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

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.

Name thesis:degree_name

M.S.

Level thesis:degree_level

Thesis

Discipline thesis:degree_discipline

Agricultural & Applied Econ

Grantor

University of Illinois Urbana-Champaign

Year dc:date

2025

Author dc:creator

• Franciosi, Francesco

Contributors dc:contributor

• Paulson, Nicholas D
• Janzen, Joe
• Schnitkey, Gary Donald

• LIQUIDITY
• FINANCE
• FARM PERFORMANCE.

Statement dc:rights

• Copyright 2025 Francesco Franciosi

Language dc:language

en, eng

Handle dc:identifier

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

OAI record oai:identifier

https://www.ideals.illinois.edu/oai-pmh?verb=GetRecord&metadataPrefix=etdms&identifier=oai%3Awww.ideals.illinois.edu%3A2142%2F129229