Economic Impact of a Proposed AGI Means Test on Representative Crop Farms

The Administration has proposed revising the AGI means test for eligibility to farm program payments. The 2002 farm bill excludes producers from farm program payments (CCP, DP, and MLG/LDP) if their average adjusted gross income (AGI) for three preceding years exceeds $2.5 million and less than 75$200,000 and repeal the 75% exclusion. The purpose of this report is to estimate the impacts of the AGI proposal on average annual government payments and real net worth in 2014 for representative crop farms. The AFPC maintains a data base of 64 representative commercial family farms in major production regions across the United States. The farms represent a full-time, commercial operation that is typical of farms in a particular area. The farmers who participate in the bi-annual farm update interviews are selected by the county agent based on farm size (typical for the area), crop mix and farming practices (typical for the area), and being full-time farmers (not employed off the farm). The farms were constructed with no off-farm income to illustrate the changes in wellbeing due to farm policy changes. To the extent that a farm has off-farm income, the results will be conservative.Agribusiness, Agricultural and Food Policy, Crop Production/Industries,

Economic Outlook for Representative Cotton Farms Given the August 2006 FAPRI/AFPC Baseline

The majority of the cotton farms are in poor overall financial condition under the August 2006 Baseline. Drought conditions this year will deplete cash built from more favorable yields in 2004 and 2005 in many cases. In addition, the poor financial performance of the farms is attributed in part to the large increase in input prices. Fuel costs, previously projected to decrease modestly in 2005 and 2006, are now more accurately depicted as significant increases, building further on the large increases experienced in 2003 and 2004. The increase in cost is not limited to fuel expense for trucks, equipment, and irrigation motors, but includes the cost of nitrogen fertilizer and ag-related services which are closely linked to energy prices. Many cotton producers have adopted genetically modified seed and more expensive conventional varieties in order to enhance efficiencies and achieve higher yields; however, the tradeoff for these gains is increased cost of seed and technology fees. Steel prices have skyrocketed, thus increasing the cost of machinery along with the cost of repairing existing machinery. To keep quality employees on the farm, producers are faced with rising wage pressure from competing industries. The bottom line is producers are threatened by the rising cost of doing business while modest projected increases in cotton and other commodity prices fail to outpace these inflationary pressures.Agribusiness, Agricultural and Food Policy, Crop Production/Industries,

The Farm Level Impacts of Operating the Current Farm Bill at Reduced Federal Budget Spending Levels

Agricultural and Food Policy,

Investigating the Redundancies in Current Farm Programs

Farm Programs, Agricultural and Food Policy, Risk and Uncertainty,

Farm Level Impacts of a Revenue Based Policy in the 2007 Farm Bill

Revenue-based policy alternatives are thought to be a potential component of the 2007 Farm Bill. This research provides an economic analysis of switching to a revenue assurance farm program for representative farms. Specifically, this research provides a monte-carlo stochastic simulation model that compares the effect of a revenue based safety net policy relative to continuing the 2002 Farm Bill policies for different types of U.S. crop farmers. The results show that both revenue assurance proposals by the National Corn Growers Association leave the majority of farmers, especially feed grain producers, with higher total receipts and higher government payments.Agricultural and Food Policy,

The Impact of Increased Planting Flexibility on Planting Decisions Across Texas

Increased acreage planting flexibility granted through the last three farm bills has allowed agricultural producers to make production choices without government programs driving their decisions. Planted acre data for program crops in seven Texas regions is used to describe response to varying degrees of flexibility granted through decoupled payments.Crop Production/Industries,

The Farm Level Impacts of Replacing Current Farm Programs with a Whole Farm Revenue Program

This study evaluates the farm level economic impacts of implementing a whole farm revenue insurance program in lieu of current government program payments on agricultural producers in major production areas of the United States. Realizing a multitude of viable options exist, this study demonstrates one way a whole farm revenue coverage program could work at the farm level and makes comparisons between the current baseline situation and alternative levels of revenue coverage implementation.agricultural policy, simulation, representative farms, government payments, crop insurance, revenue coverage, Agricultural and Food Policy,

Impacts of Budget Reconciliation on U.S. Crop Producers

The President has called for a $6.96 billion savings in expenditures to agriculture over a five year period. A budget reconciliation is required to achieve these targeted savings from farm bill authorized expenditures. This study uses optimal control theory and farm level simulation to quantify the impacts on U.S. crop producers of reducing federal spending for agricultural income supports. Results indicate that the least harmful method for the Agricultural Committees to achieve budget savings of$3 billion is to reduce loan rates. At higher levels of net budget savings, some risk adverse decision makers would prefer that the Committees reduce target prices.Agricultural and Food Policy,

Economic Outlook for Representative Ranches Given the August 2007 FAPRI/AFPC Baseline

While projected cattle prices are considered to be the primary determinant of the financial viability of the representative ranches, the prices of feed crops and bi-products can also have an impact. The ranches produce hay and are often net buyers or net sellers. At least two of the ranches retain ownership through the backgrounding stage and feed some concentrates. The smaller Missouri ranch produces a number of grain and oilseed crops, and the smaller Texas ranch also raises broilers. Additionally, crop prices have an impact on fed cattle returns, which impacts feeder cattle prices. Projected livestock prices for FAPRI’s August 2007 Baseline are presented in Table 1. In general, beef cattle prices are projected to decline each year from 2008 though 2012, but feeder cattle prices are now expected to stay above $102/cwt. Specifically, prices for classes of cattle are projected to move as follows: • Feeder cattle prices are projected to peak at$118.46/cwt in 2008 and decline to $102.03/cwt by 2012. • Fat cattle prices peak at$94.21/cwt in 2008 and end at $86.40/cwt in 2012. • Cull cow prices range between$47.14/cwt and $52.98/cwt during the 2007-2012 period. Projected crop prices for FAPRI’s August 2007 Baseline are also summarized in Table 1. Individual crop prices are projected to move as follows: • The U.S. all hay prices are expected to hit a high of$123.20/ton in 2007 and then level off to $111.52/ton by 2012. • Corn prices start at$3.10/bu in 2007, peak at $3.38/bu in 2008, and end at$3.25/bu in 2012. • Wheat prices range between $5.11/bu and$4.19/bu between 2007 and 2012, with the highest price expectation in 2007. • Sorghum prices remain in the relatively tight range of $2.92/bu to$3.19/bu through 2012. • Soybean meal is expected to stay between $192.68/ton and$207.88/ton from 2007- 2012. Projected annual rates of change for variable cash expenses are summarized in Table 2. The rate of change in input prices comes from FAPRI’s August 2007 Baseline. Based on projections from Global Insight, annual interest rates paid for intermediate-term and long-term loans and interest rates earned on savings are also reported in Table 2. Assumed annual rates of change in land values over the 2007-2012 period are provided by the FAPRI Baseline and are projected to range between 3.51% and 13.68% per year.Agribusiness, Agricultural and Food Policy, Livestock Production/Industries,

Impacts of the Administration's 2007 Farm Bill Proposal on Representative Crops, Dairy and Beef Cattle Farms -- Revised

For the first time in two decades, the Secretary of Agriculture provided the House and Senate Agriculture Committees a farm bill proposal from the Administration. The Administration’s Proposal is a comprehensive revision of the 2002 farm bill with suggested changes to all titles. Four major proposed changes to Title 1 Commodity Programs are analyzed and reported in this Briefing Paper. The four key policy changes analyzed are: - an increase in direct payment rates, - a reduction in loan rates for most crops, - the replacement of the counter cyclical payment (CCP) program with a counter cyclical revenue (CCR) program, and - a change in eligibility for farm program payments by using $200,000 adjusted gross income (AGI) for a means test. The economic impact of the Administration’s Proposal on the viability of 99 representative crop, dairy, and beef cattle farms is compared to a base situation of continuing the current farm bill through 2012. This report is a companion to FAPRI-UMC Report #11-07 that contains sector level impacts.Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Livestock Production/Industries,