Off Farm Income: Evaluating the Effects of Off Farm Income on Debt Repayment Capacity
Aaron Cling, Mediapolis, IA, defended his thesis, “Off Farm Income: Evaluating the Effects of Off Farm Income on Debt Repayment Capacity” on April 28, 2017. He works as an Agricultural Loan Officer for Two Rivers Bank and Trust. Cling graduated from Kansas State University in August 2017 with a Master of Agribusiness (MAB) degree.
In recent years, certain farm operations have experienced decreased income patterns along with commodity prices as a result of evolving agricultural trends. For some, this has led to high input prices, machinery costs, cash rent and land prices, introducing increased risk into the farming industry. Due to innovations in technology, farmers are able to accomplish more in a given time period, allowing some to have time to devote time to off-farm ventures to combat farm-related income deficits and pay off debt. In his thesis, Cling the financial performance and ratios of farms with off-farm incomes to farms without a source of off-farm income, and evaluates the importance of an off-farm job to a farming enterprise.
“The thesis develops a model that includes net farm income, debt repayment capacity with carryover working capital, off-farm income sources and a number of other independent variables that help define each individual borrower. The model provides an evaluation of the current farming environment, and examines various income opportunities available to said borrowers” Cling said.
Cling’s thesis results suggested that the dummy variable for one source of off-farm income was the only statistically significant variable in both models estimated, therefore a farming operation with a strong outside income source is likely more financially stable. He also provided recommendations for future research about other factors that can influence farm stability.
Dr. Allen Featherstone, Agricultural Economics Department Head, Professor, MAB Program Director and Cling’s thesis advisor, said, “INSERT QUOTE HERE.”
The full thesis publication can be found online on Kansas State University’s Research Exchange at add link
