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The Farm Diversification Discount

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  • Ani L. Katchova

Abstract

This article estimates the effect of diversification on farm values, where farms are valued relative to the median specialized farm having the same enterprise. Using data from the Agricultural Resource Management Study, the estimated diversification discount in agriculture is similar to the discount found for corporate firms. The results show that diversified crop/livestock farms had a diversification discount of 5.8% in comparison with specialized crop or livestock farms from 1999 to 2001. Commodity diversified farms had a diversification discount of 9.4% in comparison with commodity specialized farms. Copyright 2005, Oxford University Press.

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  • Ani L. Katchova, 2005. "The Farm Diversification Discount," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 984-994.
    • Handle: RePEc:oup:ajagec:v:87:y:2005:i:4:p:984-994
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00782.x
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    2. Stefan Hirsch & Adelina Gschwandtner, 2013. "Profit persistence in the food industry: evidence from five European countries," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(5), pages 741-759, December.
    3. Harris, James Michael & Blank, Steven C. & Erickson, Kenneth W. & Hallahan, Charles B., 2010. "Off-farm Income and Investments in Farm Assets: A Double Hurdle Approach," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61531, Agricultural and Applied Economics Association.
    4. Winikoff, Justin B. & Maguire, Karen, 2024. "The Role of Commercial Energy Payments in Agricultural Producer Income," Economic Information Bulletin 342468, United States Department of Agriculture, Economic Research Service.
    5. Harris, James Michael & Dillard, John & Erickson, Kenneth W. & Hallahan, Charles B., 2009. "Changes in Debt Patterns and Financial Structure of Farm Businesses: A Double Hurdle Approach," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49402, Agricultural and Applied Economics Association.
    6. Singbo, Alphonse G. & Emvalomatis, Grigorios & Alfons, Oude Lansink, 2013. "Assessing the impact of crop specialization on farms’ performance in vegetables farming in Benin: a non-neutral stochastic frontier approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149172, Agricultural and Applied Economics Association.
    7. Agnieszka Kurdyś-Kujawska & Agnieszka Strzelecka & Danuta Zawadzka, 2021. "The Impact of Crop Diversification on the Economic Efficiency of Small Farms in Poland," Agriculture, MDPI, vol. 11(3), pages 1-21, March.
    8. Beatriz García-Cornejo & José A. Pérez-Méndez & David Roibás & Alan Wall, 2020. "Efficiency and Sustainability in Farm Diversification Initiatives in Northern Spain," Sustainability, MDPI, vol. 12(10), pages 1-18, May.
    9. Finocchio, Romina & Esposti, Roberto, 2008. "Determinants of farm diversification and interaction with the CAP. An application to FADN of Marche region (Italy)," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44251, European Association of Agricultural Economists.
    10. Weber, Jeremy G. & Key, Nigel & O'Donoghue, Erik J., 2015. "Does Federal Crop Insurance Encourage Farm Specialization and Fertilizer and Chemical Use?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204972, Agricultural and Applied Economics Association.
    11. Lakner, Sebastian & Kirchweger, Stefan & Hoop, Daniel & Brümmer, Bernhard & Kantelhardt, Jochen, 2015. "Impact of diversification on technical efficiency of organic farming in Switzerland, Austria and Southern Germany," DARE Discussion Papers 1508, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    12. Gamel Abdul-Nasser Salifu, 2019. "The Political Economy Dynamics of Rural Household Income Diversification: A Review of the International Literature," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 273-290, December.
    13. Musser, Wesley N. & Lambert, Dayton M. & Daberkow, Stan G., 2006. "Factors Affecting Direct and Indirect Energy Use in U.S. Corn Production," 2006 Annual meeting, July 23-26, Long Beach, CA 21063, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Erik J. O’Donoghue & Michael J. Roberts & Nigel Key, 2009. "Did the Federal Crop Insurance Reform Act Alter Farm Enterprise Diversification?," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 80-104, February.
    15. Sebastian Lakner & Stefan Kirchweger & Daniel Hoop & Bernhard Brümmer & Jochen Kantelhardt, 2018. "The Effects of Diversification Activities on the Technical Efficiency of Organic Farms in Switzerland, Austria, and Southern Germany," Sustainability, MDPI, vol. 10(4), pages 1-18, April.
    16. Jeremy G. Weber & Nigel Key & Erik O’Donoghue, 2016. "Does Federal Crop Insurance Make Environmental Externalities from Agriculture Worse?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 707-742.
    17. Larsen, Ryan A. & Leatham, David J. & Mjelde, James W. & Wolfley, Jared L., 2008. "Geographical Diversification: An Application of Copula Based CVaR," 2008 Agricultural and Rural Finance Markets in Transition, September 25-26, 2008, Kansas City, Missouri 119533, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    18. Ting Chang & Luca Iseppi, 2012. "EU Agro-Food Chain and Vertical Integration Potentiality: a Strategy for Diversification?," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(1), pages 107-130, September.
    19. Luigi Mastronardi & Aurora Cavallo & Luca Romagnoli, 2020. "Diversified Farms Facing the Covid-19 Pandemic: First Signals from Italian Case Studies," Sustainability, MDPI, vol. 12(14), pages 1-12, July.
    20. Jianmei Zhao & Peter J. Barry, 2014. "Income Diversification of Rural Households in China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(3), pages 307-324, September.

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