BUSINESS SUCCESS: WHAT FACTORS REALLY MATTER?

375 operations are classified as crop farms. 278 of the operations have 75% or more of receipts
coming from crop activities. Likewise, a livestock operation is defined as a ranch that produces
75% or more of total receipts from livestock sales. Operations with less than 75% from either
crops or livestock were classified as diversified. Crop farms have the highest projected
performance with an average index of future success of 7.6 followed by 1.6 and negative 12.4 for
diversified and livestock producers respectively.

Another way to analyze the performance of the different types of producers is to compare
the composition of the entire sample of 375 farms to the make up of the top, middle, and bottom
performance categories. Table 2 contains the composition of the performance groups, and
provides further evidence of the superior financial outlook for crop farms. Almost 75% of the

Table 2. Composition of Perfomance Groups

* Success Index = AvgROA + Avg%ChangeRNW - 0.25(Probability of Ref.)

1 Crop sales account for more than 75% of all farm receipts

2 Livestock sales account for more than 75% of all farm receipts

3 Farm can not be classified as primarily crop or livestock

farms are crop farms with the other 25% split between livestock and diversified operations. The
middle performance group maintains a very similar make up to the entire sample of producers.
The diversified operations, which make up 13.3% of all operations, are represented similarly in
each of the performance categories with 11.2% to 14.4% representation. Livestock producers
are under-represented in the highest success group, accounting for less than 2% of the 125 top
performers. While 12.5% of all operations are classified as livestock, the lowest performance
group is made up of 23.2% livestock operations. The representation of crop farms is highest in

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