skip to main content
Language:
Search Limited to: Search Limited to: Resource type Show Results with: Show Results with: Search type Index

Profitability, risk and cash flow deficit for beginning cow–calf producers

Agricultural finance review, 2022-01, Vol.82 (1), p.1-19 [Peer Reviewed Journal]

Emerald Publishing Limited ;Emerald Publishing Limited 2021 ;ISSN: 0002-1466 ;EISSN: 2041-6326 ;DOI: 10.1108/AFR-05-2020-0065

Full text available

Citations Cited by
  • Title:
    Profitability, risk and cash flow deficit for beginning cow–calf producers
  • Author: Trejo-Pech, Carlos J.O ; Bruhin, Jared ; Boyer, Christopher N ; Smith, S. Aaron
  • Subjects: Accumulated depreciation ; Agricultural production ; Beef cattle ; Capital expenditures ; Carrying capacity ; Cattle ; Discount rates ; Discounted cash flow ; Economics ; Farm income ; Farmers ; Financial management ; Flow ; Investments ; Market value ; Net present value ; Operating costs ; Opportunity costs ; Payback periods ; Profit margins ; Profitability ; Risk ; Stochasticity ; Tax rates ; Weaning
  • Is Part Of: Agricultural finance review, 2022-01, Vol.82 (1), p.1-19
  • Description: PurposeThe purpose of this study is to estimate the amount of cash flow deficit, if any, needed to maintain the operating costs and service debt of a startup cow–calf enterprise. The study compares long-term profitability and risk between starting small and building a herd to full carrying capacity or by starting at desired herd capacity.Design/methodology/approachA dynamic cattle growth model was developed to capture expanding and maintaining the desired herd size. Discounted cash flow (DCF) models over a 15-year period were calculated to estimate net present value (NPV), modified internal rate of return (MIRR) and cash flow deficit to keep the business operating and service debt. Simulation analyses were conducted considering price and production risk.FindingsStarting at the desired herd size was preferred, according to NPV/MIRR and cash flow deficit, but the differences were not substantial. Assuming the operation is liquidated at book values, there was a 36.3% probability of this enterprise having a zero or positive NPV. If the conservative terminal value assumption is relaxed up to feasible market values, the cow–calf enterprise is economically attractive at an estimated 2.4% opportunity cost of capital. However, the producer would experience a cash flow deficit during the first seven years, which was simulated to be $14,892 and $15,985 annual for both strategies.Originality/valueInnovative methods used in this study include varying the annual opportunity cost of capital as a function of financing decisions, stochastic prices by cattle type and stochastic weaning weights that are a function of a dynamic cattle model.
  • Publisher: Bingley: Emerald Publishing Limited
  • Language: English
  • Identifier: ISSN: 0002-1466
    EISSN: 2041-6326
    DOI: 10.1108/AFR-05-2020-0065
  • Source: ProQuest Central
Back to results list
INSPIRE LIBRARY - TON DUC THANG UNIVERSITY (84-028) 37 755 057 Feedback
19 Nguyen Huu Tho St. Dist.7, HCM thuvien@tdtu.edu.vn

Copyright © 2017 INSPIRE LIBRARY - TON DUC THANG UNIVERSITY

Searching Remote Databases, Please Wait