Business Growth Strategies of Illinois Grain Farms Cesar L. Escalante and Peter J. Barry Abstract This study identifies key strategies employed by Illinois grain farms to prevent the erosion of their equity positions due to significant downturns in commodity prices during the implementation of the 1996 farm bill. The econometric results emphasize the collective importance of revenue enhancement, cost reduction, and capital management strategies. Nonfarm- related strategies aimed at minimizing equity withdrawals through regulated family living expenditures, as well as supplementing low farm incomes with receipts from nonfarm employment and investments, significantly affect cost value equity growth rates. Moreover, significant financial and asset management strategies include those that minimize the costs of borrowing and maintain high asset productivity levels through elimination of excess farm capacity. Key words: backward elimination procedure, capital management, cost value equity growth rate, operations management, unrealized nominal capital gains Cesar L. Escalante is an assistant professor in the Department of Agricultural and Applied Economics, University of Georgia; Peter J. Barry is a professor and director of the Center for Farm and Rural Business Finance, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign. The continuance of the agricultural business cycle during the last few years of the 20th century was reflected in highly volatile farm incomes. This coincides with the enactment of government legislation that redefined the role of federal policy toward the U.S. agricultural sector. The repercussions of the “freedom to farm” attribute of the 1996 farm bill [the Federal Agriculture Improvement and Reform (FAIR) Act] interrupted a period of strong farm income that started in the early 1990s. Thus, high production and large carryover stocks resulted in significant downturns in prices of many commodities during the early years of the farm bill’s implementation. In 1998, the federal government, in an effort to stabilize farm incomes, disbursed a total of $12.2 billion in payments to farmers, representing a 62.89% increase over the previous year’s level of $7.5 billion [U.S. Department of Agriculture/Economic Research Service (USDA/ERS)]. As a result, the 1996 farm bill’s original intent of replacing deficiency payments with decoupled production and price supports under declining fiscal budget outlays was undermined. In the predominantly crop-producing regions such as Illinois, incremental federal support had been larger than the national average, with total payments growing by 68.95% and 83.34% in 1998 and 1999, respectively (USDA/ERS). In spite of the influx of government support, farm income variability still remained relatively high, especially for