Citation
Florida food and resource economics

Material Information

Title:
Florida food and resource economics
Creator:
Florida Cooperative Extension Service
Place of Publication:
Gainesville Fla
Publisher:
Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences.
Creation Date:
September 1984
Frequency:
bimonthly
regular
Language:
English
Physical Description:
v. : ; 28 cm.

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Subjects / Keywords:
Agriculture -- Statistics -- Florida ( nal )
Agriculture -- Periodicals -- Florida ( nal )
Agricultural extension work -- Periodicals -- Florida ( nal )
Agricultural extension work -- Periodicals -- Florida ( lcsh )
Agriculture -- Periodicals -- Florida ( lcsh )
Agriculture -- Statistics -- Periodicals -- Florida ( lcsh )
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serial ( sobekcm )
periodical ( marcgt )

Notes

Dates or Sequential Designation:
no. 1- Nov./Dec. 1974-
Funding:
Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.

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University of Florida
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University of Florida
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The University of Florida George A. Smathers Libraries respect the intellectual property rights of others and do not claim any copyright interest in this item. This item may be protected by copyright but is made available here under a claim of fair use (17 U.S.C. §107) for non-profit research and educational purposes. Users of this work have responsibility for determining copyright status prior to reusing, publishing or reproducing this item for purposes other than what is allowed by fair use or other copyright exemptions. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. The Smathers Libraries would like to learn more about this item and invite individuals or organizations to contact Digital Services (UFDC@uflib.ufl.edu) with any additional information they can provide.
Resource Identifier:
000301142 ( ALEPH )
01525473 ( OCLC )
ABS7625 ( NOTIS )

Full Text
HISTORIC NOTE
The publications in this collection do not reflect current scientific knowledge or recommendations. These texts represent the historic publishing record of the Institute for Food and Agricultural Sciences and should be used only to trace the historic work of the Institute and its staff. Current WFAS research may be found on the Electronic Data Information Source (EDIS)
site maintained by the Florida Cooperative Extension Service.
Copyright 2005, Board of Trustees, University of Florida




INSTITUTE OF FOOD AND FLORIDA
AGRICULTURAL SCIENCES COOPERATIVE
K lFAS UNIVERSITY OF FLORIDA EXTENSION SERVICE
TEACHING ........ EKENSION FLORIDA FOOD AND RESOURCE ECONOMICS
September-October 1984 No. 60
FARM RISKS IN NORTH FLORIDA: IMPORTANCE,
CAUSES, AND FARMERS' RESPONSES*
William G. Boggess and Kwabana A. Anaman
Farm risks faced by mixed crop livestock In the fall of 1983, twenty-five farmers
farmers in North Florida result to a large in Jackson County, Florida were randomly
degree from the resource and climatic selected. Personal interviews were conducted
conditions of the area. The growing season is with each farmer. Initially the farmers were
long, but the winters are too cold for citrus asked to define risk and then to rank various
or winter vegetables. The summer months are sources of risk and possible management
warm, wet, and humid providing an excellent responses to risk based on the relative
environment for insects, weeds, and importance of each to their operation. The
diseases. Despite the fact that the area following is a summary of their assessment of
receives nearly 60 inches of rain yearly, the most important sources of risk they face
drought is a frequent problem on the extremely and their management responses to these risks.
sandy soils. Compounding these physical and
climatic problems is the region's distance
from and lack of access to major crop and Risk is generally used to indicate that
livestock markets. The region realistically the action a decision-maker selects has
is part of a "fringe" agricultural -area alternative outcomes. The particular outcome
between the major Corn Belt production area to that will occur is unknown, but some
the north and the high-valued citrus and assessment of the likelihood or probability of
vegetable production area to the south. each outcome is available. One of the primary
Roughly 80 percent of the farms are mixed objectives of the survey was to determine how
Rougly mxed farmers define risk.
crop and livestock. Major crops include corn,
soybeans, peanuts, small grains and forages. "Risk is a loaded gun" is how one rather
Peanuts are king if the farmer has an articulate farmer defined risk. This
allotment. Thanks to the development of new definition captures the essence of the
southern varieties, wheat is rapidly become a majority of responses. Nearly all of the
major crop. The long growing season allows farmers focused on the potential of negative
full-season wheat to be double-cropped with outcomes. "Always figure on half a crop and
full-season soybeans. The wheat does well in don't spend any more than that," "Losing
sandy soils and provides winter grazing for assets you've already accumulated" or "How
the numerous cow-calf herds. Approximately much you stand to lose" are other responses.
two-thirds of the farms have cow-calf herds Many farmers also expressed the probability
and nearly half have small hog operations. aspect in their definitions. "Chance taking
The vast majority of the farms are sole putting it all on the line without knowing the
outcome" or "Plans are based on facts, but
proprietorships or family partnerships. Off- outcomes are uncertain." Finally, a couple of
farm income plays an important role, with over farmers expressed the potential for gain
half of the farms indicating that either the aspect, "Risk is the gateway to success,"* and
operator or spouse worked off-farm. "The chances of making and losing money."
*Appreciation is extended to Leonard Cobb, Jackson County Extension Director, Tim Hewitt, Area Economist and John Holt, Professor of Food and Resource Economics for their support and assistance with the survey.
William G. Boggess is Associate Professor and Kwabena A. Anaman is a Graduate Assistant, Department of Food and Resource Economics, University of Florida.




SOURCES OF RISK highest ranked source of risk. Farmers
Over half of farmers' definitions of risk frequently mentioned uncertainty over the
explicitly mentioned weather or pests. Not future of -the peanut program as a maj or risk
surprisingly then, production risks, f actor. The future of PIK or similar programs
specifically rainfall variability and pests was another common concern. Variability in
(insects, weeds, and diseases) were identified state and federal laws and regulations was
as the major sources of risk (Table 1). With also identified as a major source of risk.
respect to rainfall variability, praying was Normally this would be a surprising result
the most common management response, with were it not for the state's banning of Temik
irrigation a close second. Other common and EDB shortly before the survey was
management practices used to combat rainfall conducted. These chemicals were considered to
variability includes minimum tillage, be critical in the control of nematodes in
subsoiling, crop selection (wheat and grain peanuts and soybeans.
sorghum), and maintaining feed reserves, The fourth source of risk commonly
primarily hay. Pests are major problems due mentioned was the cost of credit. This was
to the warm, humid climate. Nematode control the only credit variable consistently ranked
is a particular problem since the state of as an important source of risk. The majority
Florida recently banned the use of Temik and of farmers had responded to variability in the
EDB. Still, chemical control far and away cost of credit by minimizing their use of
dominated the list of management responses to debt, particularly operating capital. Over
pests. Chemicals are used to control weeds, half of the farmers surveyed had not borrowed
insects, diseases and nematodes. Rotating any operating capital in the past year. Other
grass crops between crops of soybeans or practices included shopping around and
peanuts to control nematodes was the second delaying major expenditures.
most common practice. Other common practices Variability in freezes, leasing, new
include: using resistant varieties, scouting technology, other weather phenomena (wind and
for insects and diseases, planting corn early
to beat the insects and spraying and worming hail) and hired labor were ranked as the five
livestock routinely. least important sources of risk. As a fringe
production area, land is plentiful in North
Market related risks were identified as Florida and leasing is not a problem. Rather,
the second most important source of risk with the problem is making money on the leased
variability in commodity prices leading the land! Hired labor is generally not a problem
way (Table 1). Variability in the costs of on the small, diversified farms. However,
operating inputs and variability in the costs there were several specialized livestock
of capital equipment were also frequently operations (dairy and hog) which indicated
mentioned. Forward contracting was the most that variability in labor availability and
common management responses to variability in quality was a problem.
commodity prices. Soybeans was the most MANABEMENT RESPONSES TO RISK
common commodity contracted. Other less
common practices used to off-set commodity In addition to ranking the importance of
price variability were drying and storage and various sources of risk and indicating how
shopping around for the best price. Farmers they attempted to manage those risks, farmers
f or the most part felt that there was little were asked to rank the importance of a list of
they could do to combat variability in the management responses. Not surprisingly, there
costs of operating inputs or capital is a lot of overlap between their volunteered
equipment. Most indicated that they shopped responses and their subsequent ranking of the
around and attempted to take advantage of cash listed responses. The highest ranked and most
or quantity discounts on operating inputs. commonly used management responses were
However, with the average farm size being 240 enterprise diversification, production
acres, bulk discounts are uncommon. In the practice diversification, and maintaining feed
case of capital equipment, most f farmers reserves. With the exception of irrigation indicated that they put off replacing (which was inadvertently left off the
equipment and concentrated on maintenance of questionnaire) these match the farmers'
existing machinery. responses to the highest ranked source of risk
Given the importance of peanuts as the (rainfall variability and pests). All-risk
dominant cash crop in the area f or farmers crop insurance was rarely used.
with an allotment, it isn't surprising that The second most highly ranked group of
government commodity programs were the third management responses dealt with managing price




risks. Using market information wa s the was most useful in dealing with the question highest rated response in this category, of "When to plant?" as it related to controlfollowed by pacing of investments and spread- ling pests. Only four of the responses to
ing sales. Surprisingly, forward contracting this question mentioned records or cost of
was not rated as very important even though a production. It was pretty clear that the
majority of farmers had used forward con- majority of farmers viewed records as an
tracts. The farmers unanimously agreed that income tax requirement, but not as a managehedging in the futures market. was not an ment tool. This would appear to be an opporimportant management response giving it the tunity for extension education programs,
second lowest rating after hail insurance. perhaps harnessing the power of microcomputers
Only*eight percent of the farmers surveyed had to make record keeping more palatable.
ever used the futures market. The low rating The third question in this series was,
of hedging is probably a result of lack of "What types of information not currently
familiarity with hedging, the small average available would be helpful to you in making
farm sizes, and the distance and lack of these (key) decisions?" The overwhelming
access to the major grain markets. response was market price and outlook informaA third group of highly ranked management tion of any kind. No other response drew more
responses to risk included maintaining eligi- than two comments.
bility for participation in government commod- The fourth question in the series was
ity programs, maintaining flexibility in farm designed to determine if farmers practiced
operation, and off-farm activities by the 1. risk balancing." The question asked read,
operator's spouse. These responses are consis- "If you take an action which increases
tent with earlier responses emphasizing the risk/uncertainty in one aspect of your opera-importance of the peanut program, the diversi- tion, do you try to off set or balance this
fied nature of the farms and the importance of with other actions in another part of the
off-farm income. business?" For example, if a farmer decided
INFORMATION NEEDS FOR DEALING WITH RISK to grow watermelons (a relatively risky crop)
Farmers were also asked to respond to a this additional risk by might be offset irriseries of questions dealing with information gating and forward contracting his corn and
and risk. The first question asked was, "What soybeans. This question was probably the most
are the key farm decisions you must make?" misunderstood question in the survey. HowThe most frequent was, 'What should I plant ever, it was quite clear from the responses
and how many acres?" For most farmers in the that few, if any, of the farmers had thought
area their peanut acreage is fixed by their about or deliberately practiced risk balancallotment. After peanuts however, there are ing. Only two farmers responded that they
few, if any, clear choices. Weather, pests did, although they hadn't thought about it in
and price uncertainty all combine to make this those terms. Both farmers mentioned the
a very difficult decision. textbook idea of diversification, or a
balanced portfolio.
The second most common response was,
"When to plant?" Weather and pest uncertainty The final question asked was, "Have your
are the major risk factors that complicate responses to risk/variability resulted from or
this decision. The long growing season and been influenced by other people or institu-alternative varieties allow a number of crops tions; (e.g. lenders, etc.) with whom you
to be planted over a relatively wide range of deal? If so, how?" The county extension
dates. The only other responses mentioned by agent was the most frequently mentioned permore than three farmers were, "When to sell?" son. This response illustrates the impact
and "How much money to borrow?" that a good agent can have in an area. Neighbors and parents finished second and third,
Farmers were then asked, 'What types of respectively in the list of most influential
information are most useful in making these people.
(key) decisions?" The dominant response was, SUMMARY
"Demand and price outlook." It was clear from
the farmers' response that this outlook infor- The mixed crop and livestock farmers in
mation was critical in making decisions on North Florida responding to this questionnaire
what and how much to plant as well as deciding indicated that rainfall variability and pests
on when to sell. Extension production infor- (weeds, insects, nematodes, and diseases) are
mation was the second most common type of the most important sources of risk they face.
inf formation used. This type of inf formation. The most important management responses used




to combat these risks were irrigation, che- There would appear to be a need for more
micals, crop rotation, maintaining feed research on marketing alternatives (particureserves, and production practices diver- larly the futures market), all-risk crop
sification (planting dates, tillage, varie- insurance, optimal crop mixes, irrigation, and
ties, etc.). Commodity price variability was integrated pest management. The respondents
the third most important source of risk. to the survey indicated that they wanted more
Producers indicated that they spread sales and market price and outlook information, and
used forward contracts to offset these risks, their responses suggested demand for use of
Considerable concern was expressed over the records as a management tool.
future of the peanut program and over the If "risk is a loaded gun",then perhaps
State's banning of Temik and EDB. One other through appropriate research and extension
major concern was the cost of credit. The efforts that gun can be handled so that
farmers indicated that in response to high trophies are bagged and no one gets killed.
interest rates and high capital equipment prices that they had put off investments and many had attempted to minimize borrowing.
Table 1. Mean importance Rankings and Standard Deviations of Sources of Risk and Variability in Crop Production ..................................... ....................................................................
Source of Risk Mean Ranking Standard
Number Variability of Importance" Deviation
I Rainfall variability 4.70 0.59
2 Diseases and pests 4.50 0.75
3 Commodity prices 4.22 1.01
4 Inflation 3.60 1.64
5 Govern aent commodity programs 3.53 1.39
6 Cost of operating inputs 3.50 1.17
7 Personal safety and health 3.35 1.42
8 World economic situation 3.16 1.36
9 Cost of capital equipment 3.15 1.41
10 Cost of credit 3.04 1.72
Ii Federal and State government laws 2.96 1.69
12 Family plans 2.51 1.59
13 Theft of farm equipment, etc. 2.33 1.59
14 Hired labor 2.24 1.79
15 Changes in technology 2.22 1.59
16 Availability of loan funds 2.06 1.55
17 Use of leverage 2.00 1.55
18 Other climatic factors (wind, etc.) 2.00 1.83
19 Leasing 1.67 1.83
20 Freezes 0.91 1.09
aRankings are based on a scale of 0 for not important to 5 for very important.
Articles appearing in Florida Food and Ro- This public documentwas promulgated Adree. editorial coinsts or cocrespodeoae source Economics may be reproduced, in whole
.rcon addires or Jling t i- be.lork, or in part, without special permission. News- at an annual cost of $150.20, or 7.5
L.c. Pololus, and J.It. Smpso, Edtors,
1125 HoCactyr hl. Food and tesoorce coeolc. papers. periodicals, and other publications are cents per copy, to give research results eparteut. sutviesty of Florida, Geaiiesvlle, encouraged to reprint articles which would be and economic information on Florida
Flortda 32611. of interest to their readers Credit is requested
if information is reprintsd. food and agricultural industries.
Food and Resource Fconomics Department 1125 McCarty Hall
University of Florida
Institute of Food and Agricultural Sciences Gainesville, FL 32611