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A ggregate Farm Level Impacts of the Farm Bill on the South. 2002 Southern Region Agricultural Outlook Conference Tunica, Mississippi September 24, 2002. Joe L. Outlaw Associate Professor and Extension Economist Agricultural and Food Policy Center Texas A&M University www.afpc.tamu.edu.

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A ggregate farm level impacts of the farm bill on the south
Aggregate Farm Level Impacts of the Farm Bill on the South

2002 Southern Region Agricultural Outlook Conference

Tunica, Mississippi

September 24, 2002

Joe L. Outlaw

Associate Professor and Extension Economist

Agricultural and Food Policy Center

Texas A&M University

www.afpc.tamu.edu


Assumptions for 2002 2007 analysis of farm bill impacts
Assumptions for 2002 – 2007 Analysis of Farm Bill Impacts

  • Continuation of 2002 Farm Bill through 2007

  • No more Market Loss Assistance payments after 2001

  • Farmers update base and yields to maximize government

    payments

  • Farms structured so payment limits are not binding

  • FAPRI July 2002 Baseline provides

    • Average annual prices

    • Inflation rates for purchased inputs

    • Interest rates

    • Inflation rates for land

  • Historical yield and price risks used to incorporate risk.


Initial debt levels on farms
Initial Debt Levels on Farms

  • Representative farms borrow all of their operating capital.

  • Real estate debt on January 1, 2001 assumed to be:

    • 20% Feed grains

    • 20% Wheat

    • 20% Cotton

    • 20% Rice

    • 30% Dairy

    • 1% Beef cattle

    • 35% Hogs

  • Machinery and livestock debt is 20% for all farms.


Representative farms and ranches used for the analysis of the 2002 farm bill
Representative Farms and Ranches Used for the Analysis of the 2002 Farm Bill

Dairy

Wheat

Dairy

Wheat

Cattle

Dairy

Cattle

Dairy

Dairy

Dairy

Dairy

Dairy

Feed Grain

Hog

Cattle

Rice

Hog

Feed

Grain

Hog

Cattle

Feed Grain

Wheat

Wheat

Feed Grain

Cotton

Cattle

Dairy

Cattle

Wheat

Rice

Cotton

Dairy

Feed Grain

Hog

Cattle

Feed

Grain

Rice

Cotton

Feed

Grain

Rice

Cotton

Rice

Dairy

Dairy

Cotton

Dairy

Cotton

Cotton

Dairy

Dairy

Cotton

Rice

Cotton

Dairy

Feed Grain

Dairy

Cotton

Rice

Rice

Cattle

Cotton

Dairy


Definition of output variables
Definition of Output Variables the 2002 Farm Bill

  • Probability of Cash Flow Deficits – chance that net cash farm income is less than family living, taxes, principal payments, and machinery replacement costs.

  • Probability of Losing Real Net Worth – chance that net worth, adjusted for inflation, is less than net worth at the end of 2001.


Definition of overall financial position
Definition of Overall Financial Position the 2002 Farm Bill

  • Good – Less than 25% chance of cash flow deficits and losing real net worth.

  • Marginal– A 25 - 50% chance of cash flow deficits and losing real net worth.

  • Poor – Greater than 50% chance of cash flow deficits and losing real net worth.


REPRESENTATIVE FARMS PRODUCING FEED GRAINS the 2002 Farm Bill

IA

NE

MON

MOC

TN

TXNP

SC

TXB


Economic viability of representative feed grain farms under continuation of the 1996 farm bill
Economic Viability of Representative Feed Grain Farms Under the 2002 Farm BillContinuation of the 1996 Farm Bill


Economic viability of representative feed grain farms under continuation of the 2002 farm bill
Economic Viability of Representative Feed Grain Farms Under the 2002 Farm BillContinuation of the 2002 Farm Bill


REPRESENTATIVE FARMS PRODUCING COTTON the 2002 Farm Bill

CA

NC

TN

AL

AR

TXSP

LA

TXRP

GA

TXB

TXCB


Economic viability of representative cotton farms under continuation of the 1996 farm bill
Economic Viability of Representative Cotton Farms the 2002 Farm BillUnder Continuation of the 1996 Farm Bill


Economic viability of representative cotton farms under continuation of the 2002 farm bill
Economic Viability of Representative Cotton Farms the 2002 Farm BillUnder Continuation of the 2002 Farm Bill


REPRESENTATIVE FARMS PRODUCING RICE the 2002 Farm Bill

CA

MO

ARH

ARM

MS

LAN

TX

LAS

TXE

TXB


Economic viability of representative rice farms under continuation of the 1996 farm bill
Economic Viability of Representative Rice Farms the 2002 Farm BillUnder Continuation of the 1996 Farm Bill


Economic viability of representative rice farms under continuation of the 2002 farm bill
Economic Viability of Representative Rice Farms the 2002 Farm BillUnder Continuation of the 2002 Farm Bill


REPRESENTATIVE FARMS PRODUCING MILK the 2002 Farm Bill

WA

VT

NYC

MIC

NYW

ID

WI

MIE

CA

MO

TXN

GAN

TXE

NM

GAS

TXC

FLN

FLS


Economic viability of representative dairy farms under continuation of the 1996 farm bill
Economic Viability of Representative Dairy Farms Under Continuation of the 1996 Farm Bill


Economic viability of representative dairy farms under continuation of the 2002 farm bill
Economic Viability of Representative Dairy Farms Under Continuation of the 2002 Farm Bill


REPRESENTATIVE FARMS PRODUCING HOGS Continuation of the 2002 Farm Bill

IA

IL

IN

NC


Economic viability of representative hog farms under continuation of the 1996 farm bill
Economic Viability of Representative Hog Farms Continuation of the 2002 Farm BillUnder Continuation of the 1996 Farm Bill


Economic viability of representative hog farms under continuation of the 2002 farm bill
Economic Viability of Representative Hog Farms Continuation of the 2002 Farm BillUnder Continuation of the 2002 Farm Bill




Conclusions
Conclusions Livestock Farms

  • Relative to December 2001 Baseline

  • Significant improvement in economic viability across all crop farms

    • Still considerable cash flow pressure

    • Very little pressure on equity as land values stem the slide

  • Improvement in economic viability of dairy operations

    • Considerable cash flow pressure

    • Some equity pressure

  • Hog operations marginally worse

    • Considerable cash flow pressure


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