Masters Theses

Date of Award

12-1971

Degree Type

Thesis

Degree Name

Master of Science

Major

Agricultural Economics

Major Professor

B. R. McManus

Committee Members

Charles M. Cuskaden, James G. Snell

Abstract

Additional knowledge Is needed of the process of farm firm growth used by dairy operators to accumulate owned capital. The objectives of this study were: (1) to ascertain characteristics, goals, and attitudes of Grade A dairy farmers to provide a framework for farm size and financial growth analysis, (2) to determine sources and characteristics of farm credit used by Grade A dairy farmers to acquire capital for selected loan purposes and operating expenses, and (3) to relate goals and attitudes of Grade A dairy farmers to farm size and financial growth and determine those factors which are associated with farm size and financial growth. The data were obtained from a survey of 178 Grade A dairy farmers In West Tennessee and were collected by means of a structured questionnaire. Capital Investment and net worth of the farm operator, at the time of the survey, were used as a proxy for farm size. Changes In capital Investment and net worth, from the time the farmer began Grade A dairying until the survey, were used as a proxy for financial growth. Linear regression equations were estimated to relate goals and attitudes to farm size and financial growth. Four models were theorized and estimated by regression analyses to determine those factors which are associated with farm size and financial growth. Goals and attitudes Indexes were developed by means of subjective scaling to be used In the size and growth models. Contrary to economic theory of the firm, "profit maximization" was not the most important financial goal among farmers. Farmers in this study placed more emphasis on "standard of living" as a financial goal than on "making the highest possible income." Clarity of goal verbalization by farm operators was positively related to capital investment and net worth. Farmers who had goals "clearly verbalized" had a significantly higher capital investment and net worth than those farmers who had goals "not clearly verbalized." There was a strong tendency for farmers to use credit. In most all cases, farmers experienced no difficulties in locating lenders who provided loans requested. Limitations to borrowed funds appeared to be from internal capital rationing rather than external capital rationing. Farmers who were "in favor" of using credit had a signifi-cantly higher capital investment and net worth than farmers who were "not in favor" of using credit. Variables which were positively and significantly related to both capital investment and net worth were: (1) number of years Grade A dairying, (2) initial net worth, and (3) average production per cow. Number of credit sources was significantly related to capital invest-ment but was not significantly related to net worth. Education was positively related to capital investment and net worth but was not significantly related to either one. Variables which were positively and significantly related to change in capital investment per year and change in net worth per year were: (1) change in herd size per year, (2) change in farm size per year, and (3) education. Qiange in farm debt was significantly related to change in capital investment per year but was not significantly related to change in net worth per year. Average production per cow and goal index score were positively related to change in capital investment per year and change in net worth per year but were not significantly related to either of the above. The results obtained from this study should: (1) provide educational information to dairy farmers as well as lenders, (2) enable lenders to make better evaluations of prospective borrowers, and (3) provide guidelines for future research on capital acquisition and accumulation problems of dairy farmers.

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