Pre-planting liquidity shocks and farm performance: Evidence from Illinois grain farms

Franciosi, Francesco

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https://hdl.handle.net/2142/129229 Copy

Description

Title

Pre-planting liquidity shocks and farm performance: Evidence from Illinois grain farms

Author(s)

Franciosi, Francesco

Issue Date

2025-04-21

Director of Research (if dissertation) or Advisor (if thesis)

Paulson, Nicholas D

Committee Member(s)

• Janzen, Joe
• Schnitkey, Gary Donald

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

LIQUIDITY, FINANCE, FARM PERFORMANCE.

Abstract

This thesis investigates how pre-planting liquidity shocks affect farm performance by examining the interaction between unexpected changes in grain futures prices and farms' existing grain inventories. Using unbalanced panel data from Illinois grain farms collected by the Farm Business Farm Management (FBFM) association (2003-2023) and futures price data from Bloomberg, this thesis utilizes a two-way fixed effects model to determine causal relationships between liquidity shocks and farm economic outcomes. The study constructs a novel measure of farm-specific liquidity shocks by combining futures price movements during the critical January March pre-planting period with individual farm grain inventory positions. Results indicate that positive pre-planting liquidity shocks enhance farm financial performance, with the most substantial and statistically significant effect observed for gross margin. The analysis also reveals that higher debt-to-asset ratios and more significant proportions of cash-rented land are consistently associated with lower farm performance across all measures. This research makes three key contributions to agricultural finance literature: it introduces a farm-specific liquidity shock measure that captures the impact of price movements on stored grain inventories; it exploits exogenous variation in futures prices to identify causal effects; and it examines how farm characteristics moderate the relationship between liquidity shocks and performance.

Graduation Semester

2025-05

Type of Resource

Thesis

Handle URL

https://hdl.handle.net/2142/129229

Copyright and License Information

Copyright 2025 Francesco Franciosi

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