Data/hora: 10/06/2024 17:19:29

Provedor de dados: 	Research in Agricultural & Applied Economics (AgEcon Searh)	
País: 	United States	
Título: 	VALUE OF SOCIAL CAPITAL TO MID-SIZED NORTHERN PLAINS FARMS	
Autores: 	Gustafson,   Cole R.	
Data: 	2004-10-28	
Ano: 	2004	
Palavras-chave: 	Social; Capital; Financial risk; Simulation; Stochastic; Farm Management; Institutional and Behavioral Economics.	
Resumo: 	As farms increase in size, operators often face the difficult decision of remaining loyal to local merchants or obtaining volume discounts from more distant input suppliers.  When farmers bypass local merchants and buy inputs in volume from a wholesaler, they often realize a price discount but forego many services including credit forebearance.  In essence, when farmers buy locally, they pay higher prices, which decreases profits and increases financial risk, but generates social capital which can be drawn upon during periods of economic adversity later in the form of credit forebearance.   A theoretical model of farm financial risk evaluates borrower behavior in light of cash flow constraints, volume discounts, and social capital.  Monte-carlo simulation was used to empirically apply the model to a representative 2,000-acre Northern Plains crop farm.  The stochastic simulation model embodied local price and yield distributions, tax policy, and financial repayment risks.  A survey of local input suppliers and lenders provided key information on levels of price discount and credit forebearance.  Competition among suppliers resulted in less difference between retail and wholesale prices than expected a priori.    Results of the analysis delineated the financial risks involved and value of social capital received in the form of credit forebearance.  The distribution of year-end available funds when inputs were purchased locally had a slightly lower mean and longer left tail.  While a longer and bulkier left tail appeared to present the farm with additional financial risk, it was actually the result of additional borrowing arising from credit forebearance.  If forebearance were not available, the firm would have been bankrupt.  In this model, bankruptcy occurred with 2.6 percent frequency.  Personal exemptions provided under statutory bankruptcy provisions altered the shape of the left tail.	
Tipo: 	Working or Discussion Paper	
Idioma: 	Inglês	
Identificador: 	15205

http://purl.umn.edu/23677	
Editor: 	AgEcon Search	
Relação: 	North Dakota State University&gt;Department of Agribusiness and Applied Economics&gt;Staff Papers

Staff Paper No. AAE 04005	
Formato: 	15

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