USE OF PROBABILISTIC CASH FLOWS IN ANALYZING INVESTMENTS UNDER CONDITIONS OF RISK AND UNCERTAINTY

Risk and Uncertainty,

Simulation of Alternative Marketing Strategies for U.S. Cotton

Three marketing strategies (selling a put option, cash sale at harvest, and cash sale in June) are simulated based on historical values and ranked based on certainty equivalents for a representative irrigated and dryland cotton farm Scenario analysis is also used to compare varying yield values.Simulation, Marketing, Cotton, Risk, Marketing, Research Methods/ Statistical Methods,

The Impact of the National Counter-Cyclical Income Support Program for Dairy Producers on Representative Dairy Farms

This report contains the results of an analysis of the National Counter-Cyclical Income Support Program for Dairy Producers on the Agricultural and Food Policy Center’s (AFPC) representative dairy farms. The impact of the proposal on the representative farms is evaluated in terms of the change in average annual cash receipts and the change in the average annual net cash farm income. The role and potential importance of payment limits on these farms are discussed. All milk prices by state and program benefits under the payment limit binding and nonbinding scenarios were developed by FAPRI and were applied to the representative dairies. For more information on those results see the FAPRI analysis of this program.Agribusiness, Agricultural and Food Policy, Livestock Production/Industries,

Can We Save the Traditional Family Farm?

What is a traditional family farm? Is it a family of four living on a farm and supplying all of the labor, capital and management or is it a family corporation with four families supplying all of the capital and management? These types of questions continue to arise in policy debates, as they have for many years. While subject to heated debate and the core of many people’s positions on farm programs the answer is more sociological as it is becoming less and less economically relevant. Whether these types of farms or any other farm sizes should survive is not a question that can be answered by a policy analyst. The job of an analyst is to determine if and under what conditions family farms can survive. To this end, this paper reviews the various definitions of family farms and draws inferences as to the economic and financial survival of these different size farms using the results generated from simulating representative farms.Agricultural and Food Policy,

Post-Freedom to Farm Shifts in Regional Production Patterns

The FAIR Act of 1996, also known as the Freedom to Farm Act (ACT) dismantled many of the agriculture policy tools in use for the last 25 years. Gone were target prices, deficiency payments, and set asides. In their place were expanded marketing loan programs to effectively include wheat and feed grains and oilseeds in addition to cotton and rice. Full planting flexibility has been popular with farmers who are no longer constrained by base acres. Grain merchants and other volume oriented agribusinesses praise the elimination of set asides. The sharp decline in farm prices for all major program commodities since 1996 has left most farmers questioning the income safety net provisions of the FAIR Act. The flexibility and marketing loan provisions continue to be praised. Farm program changes in the 1996 farm bill rendered methods of crop supply response estimation based on econometric models, using historic data, difficult at best. Yet it can, and has been, hypothesized that the Act resulted in major shifts in regional crop production patterns. This paper draws inferences from changes in acres planted among crops for representative farms in the Texas A&M Agricultural and Food Policy Center’s (AFPC) farm data base. AFPC has maintained longitudinal data for more than three dozen representative crop farms across states, regions, farm size, and type of farm since 1990. The farms were updated in 1999 as to their crop mix changes following the ACT and the crop mix changes observed in the updates are summarized here. United States aggregate production shifts are identified from NASS data. Implications for future potential acreage changes are identified. The commodity focus includes feedgrains, soybeans, wheat, cotton, and rice.Agricultural and Food Policy,

ECONOMETRIC MODEL OF THE U.S. SHEEP INDUSTRY FOR POLICY ANALYSIS

The U.S. sheep inventory has been declining for many years. To further investigate this trend, an econometric sector model using single demand equations was developed to analyze the impacts of two alternative levels of wool marketing loan rates.Marketing,

A Brief Summary of U.S. Farm Program Provisions

This brief publication began as a need for a short summary of farm programs and farm bills for two agricultural economics courses focusing on agricultural policy -- ag. economics 429, and ag. economics 614. It became clear that many students taking these courses had less and less background in agriculture and less (even cursory) knowledge of policies than those of the recent past. After this list was developed a number of other professional agricultural economists found copies and began to use it, hence its publication in a more structured form. The list of Farm Program Provisions is not all-inclusive. It certainly does not contain all the laws and provisions that have affected agriculture over the years. However, it is an easy reference to farm bills and provisions since 1933. We intend to update this list as time goes on to continue its usefulness to professionals and students alike.Agricultural and Food Policy,

The Impact of Land Fragmentation on Beef Cattle Inventory

Many groups have discussed with alarm the impact of agricultural land conversion to non-agricultural uses. This research indicates little evidence that beef cow inventory has been negatively affected by land fragmentation. Average acres per transaction, total transactions, or a fragmentation index did not have an important effect on cattle inventory.Land Economics/Use, Livestock Production/Industries,

SOUTHERN AGRICULTURE UNDER THE 2002 FARM BILL: A REPRESENTATIVE FARMS APPROACH

The 2002 Farm Bill affects economic activity of farms and ranches in the southern United States. Using stochastic simulation techniques, key financial variables were projected for 39 representative farms and ranches in ten southern states. Results indicate 24 of 39 farms studied have more than a 40 percent likelihood of having annual cash flow deficits during the period 2002 through 2007. Results are largely consistent across commodities and between moderate and large size farms in the same geographic area.Agricultural and Food Policy,

Financial Impacts of Regional Differences in Dairies

The sensitivity of net cash farm income to changes in selected production variables, output prices, and input costs varies significantly across representative U.S. dairies. Different regions of the country were impacted differently by changes to production and prices.Agricultural Finance, Q12, Q14,