FARM CHARACTERISTICS THAT INFLUENCE NET FARM INCOME VARIABILITY AND LOSSES

Farm-level, cross-section and panel data were used with econometric methods to examine relationships between variability in net farm income and explanatory variables including government payments, gross crop income, gross livestock income, costs, efficiency measures, and other socioeconomic characteristics such as age, leverage, percent of land rented, and enterprise diversification. The results suggest that quantifying the impacts of socioeconomic factors on variability of net farm income is difficult. Among the income variables, changes in gross crop income had the largest impact. Among cross-section data, increases in interest costs, age, and diversification were found to have positive relationships with net income variability. However, only the diversification variable was significant when deviations below mean net farm income were used as the measure of risk. Increasing farm size also was found to have a positive relationship with net income variability. When panel data were used and the estimated models included adjustments for time or random effects, the age and diversification variables were insignificant.