Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-19T02:36:40.671Z Has data issue: false hasContentIssue false
  • English
  • Français

Impacts of Financial Characteristics and the Boom-Bust Cycle on the Farm Inventory-Cash Flow Relationship

Published online by Cambridge University Press:  28 April 2015

Ralph Bierlen ,
Bruce L. Ahrendsen  and
Bruce L. Dixon
Ralph Bierlen
Affiliation:
Department of Agricultural Economics and Agribusiness at the University of Arkansas
Bruce L. Ahrendsen
Affiliation:
Department of Agricultural Economics and Agribusiness at the University of Arkansas
Bruce L. Dixon
Affiliation:
Department of Agricultural Economics and Agribusiness at the University of Arkansas
Get access Rights & Permissions [Opens in a new window]

Abstract

The sensitivity of farm inventory investment to movements in cash flow is tested. Inventories should be sensitive to shifts in cash flow because inventory investment is readily reversible and inventories are a significant portion of assets. Investment models estimated with Kansas farm panel data indicate that: (a) farms absorb internal finance shocks by adjusting inventories, (b) the inventory investment of livestock and high-debt farms are more sensitive to movements in cash flow than crop and low-debt farms, and (c) inventory investment is more sensitive to cash flow during the 1981-86 bust and the 1987-92 recovery than during the 1975-80 boom.

Keywords

cash flowcredit constraintsfarm cyclesfarm inventoriesinvestmentinvestment models
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 30 , Issue 2 , December 1998 , pp. 363 - 377
Copyright
Copyright © Southern Agricultural Economics Association 1998

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bierlen, R., and Featherstone, A.M.. “Fundamental Q, Cash Flow and Investment: Evidence from Farm Panel Data.” Rev. Econ. and Statis. 80(1998):forthcoming.CrossRefGoogle Scholar
Blinder, A.S. “Inventories and Sticky Prices: More on the Microfoundations of Macroeconomics.” Amer. Econ. Rev. 72(1982):334-49.Google Scholar
Blinder, A.S., and Maccini, L.J.. “Taking Stock: A Critical Assessment of Recent Research on Inventories.” J. Econ. Perspectives 5(1991):73–96.CrossRefGoogle Scholar
Brennan, M.J. “The Supply of Storage.” Amer. Econ. Rev. 48(1958):50–72.Google Scholar
Bultena, G., Lasley, P., and Geller, J.. “The Farm Crisis: Patterns and Impacts of Financial Distress Among Iowa Farm Families.” Rural Sociol. 51(1986):436-48.Google Scholar
Calomiris, C.R., Hubbard, R.G., and Stock, J.H.. “The Farm Debt Crisis and Public Policy.” Brookings Papers on Economic Activity (1986):441-79. Brookings Institution, Washington DC.Google Scholar
Carpenter, R.E., Fazzari, S.M., and Petersen, B.C.. “Inventory Investment, Internal-Finance Fluctuations, and the Business Cycle.” Brookings Papers on Economic Activity (1994):75–138. Brookings Institution, Washington DC.Google Scholar
Chamberlain, G. “Panel Data.” In Handbook of Econometrics, Vol. 2, eds., Griliches, Z. and Intriligator, M.D., pp. 1247–1318. Amsterdam: North-Holland, 1984.Google Scholar
Fazzari, S.M., Hubbard, R.G., and Petersen, B.C.. “Financing Constraints and Corporate Investment.” Brookings Papers on Economic Activity (1988):141–206. Brookings Institution, Washington DC.Google Scholar
Featherstone, A.M., Griebel, J.C., and Langemeier, L.N.. “Comparison of Farm Management Association Data to the USDA Farm Costs and Returns Survey Data.” Farm and Management Newsletter. Dept. of Agr. Econ., Kansas State University, 1992.Google Scholar
Gardner, B.L.Optimal Stockpiling of Grain. Lexington MA: Lexington Books, 1979.Google Scholar
Gilchrist, S., and Himmelberg, C.P.. “Evidence on the Role of Cash Flow for Investment.” J. Monetary Econ. 36(1995):541-72.CrossRefGoogle Scholar
Gujarati, D.N.Basic Econometrics, 2nd ed. New York: McGraw-Hill, 1988.Google Scholar
Hansen, L.P., and Singleton, K.J.. “Generalized Instrumental Variable Estimation of Nonlinear Rational Expectations Models.” Econometrica 50(1982):1269-86.CrossRefGoogle Scholar
Helmberger, P., and Weaver, R.. “Welfare Implications of Commodity Storage Under Uncertainty.” Amer. J. Agr. Econ. 59(1977):639-51.CrossRefGoogle Scholar
Holtz-Eakin, D., Newey, W., and Rosen, H.S.. “Estimating Vector Autoregressions with Panel Data.” Econometrica 56(1988):1371-95.CrossRefGoogle Scholar
Hoshi, T., Kashyap, A.K., and Scharfstein, D.. “Corporate Structure, Liquidity, and Investment: Evidence from Panel Data.” Quart. J. Econ. 106(1991):33–60.CrossRefGoogle Scholar
Kansas Department of Agriculture. Kansas Farm Facts. Topeka KS. Various years, 1973-92.Google Scholar
Kashyap, A.K., Lamont, O.A., and Stein, J.C.. “Credit Conditions and the Cyclical Behavior of Inventories.” Quart. J. Econ. 109(1994):565-92.CrossRefGoogle Scholar
Kliesen, K.L., and Gilbert, R.A.. “Are Some Agricultural Banks Too Agricultural?” Federal Reserve Bank of St. Louis Review 78(1996):23–35.Google Scholar
Kuznets, P.W. “Financial Determinants of Manufacturing Inventory Behavior: A Quarterly Study Based on U.S. Estimates, 1947-1961.” Yale Econ. Essays 4(1964):330-69.Google Scholar
Langemeier, L.N. “Farm Management Data Bank.” Staff Pap. No. 90-10, Dept. of Agr. Econ., Kansas State University, Manhattan, April 1990.Google Scholar
Miller, L.H., and LaDue, E.L.. “Credit Assessment Models for Farm Borrowers: A Logit Analysis.” Agr. Fin. Rev. 49(1989):22–36.Google Scholar
Peoples, K.L., Freshwater, D., Hanson, G.D., Prentice, P.T., and Thor, E.. Anatomy of an American Agricultural Credit Crisis. Boston: Rowman and Littlefield, 1992.Google Scholar
Rausser, G.C., Stamoulis, K.G., Love, H.A., and Chalfant, J.A.. “Modeling Alternative Trade and Macroeconomic Scenarios: Implications for U.S. Agriculture.” In Impacts of Farm Policy and Technological Change on U.S. and California Agriculture, ed. Carter, H.O., pp. 91–136. Agriculture Issues Center, University of California, Berkeley, 1986.Google Scholar
Rucker, R.R., Burt, O.R., and LaFrance, J.T.. “An Econometric Model of Cattle Inventories.” Amer. J. Agr. Econ. 66(1984):131-44.CrossRefGoogle Scholar
Schlender, J.R. “Kansas Land Prices and Cash Rental Rates.” Pub. No. MF-879, revised, Coop. Ext. Ser., Kansas State University, Manhattan, 1992.Google Scholar
Splett, N.S., Barry, P.J., Dixon, B.L., and Ellinger, P.N.. “A Joint Experience and Statistical Approach to Credit Scoring.” Agr. Fin. Rev. 54(1994):39–54.Google Scholar
Steigum, E. Jr. “A Financial Theory of Investment Behavior.” Econometrica 51(1983):637-45.CrossRefGoogle Scholar
Turvey, C.G. “Credit Scoring for Agricultural Loans: A Review of Applications.” Agr. Fin. Rev. 51(1991):43–54.Google Scholar
U.S. Department of Agriculture. Agricultural Income and Finance Situation and Outlook Report. Pub. No. AFO-41, USDA/Economic Research Service, Washington DC, 1990.Google Scholar
Working, H. “The Theory of Price of Storage.” Amer. Econ. Rev. 39(1949):1254-62.Google Scholar
Wright, B.D., and Williams, J.C.. “The Economic Role of Commodity Storage.” Econ. J. 92(1982):596–614.Google Scholar