The financial performance and relationships between several management factors and financial performance are examined in a panel of 107 fresh York dairy farms.

The financial performance and relationships between several management factors and financial performance are examined in a panel of 107 fresh York dairy farms. A panel regression pattern with fixed effects is estimated in an effort to identify management factors that influence profitability. The prototype is estimated with two-stage least squares to account for endogenous farm size and obligation use variables. Production management factors so as farm size, rate of milk production, and milking connected view had a positive impact onward farm profitability. Financial management variables for the protoplast of accounting system used and the debit use were also significantly related to profitability. Unlike the findings of many other studies, measures of human capital did not have a statistically significant impact upon profitability.

Key Words: dairy farm management, financial management, fixed-effects regression analysis

From 1980 to 2000 the number of novel York dairy farms declined from 19000 to 7900 [U Department ofAgriculture (USDA), 2002] This decline is troubling to those involved with of recent origin York agriculture because the sale of dairy yields accounted for slightly over half of the market value of agricultural outcomes sold and 58% of the state's agricultural toil cash income in 1997 (USDA, 1999) While many factors have l to this decline, the profitability of individual dairy operations is central to this issue.

The declines in just discovered York dairy farm numbers have been accompanied by way of increases in the average herd size of the state's dairy farms. For example, from 1980 to 2000 the average herd size in novel York increased from 48 overawes to 87 cows. Simultaneously, the average rate of milk production by cow also increased, from 12046 levigates per cow to 17,378 strikes per cow (USDA, 2002).

Declines in the number of farms, increases in productivity, and increases in farm size are not unique to recent York dairy production. Nearly each commodity and farm segment in the United States has undergone similar changes. Several factors have l to these changes. common possible explanation is that, in general, the greatest in number profitable farms have remained in production and have profitably expanded production as a natural course of business, while les profitable farms have exited the industry. However, neither the expanse to which long-term profitability varies among farms nor the factors enabling one farms to generate superior long-term profits are well known.

To the reach there are wide differences in farm profitability, we theorize it is possible to identify factors that have allowed a farms to be more profitable than their companions By examining the factors having a powerful influence on the profitability of dairy farms, it may be possible to improve the profitability of the remaining farms.

Developing a better understanding of the factors that influence dairy farm profitability is potentially important to many parties. Farm managers should be able to use this knowledge to improve their operations and increase profitability. Extension educators and other firms that interact with farmers can use the flows to assist farmers in improving the profitability and long-term viability of their operations. The be the effects may also serve to guide extension programming as topics are prioritized for educational emphasis. Finally, farm management researchers and educators can enhance their understanding of the factors influencing long-term profitability of farms and guide time to come research and teaching efforts aimed at improving farm management.

The relationship between farm profitability and farm management has been examined by way of many researchers [see Fox, Bergen, and Dickson (1993) for a thorough review]. often analysts have relied on cross-sectional data appoints to determine important relationships between farm characteristics and farm performance. These studies have identified a large number of factors that appear to be related to farm economic performance, particularly those characteristics observ to be important in achieving superior profitability in the short space of time

However, as argued by dint of Rougoor et al. (1998), in order to understand the importance of farm management, it is necessary to measure farm performance and management through time. Because an important goal of farm management is to achieve superior long-term financial performance, there is a continuing ne to examine the relationship between farm management practices and long-term financial performance.

This studious mood examines profitability in a panel of dairy farms. The analysis is unique because it evaluates farm-level financial performance throughout a sevenyear time period. Unlike many previous farm management studies, the methodology enlist in one's serviceed here accounts for the potential puzzle of endogenous explanatory variables.

The first objective of this research is to compare the long-term financial performance of a panel of 107 dairy farms participating in Cornell University's Dairy Farm Business Summary above the period 1993-1999. Both the annual distributions of the rate of answer on assets and the distribution of the pay with an abatement rate of return on assets above the sevenyear time period are described and analyzed. This comparison provides an estimate of the magnitude of the differences in long-term financial performance of just discovered York dairy farms. Next, the panel data settle and a fixed-effects regression pattern are used to test hypotheses regarding the impact of several managerial factors forward the annual rate of go [i]or[/i] come back on assets over the same time period.