Including Risk in Economic Feasibility Analyses: The Case of Ethanol Production in Texas

The widespread use of personal computers and spreadsheet models for feasibility studies makes risk-based Monte Carlo simulation analysis of proposed investments a relatively simple task. Add-in simulation packages for Microsoft® Excel can be used to make spreadsheet models stochastic. Rather than basing investment decisions on point estimates, investors can easily estimate the implied distributions of returns for uncertain investments and calculate the risk of an investment as well as the probability of success. The benefits of using Monte Carlo simulation to analyze a risky investment are demonstrated using an ethanol plant as an example.economic feasibility analysis, ethanol feasibility, risk management, stochastic simulation, Agribusiness, Research and Development/Tech Change/Emerging Technologies,

Risk Assessment in Economic Feasibility Analysis: The Case of Ethanol Production in Texas

The objective of this study is to demonstrate the benefits of quantifying the economic viability of a proposed agribusiness under risk relative to a feasibility study which ignores risk. To achieve this objective, the economic viability of a 50 MMGPY ethanol facility in Texas is analyzed over a 10-year period in two ways: with no risk and with historical risk for prices and costs.Risk and Uncertainty,

An Economic Examination of Potential Ethanol Production in Texas

Agribusiness, Agricultural and Food Policy, Resource /Energy Economics and Policy,

Representative Farms Economic Outlook for the December 2005 FAPRI/AFPC Baseline

The Agricultural and Food Policy Center (AFPC) at Texas A&M University develops and maintains data to simulate 102 representative crop and livestock operations in major production areas in 28 states. The chief purpose of this analysis is to project those farms’ economic viability for 2005 through 2011. The data necessary to simulate the economic activity of these operations is developed through ongoing cooperation with panels of agricultural producers in each of these states. The Food and Agricultural Policy Research Institute (FAPRI) provided projected prices, policy variables, and input inflation rates in their December 2005 Baseline. Under the December 2005 Baseline, 12 of the 66 crop farms are considered in good liquidity condition (less than a 25 percent chance of negative ending cash during 2005-2011). Five crop farms have between a 25 percent and a 50 percent likelihood of negative ending cash. The remaining 49 crop farms have greater than a 50 percent of negative ending cash. Additionally, 22 of the 66 crop farms are considered in good equity position (less than a 25 percent chance of decreasing real net worth during 2005-2011). Ten crop farms have between a 25 percent and 50 percent likelihood of losing real net worth, and 34 crop farms have greater than a 50 percent probability of decreasing real net worth.Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Livestock Production/Industries,

Representative Farms Economic Outlook for the January 2004 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2001-2008 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s major production regions came from two sources: - Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms, and - Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) January 2004 Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers for prices and production. This report presents the results of the January 2004 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing annual cash flow deficits and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2008.Agribusiness, Agricultural and Food Policy, Crop Production/Industries,

Representative Farms Economic Outlook for the December 2004 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2002-2009 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s major production regions came from two sources: • Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms, and • Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) December 2004 Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers for prices and production. This report presents the results of the December 2004 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing annual cash flow deficits and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2009.Agribusiness, Agricultural and Food Policy, Crop Production/Industries,

Representative Farms Economic Outlook for the January 2005 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2002-2009 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s major production regions came from two sources:•Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms, and•Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) January 2005 Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers for prices and production. This report presents the results of the January 2005 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing negative ending cash reserves and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2009.Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Livestock Production/Industries,

Representative Farms Economic Outlook for the January 2004 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2001-2008 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming and ranching operations in the nation’s major production regions came from two sources: - Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms. - Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) January 2004 Baseline. The primary objective of the analysis is to determine the farms’ economic viability by region and commodity through the life of the 2002 Farm Bill. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers and ranchers for prices and production. This report presents the results of the January 2004 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing annual cash flow deficits and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2008. This report is organized into ten sections. The first section summarizes the process used to develop the representative farms and the key assumptions utilized for the farm level analysis. The second section summarizes the FAPRI January 2004 Baseline and the policy and price assumptions used for the representative farm analyses. The third through sixth sections present the results of the simulation analyses for feed grain, wheat, cotton, and rice farms. The seventh through ninth sections summarize simulation results for dairy, cattle and hog farms. Two appendices constitute the final section of the report. Appendix A provides tables to summarize the physical and financial characteristics for each of the representative farms. Appendix B provides the names of producers, land grant faculty, and industry leaders who cooperated in the panel interview process to develop the representative farms.Agribusiness, Agricultural and Food Policy, Crop Production/Industries,

Representative Farms Economic Outlook for the August 2005 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2002-2009 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s major production regions came from two sources: • Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms, and • Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) August 2005 Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers for prices and production. This report presents the results of the August 2005 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing negative ending cash reserves and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2009.Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Livestock Production/Industries,

A New Species of Boubou (Malaconotidae: Laniarius) from the Albertine Rift

We describe Laniarius willardi, a new species of boubou shrike (Malaconotidae) from the Albertine Rift of Africa. The most conspicuous, distinguishing morphological feature of the species is a gray to blue-gray iris. This and external morphometric data indicate that L. willardi is diagnosable from other black or sooty boubous. Further, L. willardi is genetically diagnosable, and its closest relative is the Mountain Sooty Boubou (L. poensis camerunensis) from Cameroon. The Crimson-breasted Bush-shrike (L. atrococcineus) and the Lowland Sooty Boubou (L. leucorhynchus) are together the sister clade to L. willardi—L.p. camerunensis. Laniarius willardi and the geographically codistributed L. p. holomelas differ by 11.5% in uncorrected sequence divergence, and elevational data taken from museum specimens suggest the possibility of elevational segregation of the species at ∼2,000 m, withL. willardi occurring at lower elevations. Our broad sampling of black and sooty boubou taxa indicate that (1) races of Mountain Sooty Boubou (L. poensis) do not form a monophyletic clade; (2) L. p. camerunensismay represent multiple, nonsister lineages; and (3) at least one race of Fülleborn\u27s Black Boubou (L. fuelleborni usambaricus) is genetically distinct from other races of that species