Prioritization of farm success factors by commercial farm managers

Abstract

This study elicits U.S. agricultural producer preferences for five key management success factors: managing output prices; managing production; controlling costs; managing land/equipment/facilities; and managing people. The objective of this analysis was to determine the relative importance of each of the five profit-centric functional areas of management among U.S. farm managers. Significant heterogeneity in preferences was observed over the management areas. Farm managers, on average, placed the highest importance in controlling costs (29% preference share). Differences emerged among groups of farmers in a latent class model where managing people became relatively important to the viability of the agribusiness.

Farmer perceptions of risk in 2017

“…However, employee management seems to be a major contributor to class 3—“Human Hurdles”—membership of the LCM. For example, producers who ranked managing people as the most important management factor on their farm are more likely to be in class 3—“Human Hurdles”—than class 1—“Traditional Production Risks.” This result is consistent with recent research that found managing people plays an important role in determining farm business success (Lai et al., ). In particular, Lai et al.…”

“…In particular, Lai et al. () found that larger operations, in terms of gross farm sales, placed more emphasis on managing people, which is consistent with the expectation of increasing complexity associated with larger operations (Bitsch & Olynk, ; Greiner, ). Although our ex post analysis of demographic characteristics fails to support any relationship between the farmer perceptions of human risk and gross farm sales (Table ), we do find that mean enterprise sizes for a variety of enterprises are largest for respondents most likely to be in class 3—“Human Hurdles—including milking dairy cows and fed dairy heifers, feeder pigs, and corn and soybean acres (Table ).…”

“…() found that livestock producers ranked output price variability as their number one source of risk. However, changes in livestock agriculture, in particular the increased role of structured contracts, have reduced input and output price variability in many livestock sectors (Harwood et al., ; Lai, Widmar, Gunderson, Widmar, & Ortega, ; Maples, Lusk, & Peel, ). As a result, it is not surprising that the preference share for marketing risk would decrease relative to the other sources of risk livestock producers face.…”

“…With that said, our results also shed light on the heterogeneity of risk preferences among producers that suggests the need to broaden research and extension programs beyond “traditional” farm business risks. For example, a segment of farmers who are keenly aware of the human risks facing their farm businesses was identified, and it is expected that this group will grow as farm businesses continue to get larger and more complex (Bitsch & Olynk, ; Greiner, ; Lai et al., ). Many farm managers lack formal training in human resource management.…”

A Clustering Approach to Understanding Farmers’ Success Strategies

“…The importance of key management factors in the success of farm businesses has previously received research attention (Holland et al, 2014;Lai et al, 2018), but these studies did not consider the similarities and differences between management strategies based on farmers' primary production activity. Holland et al (2014) used choice-based data from the 2013 edition of the Large Commercial Producer Survey to identify the most important predetermined management factors as controlling costs and managing production.…”