The Farm Diversification Discount
AbstractThis paper examines the effect of diversification on farm value by comparing values of diversified farms to a portfolio of comparable specialized farms. Using data from the Agricultural Resource Management Study, this study finds a diversification discount in agriculture similar to the discount found for corporate firms. The results show that diversified crop/livestock farms have a value loss of 5.8% in comparison with specialized crop or livestock farms for 1999-2001. Farms with commodity diversification have a value loss of 9.4% in comparison with commodity specialized farms. The results also show that the value loss due to diversification is larger for leveraged farms.
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Bibliographic InfoPaper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20068.
Date of creation: 2004
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