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Land tenure and profitability among young farmers and ranchers

Andrew W. Stevens (Agricultural and Applied Economics, University of Wisconsin–Madison, Madison, Wisconsin, USA)
Karin Wu (Agricultural and Applied Economics, University of Wisconsin–Madison, Madison, Wisconsin, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 26 November 2021

Issue publication date: 22 April 2022

106

Abstract

Purpose

The purpose of this article is to investigate how land tenure correlates with measures of profitability among young farmers and ranchers in the United States. The authors hypothesize that young producers who own a larger proportion of their operation face different incentives between short- and long-run returns than young producers who primarily rent their land. The authors analyze whether these differing incentives result in observable differences in various measures of profitability.

Design/methodology/approach

The authors use state-level data from the Agricultural Resource Management Survey (ARMS) from 2003 to 2018 to estimate fixed-effects panel models correlating land tenure with the value of farm production, expenditures on repairs and maintenance, net farm income, total operator household income from farming, rate of return on assets (ROA) and rate of return on equity (ROE).

Findings

The authors find different correlations for crop farms and livestock farms, as well as different correlations for farms with the lowest and highest gross sales. For crop farms, renting land is associated with higher production, higher income, higher ROA and higher ROE. For livestock farms, renting land is associated with lower production.

Originality/value

This study rigorously investigates the role of land tenure specifically among young farmers and ranchers in the United States. By better understanding how land ownership affects profitability among beginning farmers and ranchers, policymakers will be able to better target public resources to support the next generation of producers.

Keywords

Acknowledgements

The authors wish to thank participants at both the 2020 Farm Foundation “Emerging Research on Beginning Farmers and Ranchers Conference” and the 2021 Agricultural and Applied Economics Association Annual Meeting for their questions and feedback. The authors also thank Guest Editor Jeffrey Hopkins and two anonymous reviewers for their helpful suggestions.

Citation

Stevens, A.W. and Wu, K. (2022), "Land tenure and profitability among young farmers and ranchers", Agricultural Finance Review, Vol. 82 No. 3, pp. 486-504. https://doi.org/10.1108/AFR-04-2021-0048

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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