agriculture. Using the linked-farm approach, an average annual entry rate of 7.5% and exit rate of 8.5% is estimated for 2007 to 2012, which vary based on the farmer’s lifecycle. The cohort approach shows that exit rates are lower than 4% for the first 40 years of operating a farm business and then exit rates gradually increase. Revised estimates of approximately 70-80,000 new farms entering each year are calculated, which are considerably higher numbers than the 30-40,000 new farm entrants participating in the Census of Agriculture. To our knowledge, this is the first study to provide revised estimates for new farm entrants into U.S. agriculture.
Farmland Ownership and Leasing (Katchova and Ahearn, AEPP 2016, Outstanding Research Award from AFM section of AAEA)
This study considers the issue of the transition and growth of new farmers into U.S. agriculture, by examining land ownership and leasing trends. Our approach is to characterize the entire distribution by farmer age and farmer experience rather than using young versus old and beginning versus established farmer categories. We also use a linked-farms longitudinal approach to show trends over time in farmland expansion and contraction. We find that farms operated by older beginning farmers tend to be smaller and do not tend to grow over time. Our results show that it is mostly young farmers as opposed to all beginning farmers that rapidly expand their farm operations after entering agriculture. Our findings inform policy makers about the strategies that young and beginning farmers use to start their businesses and expand over time and suggest more effective approaches for targeting loan programs to young and beginning farmers.
Farm Financial Stress and Bankruptcies in U.S. Agriculture (Dinterman, Katchova, and Harris, Agricultural Finance Review 2018)
Declines in farm sector income and agricultural land values raises concerns that farms are experiencing higher levels of financial stress after years of rising incomes and land values. Using farm bankruptcy data from 1997 to 2016, we evaluate the degree to which the farm financial climate and general macroeconomic climate affect farm financial stress with an added emphasis on the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Our approach utilizes fixed-effects panel models and we find that macroeconomic factors (interest and unemployment rates) are strong predictors of financial standing for farms while agricultural land values are the only consistent strong predictor of the agricultural factors. When evaluating the post-BAPCPA regime, only agricultural land values continue to be a significant predictor of farm bankruptcies. Our findings also indicate a dynamic relationship with agricultural land values, where current year values are negatively related but previous year values are positively related to bankruptcies.
Evaluating Financial Stress and Performance of Beginning Farmers during the Agricultural Downturn (Katchova and Dinterman, Agricultural Finance Review 2018)
This study examines the financial performance and stress of beginning farmers in the U.S. with emphasis on the agricultural downturn experienced since 2013. Using the USDA’s Agricultural Resource Management Survey (ARMS) data, probit models are estimated to study the personal and farm characteristics that affect whether or not the financial ratios fall into critical zones as defined by the Farm Financial Standards Council. The financial ratios involve liquidity, solvency, profitability, efficiency, and repayment capacity. Beginning farmers are at a greater risk of financial stress on average, with higher likelihood of financial stress in liquidity and efficiency. Further, the recent agricultural downturn has negatively affected liquidity, solvency, and profitability for farmers while repayment capacity does not appear to be affected. During the downturn, beginning farmers are better positioned than the general farming population with respect to liquidity and repayment capacity. This paper applies current lending practices to a nationally representative sample of farms over a time of changing economic conditions for the agricultural sector.