One of the most crucial factors in starting a value-added agricultural business is sourcing equity funds. When anticipating the creation of a new value-added business venture, farmer groups are faced with the task of generate sufficient farmer investment to properly capitalize the business. If sufficient equity funds cannot be raised, a good business proposition will come to fruition.
Don Hofstrand, Co-Director of the Ag Marketing Resource Center and Bob Jolly, Professor of Economics decided to conduct a survey to try to identify farmer investment perceptions and factors that trigger farmer investment in value-added business ventures. A survey instrument was creating to address this question. The survey was targeted at a subset of the Iowa Farm Business Association membership during the summer of 2006.
The survey results are currently being analyzed. Three major factors are being assessed as to their importance for farmer investment. They are:
1) The rate of return from the investment,
2) The impact of the investment on the local community, and
3) The familiarity with the business and the industry.
Also, the participants were asked to make hypothetical investment decisions to determine farmer preferences for investments in
1) The farm business
2) Value-added business ventures
3) The stock market
4) Other investment opportunities.
These and similar factors will be examined by age of farmer, wealth of farmer, education level, etc.
The survey results will provide farmer groups with information for designing value-added business venture equity offerings that successfully raise the equity needed for financing the venture.