Financial management practices and farm profitability

Agricultural Finance Review 10/2003; 63(2):157-174. DOI: 10.1108/00215060380001147


The adoption of several basic financial management practices is examined for a group of New York dairy farms. The study provides estimates of the extent to which various business analysis and control, investment analysis and decision making, and capital acquisition practices have been adopted. Many practices, such as net present value analysis, are not widely adopted by farmers. The relationship between the adoption of financial management practices and farm profitability is also examined. Results suggest that the adoption of financial management practices, such as using investment analysis techniques, significantly impacts farm financial performance.

    • "Similarly, both Edwards and Parker (1994) and Stainhall andParker (1997)have also reported low adoption rates for many beneficial technologies within the New Zealand dairy industry. Within the literature, the successful process of technology adoption has been related to many individual factors including the farmers age (Gloy and LaDue 2003), financial position (Mishra, El-Osta, and Steele 1999), level of education (Mishra et al. 2009) and the technologies complexity (Douthwaite, Keatinge, and Park 2001). Understanding farmer decision-making about technology adoption is critical and, although many studies have considered the economic reasoning in decision-making by the farmer, few studies fully capture the important complexity of motivations and personal characteristics which contribute to the adoption of key technologies by farmers (Gartrell and Gartrell 1985;Turvey 1991). "
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    ABSTRACT: Purpose: The aims of this paper are to (1) evaluate the main factors influencing grazing system technology adoption among new entrant (NE) dairy farmers within Europe and the Irish pasture-based dairy industry, and (2) to determine the extent to which economic factors influence decision-making around technology adoption and use among NEs to the Irish dairy industry. Methodology: Multivariate analysis is used to investigate the associations between region, education level, previous experience in dairy farming, herd size, age and the farmer's perception of the usefulness (PU) and ease-of-use of a technology (PEOU), and the likelihood of that technology being adopted. Findings: The results of this study identify a high rate of grazing, artificial insemination (AI) and financial management technology adoption among NE dairy farmers whose technology decisions are primarily motivated by financial considerations and are closely related to the PU and PEOU scores of the technology. Grassland measurement had the lowest adoption rate (51%) compared to AI (86%) and farm financial management (84%). Practical Implications: The substantial importance of PU and PEOU to technology adoption decisions indicates that future research, extension and education programmes should place increased emphasis on the benefits and usability of key technologies in addition to evaluating their scientific merit. Originality/Value: For the first time information assessing technology adoption amongst new dairy farmers is available. This has the potential to improve and increase extension and education for new dairy farmers in a future post-quota environment.
    No preview · Article · Apr 2015 · The Journal of Agricultural Education and Extension
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    • "Pożytki z wysokich umiejętności zarządzania finansowego mogą być bardzo duże, o czym przekonują badania amerykańskie (Gloy, LaDue 2003). Wynika z nich, że stosowanie sformalizowanych narzędzi oceny inwestycji pozwoliło zwiększyć rentowność aktywów aż o 6,4 pkt proc. "
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    ABSTRACT: The main objective of this article is to present the prin- cipal features and conditions of pursuing financial po- licy in Polish agriculture after it was covered by the mechanisms of the Common Agricultural Policy. Sub- sequently, the article identifies the current and mid-term challenges standing before this policy and presents the possible scenarios, as well as their implications both for the agricultural sector and the whole national economy.
    Preview · Article · Jul 2008
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    • "Both were associated with higher return on assets. However, Gloy and LaDue (2003) found no evidence to support an association between return on assets and the use of either benchmarking or trend analysis. Thus the evidence from this study is also mixed. "
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    ABSTRACT: This paper reports on a study aimed at identifying financial management practices important in explaining farmer satisfaction with their business performance in the dairy farming industry in the state of New South Wales (NSW), Australia. Principal components analysis was performed on survey data from 204 NSW dairy farming businesses measuring the extent to which a wide variety of financial management practices were undertaken. This analysis identified five financial management dimensions: appraisal practices, environmental accounting, budgeting, aid use and analysis practices. Regression analysis, including control variables, indicated that greater emphasis on financial management was associated with greater satisfaction with business performance. Appraisal practices, including calculating the payback period for investments and assessing the relevant costs and benefits of decision alternatives, were found to be particularly important in explaining satisfaction. The emerging techniques of environmental accounting were also found to have a unique relationship with farmer satisfaction. The findings provide further support for prescriptions in the literature that farmers should invest time and effort into financial management.
    Full-text · Article · Nov 2006
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