http://www.loc.gov/mods/v3 http://www.loc.gov/standards/mods/v3/mods-3-2.xsd
Modeling agribusiness profitability in response to dynamic macroeconomic policies
In recent years there has been an increasing awareness of the importance of the effects macroeconomic policies have on the economic performance of the agriculture sector. Agribusinesses are influenced by current and expected conditions in the economy. An understanding of how the economy impacts agribusinesses will help management teams formulate proactive strategies to deal with fluctuating macroeconomic conditions. A partial adjustment model using pooled data is developed to quantify the linkages between macroeconomic conditions and agribusiness profitability. Thirty-seven agribusinesses organized into five groups are included in the study. The model's parameters were estimated using Seemingly Unrelated Regression adjusted for unequal number of observations across the cross sections. Empirical results from the profitability response models strongly indicate that macroeconomic conditions impact firm profitability. The agribusinesses are clearly divided in their response to macroeconomic conditions based on the market segments in which they operate. Capital intensive agribusinesses involved with manufacturing machinery and equipment and lumber and wood products are more susceptible to macroeconomic conditions in comparison to agribusinesses involved with manufacturing and processing food products. The food processors profitability is substantially higher and has the lowest variation in comparison to the other agribusiness groups. This can be primarily attributed to the overall inelastic demand for food products over time. Demand for food products does not respond to macroeconomic cycles. In comparison, demand for new machinery and lumber products for construction projects is very sensitive to macroeconomic conditions. The results indicate that monetary policies that affect interest rates and fiscal policies that affect taxes will, in turn, affect agribusiness profitability. Firms with a high debt level are more susceptible to interest rate fluctuations. This indicates that a firm's capital structure must be considered when formulating proactive management strategies in response to macroeconomic conditions. Machinery manufactures are impacted the greatest by fiscal policies that affect the tax rate, capital gains, depreciation and investment tax credit because fiscal policies affect both the cost of their capital inputs and the demand for the capital outputs.
"Major subject: Agricultural Economics."