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Profits And Risk: Fitting An Old Framework To A New Agriculture

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  • Saxowsky, David M.
  • Wachenheim, Cheryl J.

Abstract

Textbooks in agricultural economics characterize resources used in production agriculture into four categories; land, labor, capital and management. Profit is presented as earned in the process of management. This traditional list of resources is respecified. Management becomes a specialized type of labor and two additional resources, information and the willingness and ability to bear risk, are added. It is argued that profits accrue not to management but to those willing and able to bear the risk inherent in production agriculture. The strategy of equity diversification is presented as a means for farmers to provide this resource and thus earn economic profits. Producer education and the repeal or amendment of legislation restricting the ability of farmers to diversify their equity investment are needed.

Suggested Citation

  • Saxowsky, David M. & Wachenheim, Cheryl J., 2001. "Profits And Risk: Fitting An Old Framework To A New Agriculture," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36133, Western Agricultural Economics Association.
  • Handle: RePEc:ags:waealo:36133
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    References listed on IDEAS

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    1. Lawrence, John D. & Otto, Daniel M. & Meyer, Seth D., 1997. "Purchasing Patterns of Hog Producers: Implications for Rural Agribusiness," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 15(1).
    2. Hurt, Christopher, 1994. "Industrialization in the Pork Industry," Choices, Agricultural and Applied Economics Association, vol. 9(4).
    3. Wachenheim, Cheryl J. & Saxowsky, David, 2003. "Profits and Risk: Fitting an Old Framework to a New Agriculture," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    4. Drabenstott, Mark, 1994. "Industrialization: Steady Current or Tidal Wave?," Choices, Agricultural and Applied Economics Association, vol. 9(4).
    5. Lawrence, John D. & Otto, Daniel & Meyer, Seth D., 1997. "Purchasing Patterns of Hog Producers: Implications for Rural Agribusiness," Staff General Research Papers Archive 5149, Iowa State University, Department of Economics.
    6. Ervin, David E. & Smith, Katherine R., 1994. "Agricultural Industrialization and Environmental Quality," Choices, Agricultural and Applied Economics Association, vol. 9(4).
    7. Knoeber, Charles R, 1997. "Explaining State Bans on Corporate Farming," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 151-166, January.
    8. W. Timothy Rhodus & E. Dean Baldwin & Dennis R. Henderson, 1989. "Pricing Accuracy and Efficiency in a Pilot Electronic Hog Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 874-882.
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    Cited by:

    1. Bazzani, Guido Maria & di Pasquale, S. & Gallerani, Vittorio & Viaggi, Davide, 2002. "Water Regulation and Irrigated Agriculture Under the EU Water Framework Directive," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24898, European Association of Agricultural Economists.
    2. Wachenheim, Cheryl J. & Saxowsky, David, 2003. "Profits and Risk: Fitting an Old Framework to a New Agriculture," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    3. Barnard, Freddie L. & Yeager, Elizabeth, 2013. "The Perfect Storm: A Case Study Illustrating How a Series of Events Led One Farm Operator to Develop a Risk Management Plan that Includes a Lender’s Perspective," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    4. Bazzani, Guido Maria & di Pasquale, S. & Gallerani, Vittorio & Viaggi, Davide, 2002. "Water Policy And The Sustainability Of Irrigated Systems In Italy," Working Papers 14401, University of Minnesota, Center for International Food and Agricultural Policy.

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    Keywords

    Risk and Uncertainty;

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