This study used a 1976-1992 panel data set to test whether farm machinery investors face finance constraints. Tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable. Results indicated that (1) credit constraints were generally not a problem during the 1970s boom, (2) credit constraints became a problem during the 1980s and early 1990s because of tighter credit and/or more conservative financial managerial styles, (3) the investment-cash flow relationships of low-debt and older-operator farms were not significantly affected by farm business cycles, and (4) the investment-cash flow relationships of high-debt and young-operator farms were affected strongly by business cycles. Debt level was the strongest determinant of credit constraints; asset size and operator age were less important. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Recent finance studies have considered whether gaps between a firm's costs of internal and external sources of investment funds, arising from capital market imperfections, influence its investment behavior and funding preferences. This study tests the applicability of the pecking order and partial adjustment theories of financial structure to farm businesses by fitting a set of simultaneous financial equations with farm panel data from Illinois. Model results indicate that Illinois farms adjust to long-run financial targets for equity, debt, and leasing, but that additional financing needs follow a pecking order that is stronger for farms with greater asymmetric information problems.

A recurrent topic in the macroeconomic literature is the financial accelerator—the notion that informational asymmetries introduce inefficiencies to financial markets which amplify and propagate the effects of real or monetary shocks. With the purpose of finding empirical evidence that is consistent with a financial accelerator operating in the cattle sector, inventory investment models are estimated with an appended cash flow variable. The inclusion of cash flow is motivated by the notion that investment by credit-constrained farms should be sensitive to movements in internal funds. Results are consistent with the financial accelerator operating in the feeder cattle but not in the cow-calf sector. Copyright 1998, Oxford University Press.

Hedonic price models are estimated to determine if there are incentives to supply higher quality tomatoes. Price premiums are associated with extra-large tomatoes originating from shipping points located closer to consumption points. Price differences between mature-green and vine-ripe tomatoes are not significant. Vine-ripe tomatoes are favored by consumers in the summer while mature-green tomatoes are favored the rest of the year. The U.S. Department of Agriculture should consider changing the present tomato grading system, which is based on shape and smoothness, to include a flavor indicator based on harvest maturity.

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