Tooc z TA245.7 B873 NO.1530 The Impact \("T ' ()f Tenure \\ l Arrangements And Crop Rotations Q" Upper Gulf Coast Rice Farms The Texas Agricultural Experiment Station ' /Nev|lle P Clarke Director/The Tex; ' ’ s A&M University System/Colle ' ge Station, Texas CONTENTS Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Objectives and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Simulation Model and General Assumptions . . . . . . . . . . . . . . . . . . . . . . 9 General Model Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Specific Study Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Results and Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Base Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Production and Management Sensitivity Analyses . . . . . . . . . . . . . . .21 Yield and Price Sensitivity Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Financial, Interest, and Inflation Sensitivity Scenarios . . . . . . . . . . . .40 Farm Program Sensitivity Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 Farm Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Policy Makers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . . . . 57 Research Scientists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Other Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 PREFACE This bulletin reports economic analyses of the effects of important variables affecting the viability of rice-soybean farming operations in the Texas Upper Gulf Coast region. The study attempts to recognize many factors that affect production decisions and, consequently, is heavily laden with descriptions of the required assumptions. To fully capture the benefit of such in-depth assumptions, analyses are reported across a wide range of topics relevant to rice-soybean producers in the Texas Upper Gulf Coast region. Appropriate interpretation of the results for any specific topic area requires understanding the study’s methodology and the assumptions made for the base situation analyzed. All results discussed for specific topics should be considered relative to results presented for the base situation. THE IMPACT OF TENURE ARRANGEMENTS “ AND CROP RoTATloNs ON UPPER GULF COAST RICE FARMS Gregory M. Perry M. Edward Rister D James W. Richardson Warren R. Grant ]ohn W. Sij, ]r.* O *Respectively, former research associate, assistant professor, and associ- ate professor, Department of Agricultural Economics, Texas A&M Uni- versity; economist, ERS—USDA; and professor, Texas Agricultural Experi- ment Station, Beaumont, Texas. This research was jointly funded by the I Texas Agricultural Experiment Station (Projects H6507 and H3694), the Texas Rice Research Foundation (Econo-Rice Project), and the Depart- j ment of Agricultural Economics, Texas A&M University. A representative rice-soybean farm in the Texas Upper Gulf Coast was analyzed for 1984-88 using a computerized simulation model that accounts for annual produc- tion, farm policy, marketing, and income tax aspects of an individual farm. Uncertainty in harvested yields and prices received is ex- plicitly accounted for in the model. An econometric model of the U.S. rice industry (including export components) is used to project an- nual prices for rice and a somewhat similar but more integrated mac- roeconomic econometric model is used to project annual soybean prices as well as annual interest and inflation rates. The purpose of this study is to analyze common crop rotations and tenure arrange- ments used by Texas Upper Gulf Coast rice and soybean producers. In particular, the effects of various production management strate- gies, technology levels, financial lending credit policies, mac- roeconomic scenarios, and alterna- tive provisions of the government agricultural program are examined in some detail. The study results should be useful to agricultural producers, researchers, policy makers, lenders, and landowners, among others. Throughout the study, emphasis was directed towards highlighting differences in the effect on a farm's economic viability among combi- nations of two principal crop rota- tions (soybeans-rice (SR) and soy- beans-soybeans-rice (SSR)) and two prevalent land tenure share rental arrangements for rice (1/7 and 1/2, with a large component of the variable expenses shared in the latter case by the landowner). All soybean acreage was leased on a 1/7 share basis. In the base farm situation analyzed, the 2,310 acre (A) representative farm was wholly leased on a share basis (except for a 1O A homestead). The primary standards used to evaluate results 2 EXECUTIVE SUMMARY of the analyses included the proba- bility of survival, the probability of success, and the after-tax net pres- ent value of earnings over the 5- year planning horizon. In several analyses, the four combinations of crop rotations and rice rental ar- rangements were ranked for differ- ent producer risk preferences, us- ing stochastic dominance decision criteria. The analyses constituting this study included a base situation and numerous sensitivity analyses, each of which includes one or more modifications to the assumptions made for the base situation. Read- ers should interpret the results of the sensitivity analyses by compar- ing them to the base results, rather than by looking at absolute values for each scenario. In the base scenario, probabili- ties of survival (i.e. , the farm main- tains debt/equity ratios acceptable to its creditors) during 1984-88 ranged from 50 to 82 percent, the highest probability being associ- ated with the SSR 1/7 strategy. Probabilities of success (i.e., posi- tive net present value of annual earnings discounted at a pre-tax rate of 11 percent) ranged from 12 to 52 percent, the highest probabili- ty being associated with the SSR 1/7 strategy. Expected net present value of annual earnings was nega- tive for all strategies, the highest expected earnings being $ — 23,183 for the SSR 1/7 strategy The SSR 1/7 strategy was preferred to the other strategies (SR 1/7, SR 1/2, and SSR 1/2) for most categories of risk pref- erences. Results of the sensitivity anal- yses, based on the assumptions made about the farming operation, are as follows: 1. Production and Management ~ 1O percent Higher/Lower Non-Water Variable Produc- tion Costs - Increasing costs reduced probability of survival by 12 \- to 28 percent for the farm strategies. Decreasing costs increased probability of survival by 12 to 32 percent. 1/7 crop share strategies were most affected since the tenant bears the majority of the non-land expenses. ' Water costs (1/7 share strate- gies only—landowners pay for water under 1/2 share) — Reducing water costs by over $30/A enhanced the survivability of the farm and also made the SR rotations more preferable. Increasing the annual infla- tion rate in water costs from 4.5 to 7.5 had little effect over the 5-year planning horizon. Increasing water costs to $100/A in 1984, coupled with a 7 percent annual in- flation rate on water costs, reduced the probability of survival for the 1/7 share ar- rangements and enhanced the appeal of the SR 1/2 strategy. ' Management Practices — Eliminating ratoon rice acre- age improved the average annual cash farm income for the 1/7 share arrangements; beyond that, little overall impact was evident. Reducing labor availability from full-time labor by 100 hours per month (neces- sitating additional part-time labor) reduced after-tax earnings but had no mate- rial effect on probabilities of survival and success. Reducing the occurrence of red rice in the SR rotation from 2.5 to 1.5 percent re- sulted in SR becoming the preferred rotation. This re- sult suggests red rice control is important when field in-~ festations are of significant) ~cv the landowner preferred the SR rotation and the tenant preferred the SSR rotation. - Technology/Management - Neither an accumulated magnitude. 1 ' Land Tenure Arrangements I i - Part—owner and full—owner = operations had a 100 percent strategies were hurt rela- tively more, implying a good soybean yield is needed to assist in meeting T‘ ‘ probability of survival. Probabilities of success in- creased for both ownership situations under the 1/2 share arrangement. Howev- er, average after-tax net present value of earnings and annual net cash farm income figures were lower for both types of ownership tenure arrangements for most strategies (in particular for the 1/7 strategies). Pref- erence for strategies was not as distinct as for the tenant farm situation. - Cash rents of $30/A were identified as approximately comparable to the base crop share arrangements with some differences according to individuals’ risk prefer- ences. Twenty dollar per acre cash rents were pre- ferred to the 1/7 and 1/2 crop share arrangements and $40/A rents were generally inferior to the share ar- rangements. There was some evidence that cash rental arrangements tended to be a greater risk. - Reducing landowners’ share of the crop (from 50 to 45 percent and from 1/7 to 1/10 on rice and from 1/7 to 1/10 on soybeans) signifi- cantly increased tenants’ probability of survival, par- ticularly for the 45 percent share strategies. Probabili- ties of success were posi- tively affected in greater magnitudes. - Evaluation of the alternative crop rotation-share arrange- ment strategies from the landowner’s perspective (annual returns equal net share rent) revealed higher returns were associated with the 1/2 share arrange- ment. Given the 1/2 share arrangement, both land- owners and tenants pre- ferred the SR rotation. For the 1/7 share arrangement, gradual increase in ratoon rice yields of 450 lb/A by 1988 nor improvement in ra- toon rice quality had much impact on overall results. Ratoon rice accounted for only about 8 percent of SSR gross revenues and 6 per- cent of SR gross revenues, thereby contributing to its relatively small influence on the farm's viability. Examination of the effects of widespread adoption of Lemont (a new rice variety) throughout the southern rice producing region indi- cated an estimated nominal rough rice cash price decline of $0.35/cwt (because of bur- geoning supplies), but also identified the offsetting pro- tection afforded by the target price/loan rate provi- sions of the current govern- ment agricultural program for rice. Assuming this price protection through the gov- ernment program remains available from 1984-88, Le- mont is indicated to have enhanced the survivability of above-average managed operations by as much as 30 percentage points. Irrigating soybeans appears to be economical, assuming higher average and slightly less variable yields. 2. Yields and Prices ~ Average Yields — Increasing average soybean yields by 10 percent raised annual cash farm income by $14,000 or more for all strat- egies, the greatest gain be- ing associated with the SSR rotations and the 1/7 share arrangements. Decreasing average soybean yields by 10 percent caused almost opposite results in both monetary returns and with respect to impact on results for the respective share ar- rangements—the 1/2 share general overhead costs. Changes in rice yields affect- ed results more than changes in soybean yields. Increasing average rice yields by 10 percent favored the SR rotations and signifi- cantly increased net present value of earnings (in excess of $164,000 for all cropping strategies), probability of survival (8 percent or more), and probability of success (14 percent or more). In marked contrast, decreasing average rice yields by 10 per- cent (approximating Liberty County average yields) favored the SSR rotations, with significant declines oc- curring in all evaluation measures. These results suggest county average yields are insufficient to as- sure a viable farm operation (probabilities of survival were 60 percent or less for the four respective cropping strategies). - Average Prices - Changes in average prices for both rice and soybeans caused results similar to those for different average yields. The impact of changes in rice prices was partially offset by deficiency payments. With respect to increasing versus decreasing either rice or soybean average yields and prices, absolute changes in the analysis criteria tend to be greater for decreasing scenarios as op- posed to those involving in- creases. These results, at least in part, are attributable to the progressive income tax rate structure which dis- proportionately mitigates the gains associated with in- creases in prices and yields. Regression results demon- strated that income from each strategy was an impor- tant factor influencing the 3 base results. When income was equivalent across strat- egies, the SSR rotation had more risk than the SR rota- tion. Similarly, holding in- come constant, the 1/2 share strategies had the least risk, followed by the 1/7 share and cash rent strategies. An estimated off-farm income of $90,000 to $122,000 was necessary to ensure a 98 per- cent probability of survival. ~ Variability of Yields and Prices — Increasing the variability of rice and soybean yields gen- erally caused probabilities of survival to decline. Increas- ing rice yield variability more adversely affected probabilities of success and net present value of earn- independence was im- cy \ ings than did increasing posed. - Repeating 1978-81 condi- soybean yield variability. SR - The assumption of indepen- tions of high inflation, low rotations were more ad- dent normal distributions real interest rates, and high versely affected than SSR ro- greatly improved results for export demand positively tations by increasing rice all four strategies. The re- affected all evaluation stan- yield variability, with the sults imply choice of a dis- dards for all strategies, par- SSR 1/2 strategy least af- tribution may be one of the ticularly the 1/2 share ar- fected. most critical assumptions rangement. Decreasing the variability of made in simulation anal- 4. Government Farm Program rice yields tended to in- yses. ~ No Participation in Govern- crease both expected re- 3. Finance, Interest, and Inflation ment Program turns and probabilities of ~ Beginning Equity and Finan- - Survivability declined be- survival, with the greatest cial Lenders’ Credit Policy low 20 percent for all strate- benefit accruing to 1/7 share - Financial lenders’ credit pol- gies. Probability of success strategies. icy was critical only to inter— was 0 percent for the SR Decreasing the variability of mediate debt holders (i.e., rotations. Other evaluation soybean yields was less 40 to 60 percent beginning standards were adversely favorable than decreasing equity). affected, indicating govern- rice yield variability The dif- - Returns to tenants tended to ment program benefits are ference in results appears to be more variable than re- essential to the viability of be associated with the pro- turns to part-owners. rice-soybean farms similar T tection against downside - A maximum permitted le- to the representative farm variability afforded to soy- verage ratio of 1.0 was re- operation. beans with crop insurance strictive, in that producers’ ~ Strict Payment Limitation and the loss of upside varia- probabilities of survival - Assuming the representa- bility (i.e., high yields) were reduced by up to 66 tive farm could only receive when overall variance de- percentage points. Con- a maximum of $50,000 (in- creased. versely, a 4.0 maximum per- stead of the $100,000 as- Alternatively increasing and mitted leverage ratio in- sumed in the base situation) decreasing the variability of creased producers’ proba- significantly affected the 1/7 both rice and soybean prices bilities of survival but also share strategies and the SR suggests, with the current increased lenders’ risk ex- rotations. Results imply the government program, in- posure (i.e., non-surviving proposed lowering of pay- creased price variability is producers tended to have ment limitation could drasti- beneficial to producers (due larger debts when declared cally affect viability of rice- to the implicit price floors bankrupt). soybean farms as well as en- created by soybean and rice ' Interest Rates courage some shift in bot}; nonrecourse loan pro- - Lower rates (2 percentage rotations and tenure an-» grams). ' Types of Yield and Price Distributions - The assumption of indepen- dence between and within prices and yields had differ- ent effects on the strategies. Those strategies most de- pendent on one crop (SSR 1/2 and SR 1/7) were hurt by the independence assump- tion because of the weaker influence of positive correla- tion between crop yields versus the negative correla- tion between prices and yields. When returns from crop enterprise were more balanced, the positive crop yield correlation was domi- nant, resulting in an im- provement in results when points) on new loans during 1984-88 had modest effects on the farm operation. - Probabilities of success anq‘ average net present value c\ earnings were affected in\"" greater amounts when inter- est rates for both new and existing loans were lowered by 2 percentage points. ' Inflation Rates - A 2 percent increase in the annual inflation rate nega- tively affected all strategies, especially those with a 1/7 share arrangement (land- owners paid their share of the higher costs under a 1/2 share arrangement). SR ro- tation strategies were affect- ed more than SSR strategies. ' 1978-81 Macroeconomic Poli- rangements. would be needed to survive ' Increasing Long-Grain Rice ~ Allotment Program l in the short run. Premium — Requiring all rice producers - Increasing the price differ- ential for long grain rice by $O.53/cwt while maintaining the possibility of a $3.90/cwt maximum deficiency pay- ment, increased returns for all strategies, especially SR rotations. Results indicate that whenever long grain rice stocks are in short sup- ply and/or demand for long grain rice is high relative to medium and short grain rice, Texas long grain rice producers benefit. ' Eliminating Target Prices - Eliminating the govern- ment's target price program for rice farmers had a signifi- cantly negative impact on the representative farm, lowering probabilities of survival by 12 to 20 percent- age points. ~ Eliminating Set-Aside to reduce their historical rice acreage to about 65 percent of their base acreage, begin- ning in 1986, reduced pro- duction and increased prices slightly; but the effect on the representative farm was largely negative, de- creasing probabilities of sur- vival by 24 to 34 percentage points. ' Free Market - Assuming a return to the free market for rice (no gov- ernment program provi- sions), beginning in 1986, adversely affected the repre- sentative farm during the remaining 3 years of the planning horizon. The SSR 1/7 strategy remained pre- dominant but generated a mere 42 percent probability of survival, down from 82 percent under the base Given the current produc- tion technology, ratoon rice appears to be of marginal benefit in the Texas Upper Gulf Coast. Off-farm income is an im- portant source of funds to tenant farmers, especially those with a 1/2 share ar- rangement. Increasing debt should be avoided unless the farm manager holds little or no debt. Participation in the govern- ment farm program could benefit farmers in 1984-85. Participation in future pro- grams depends on the pro- gram adopted in the 1985 farm bill. ~ For Policy Makers - Financial assistance pro- grams should be targeted only to those in need and to those who will benefit. - Farmers utilizing the 1/2 scenario. share strategies benefitted and those using the 1/7 Several conclusions and recom- share strategies lost when mendations can be assimilated set-aside provisions of the from the results: government program were ' For Farm Managers eliminated. These results - 1/7 share arrangements on Farmers in a low debt posi- tion will probably survive with or without a financial assistance program, while those in a high debt position will probably not survive are tied to assumptions re- garding rice supply re- sponse to such an action, the related decline in market price, and reaching the max- imum payment limitation. If a producer seldom reached the payment limitation, he fared relatively well. ' Reducing Target Price and Loan Rate - Reducing loan rates by 1O percent (i.e., $0.80/cwt) be- ginning in 1986, while main- taining the possibility for a deficiency payment of up to $3.90/cwt (i.e., target price also reduced by $O.8/cwt), had a moderate impact on most analysis variables. Probability of survival de- clined by as much as 8 per- centage points. Results indi- cate this policy would not be as detrimental as some of the other policy changes considered in this study. rice are generally preferable to 1/2 share arrangements. Cash rents of less than $30/A are preferred to the 1/2 or 1/7 share arrangements. SSR rotations appear to be preferred to SR rotations, assuming government pay- ment limitations are restrict- ing, red rice is less of a prob- lem in the SSR rotation, a 1/7 share arrangement is in ef- fect, and soybeans are as profitable as assumed in the base situation. Variable cost containment can be effective in enhanc- ing the viability of a farm operation—cutting costs by as little as 10 percent, while maintaining yields, can be of significant benefit. New technologies, such as Lemont and possibly irri- gated soybeans, appear to be economical, providing a competitive edge that unless a large amount of debt is retired. All proposed changes in the government program for rice had negative impacts on the representative farm manager in the short run relative to provisions of the current government pro- gram. There are tradeoffs in macroeconomic benefits (i.e., savings to taxpayers) and micro-level costs (i.e., insolvent producers). This study did not examine the impact on local communities of producers going out of business, nor did it cover the longer-term effects of al- tering the current program. ' For Agricultural Lenders - Credit policies of a max- imum 1.0 leverage ratio are restrictive, in that produc- ers’ probabilities of survival are low relative to a permit- ted leverage ratio of 2.0. 5 Conversely, allowing up to a 4.0 leverage ratio, while in- creasing the probability of survival for producers, also significantly increased the risk exposure of creditors. Agricultural lenders in the Upper Gulf Coast region should evaluate each opera- tion on an individual basis- some operations are profit- - Landowners with a 1/2 share arrangement should be con- cerned with variable cost containment because they participate in a share of many such expenses. Landowners who currently have ”good” tenants should consider granting rent con- cessions to assure their ten- ants’ viability. ated when determining the commitment level and direc- tion of research resources. ._ Evaluation of yield enhanc- ing technology should con- sider the variance, skew- ness, and other characteris- tics of the distribution as well as the average yield. More information is needed regarding the correlation of yields among different crops in different rotations. able while others are tenta- ~ For Researchers tive. - Short run versus long run ~ Landowners and micro versus macro im- - Landowners should be con- cerned regarding the crop mix planted on their acre- age—their annual earnings are affected by the yield and price uncertainty associated with the respective crops. pacts of new technologies which increase yields need to be considered, especially when there is a lack of effec- tive economic demand for the commodity. Such con- siderations should be evalu- Users of simulation models are encouraged to perform an array of sensitivity anal- yses to verify and validate their modelling procedures before accepting and pub- lishing the results. l I l “\I\. The Impact of Tenure Arrangements INTRODUCTION The Upper Gulf Coast region of Texas has traditionally been a major rice-producing region. Located be- tween Houston and the Louisiana state line, the region benefits from level land, a long growing season, close proximity to seaports, and a clay subsoil that is ideally suited for holding irrigation flood waters. These conditions make the area well suited for rice production. Regional rice acreage, although generally increasing, varied great- ly before World War II. A large increase in Texas rice acreage (from 347,000 to 642,000 acres (A)) oc- curred between 1941 and 1954. Na- tional rice acreage also approxi- mately doubled during the same period. This tremendous increase in acreage was in response to high prices for rice during and im- mediately after the war. Additional production from the increased acreage resulted in declining rice prices, causing rice farmers to ap- peal to the federal government for assistance. In response, produc- tion controls and marketing quotas were imposed in 1955, remaining in effect through 1973 (Holder and Grant 1979). Government farm programs had a stabilizing effect on both rice acreage and price throughout the period (Grant et al. 1984). Stable prices, combined with moderately fluctuating yields, re- sulted in rice being a relatively low risk crop. Since 1973, however, the situa- tion for rice in the Upper Gulf Coast region has changed dramati- cally. Following sharp increases in ice prices during late 1972 and A973, marketing quotas were sus- pended for the 1974 and 1975 crops. A target price program was initiated in 1976 and the rice loan rate was reduced, placing empha- sis on deficiency payments as a means of income support to pro- ducers (Grant et al. 1984). Export demand for rice has increased since the early 1970's but has be- come more volatile. This combina- tion of a change in government policy and fluctuating export de- mand has resulted in higher U.S. rice price volatility. The rice indus- try is now faced with a high level of price risk heretofore unknown to this generation of U.S. rice produc- ers. Texas rice producers traditional- ly use more energy inputs than producers in other states because of several factors. Surface water for irrigation is generally lifted from lower depths in Texas than in Loui- siana and California. Groundwater wells are, on the average, deeper in Texas than in states such as Arkan- sas and Mississippi, thereby re- quiring greater lift. These factors make water more expensive in Tex- as than in other rice-producing states (Mullins et al. 1981). The combination of clayey soils and humid climate limits the number of field days available for land prepa- ration and harvest, requiring larger equipment and higher per acre fuel costs (Gerlow 1983). Surveys have shown that more fertilizer and chemicals are used in Texas than in other rice-producing states (Mul- lins et al. 1981). The large increase in energy costs during the 1970's has contributed to Texas rice pro- ducers having higher production costs than rice producers in other states. "Traditionally, rice acreage in the and Crop Rotations on Upper Gulf Coast Rice Farms Upper Gulf Coast region of Texas has been rotated with 1 or more years of pasture to maintain high productivity (Griffin et al. 1984). Higher costs and greater risk in prices caused producers to search for profitable crops that could be grown in rotation with rice. Crop diversification also reduces the farmer's production and market- ing risks, since they are less depen- dent on a particular crop. The fac- tors that make the region ideal for the production of rice, however, make it hostile to alternative crops. The hot humid climate, combined with poor drainage, severely limits the number of rotation crops that can be grown (Smith 1983). Soy- beans are generally considered the best rotation crop for the region (Stansel 1983). Common rice- soybean rotations in the Upper Gulf Coast region include (1) rice followed by 1 year of soybeans, (2) rice followed by 2 years of soy- beans, and (3) rice followed by 3 years of soybeans. Soybean production expanded from 8,200 to 240,500 A in the Up- per Gulf Coast area between 1970 and 1980. This increase was primarily because of: (1) high soy- bean prices, (2) improvements in soybean varieties, and (3) lower profit margins for rice production. Despite improvements in varieties, however, soybean yields remain highly variable from year to year, requiring producers to assume a high level of production risk. Fed- eral crop insurance is available as protection against downside yield risk, but the program has been in operation for only a few years. Price risk is present in soybean production because of a low gov- 7 1111111111111 LONER GULF coast i UPPER GULF coast Figure 1. Rice belt and study area. ernment loan rate and fluctuating export demand. One method available for re- ducing production and marketing risk is crop-share land-lease ar- rangements. Crop-share arrange- ments allow the land rent to fluc- tuate in proportion to the per acre revenues received from the farm- ing operation. This is beneficial in adverse years, when the producer is hard-pressed to cover all cash operating costs. In good years, however, more of the gross reve- nues go to the landowner, resulting in smaller profits for the tenant than would occur under a cash rent tenure arrangement. Liberty County crop rotations and crop-share arrangements are representative of the Upper Gulf Coast region (Stansel 1983). The location of Liberty County relative to the rest of the Upper Gulf Coast area and to Texas is illustrated in Figure 1. In 1981, farmers har- vested 70,000 A of soybeans and 37, 100 A of rice, comprising over 90 8 percent of total harvested crop acreage in Liberty County. On an acreage basis, Liberty County was the number one soybean- producing county and the number eight rice-producing county in Tex- as for 1981 (TDA—USDA 1982). Crop-share arrangements repre- sented over 53 percent of the 1982 rice acreage farmed in Liberty County. Several different types of crop-share arrangements were used in 1982, ranging from 1/10 to 1/2 of the crop being received by the landowner (Griffin et al. 1984). The proportion of the crop going to the landowner was related to the amount of variable production costs (e.g., water, fertilizer) paid by the landowner. Continued viability of Texas Up- per Gulf Coast rice-soybean farm- ing operations is threatened by price and yield risks and low profit margins for rice and soybeans. Un- fortunately for producers, many factors must be evaluated to iden- tify a production strategy that achieves their personal goals. A detailed examination of the com- monly used crop rotations and ar‘ rangements would provide usefu», information to farm managers, as well as those associated with agri- culture in the Upper Gulf Coast region. This bulletin presents re- search analyzing the joint impact of some of these factors on the viabili- ty of a representative rice-soybean farming operation in Liberty County. Objectives and Methodology The objective of this study is to identify the impact of alternative tenure arrangements and crop ro- tations, as well as several addition- al important factors, on the con- tinued viability of rice-soybean farms in the Upper Gulf Coast re- gion of Texas. For purposes of sim- plicity, only two major crop rota- tions and two predominant crop- share arrangements are examinedl in the base scenario. The specific study objectives are: (1) To identify the particular crop rotation(s) and tenure arrange- ment(s) preferred, given a base set of assumptions for a representative farm. Producers’ survivability, economic success, and ending equity position serve as principal criteria for evaluation of the re- sults; and (2) To identify and discuss im- pacts of alternative production and management strategies and tech- nologies, alternative government macroeconomic and farm policies, and financial institutions’ credit criteria on the continued viability of rice-soybean farming operations in the Upper Gulf Coast region of Texas. Four crop rotation-tenure ar- rangement strategies were simulat- ed over a 5-year period, 1984-88, using RICESIM, an updated and expanded version of the FLIPSIM V (firm level income tax and farm lExamination of only two crop-share arrangements and two rotations does not limit the applicability of results to other arrangements and (or) rotations. Many of the results could probably be extrapolated to similar types of farm.\ \ ing situations in the Upper Gulf Coasi, area. . "l policy simulator) simulation model developed by Richardson and ‘Nixon (1985). The optimal Ztrategies in each scenario were determined by examining the probability of farm survival under _ each strategy, the ending equity position for each strategy, and the net present value (NPV) of the farming operation as an invest- ment. Following an analysis of the base scenario, several additional analyses were conducted to ex- amine sensitivity of the results to initial assumptions made in the base scenario. Literature Review Many studies have been con- ducted to identify optimal crop ro- tations. In these studies, it is gener- ally assumed that producers at- tempt to maximize net returns, or minimize production and market- ing risks, subject to a minimum acceptable net return. The model- ling approaches commonly used in these analyses include whole farm budgeting (Johnson 1979), linear programming (Heady 1954), non- linear programming (Freund 1956), and MOTAD (Hazell 1971). In gen- eral, these approaches identify ro- tations that meet or exceedproduc- ers’ economic goals and objectives for a single year, ignoring long- term effects of pursuing particular rotations. In contrast, many agronomists conduct studies to identify rota- tions satisfying a number of long- term objectives. In these studies, rotations that maximize per acre yields, minimize insect infesta- tions, improve soil tilth, etc. are identified (Crop and Soils Magazine 1981). A recent study by Hoskin (1981) examined 16 different rota- tions commonly used in the Saginaw Valley of Michigan. Crop prices and yields were stochastical- lyz generated using beta probabili- ty distributions, after which the rotations were ranked using sto- 2”Stochastic" indicates prices and yields are random or not known with certainty until the analysis is com- plete. This approach is the opposite of a deterministic approach, where vari- \ p“ ables are assumed to be known with certainty for the entire time period. chastic dominancea decision criteria. Hamill and Lin (1982) evaluated three different rice-soybean rota- tions in the rl/(ississippi Delta, us- ing simple production budgets. The N PV of the income stream pro- duced over a 12-year period was calculated for (1) a 1 year rice - 1 year soybean rotation, (2) a 1 year rice - 2 years soybean rotation, and (3) a 2 years rice - 2 years soybean rotation. Future prices and yields for both crops were deterministic in nature and were held constant throughout the study period. Hamill and Lin (1982) concluded the 1 year rice - 1 year soybean rotation offered the greatest poten- tial return to farmers in the Delta area. They cautioned, however, this rotation might increase the in- cidence of red rice, thereby lower- ing rice quality. In contrast to the many studies on crop rotations, few studies have identified optimal tenure arrange- ments for farm managers. Most studies of crop-share arrange- ments, for example, have focused on efficiency of share arrange- ments in motivating tenants to pro- duce at profit-maximizing levels (Cheung 1969; Sutinen 1975). Most studies of tenure arrangements have ignored the influence of crop rotations on results. Pederson (1984) did evaluate optimal tenure arrangements and crop rotations for farm managers in North Dako- ta. He found that farm managers would prefer fully price-flexible and price-and-yield-flexible tenure arrangements. A simplistic ac- counting approach (i.e., price times yield minus costs) was used in the analysis, thus ignoring ef- fects of taxes, government farm policy, firm financial situation, and other factors. A study by Richardson and Bailey (1982) examined the debt servicing capacity of Upper Gulf Coast rice and soybean producers. A typical farm was defined and FLIPSIM V was used to determin- istically simulate operation of the farm from 1982-91. The results in- 3The stochastic dominance approach is detailed in Appendix A. dicated tenant farmers at all levels of managerial ability probably would not generate sufficient after- tax income to meet their financial obligations over the next Z0 years. A 1 year rice — 2 years soybean rotation was assumed in this study. Richardson and Bailey (1982) as- sumed a crop-share arrangement where 1/10 of the crop went to the landowner for both soybeans and rice, with the landowner providing only the land. Both the determin- istic approach and the limited scenarios examined were limita- tions of the study. Simulation Model and General Assumptions The rice simulation model (RICESIM) was used to analyze a representative Liberty County rice farm under various scenarios. Simulation modelling is one of many techniques that has been used extensively in recent years for analysis of questions vital to firm level agriculture (Baum and Schertz 1983; Dent and Blackie 1979), as well as in other similar applications (Emshoff and Sisson 1970; Law and Kelton 1982). Mi- croeconomic simulation models are the only type of model that generates probabilities of survival and pertinent financial data. Use of RICESIM is, therefore, appropriate given the study objectives. The computer model is a firm level, recursive, Monte Carlo simu- lation model that simulates annual production, farm policy, market- ing, management, and income tax aspects of a farm over a chosen planning horizon. The model re- cursively simulates the farming op- eration by using the current year's ending financial position as a be- ginning financial position for the next year. The Monte Carlo aspect of the model comes from repeating (iterating) simulations of farm op- erations over the planning horizon many times, using pseudo- random crop prices and yields drawn from a multivariate empiri- 4In this study, 5O iterations were used. The initial results were also examined using 100 iterations. No notable dif- ference was observed between the two solutions. cal probability distribution for these variables.5 Many general and specific as- sumptions concerning producer and firm behavior are typically made in a RICESIM analysis. The use of assumptions allows re- searchers to include significant fac- tors in the analysis, while keeping the model size manageablefs In this section, a detailed description of the study assumptions is pre- sented. Although lengthy, the sec- tion provides the foundation for the study results and therefore merits careful consideration. The accuracy and applicability of the results in addressing individual farm problems depend largely on how closely the study farm depicts an actual situation. Following the base analysis, impacts of many of the major assumptions are evaluat- ed using sensitivity analyses. General Model Assumptions One criteria useful in evaluating the firm level impact of alternative production, financial, or govern- ment policy strategies is the proba- bility of survival. The probability of survival, as used in this study, is the probability that the farm mana- ger will maintain the farm's inter- mediate and long-term equity ratios7 at greater than minimum levels established by local financial institutions. In RICESIM, the farm manager must have a positive cash balance at the end of each produc- 5Probability is a measure of the chance that an uncertain event will occur. A probability distribution is a repre- sentation of all possible values of a random variable and the associated probabilities of occurrence. When a random number generated from one probability distribution is allowed to be influenced by random numbers generated from other distributions with which the first distribution is correlated, it is said to be multivariate. Such representation is needed in RICESIM to delineate the interrelated behavior of rice and soybean prices and yields. The prices and yields are pseudo-random because the seeds for the random number generator are pre- set by the researchers, thereby al- lowing many scenarios to be ex- amined using the same set of random variables. 1O tion year. The farm manager is forced to liquidate farm assets if: (a) a negative cash balance exists at the end of a production year, (b) loans have been secured against crops held for marketing in the next year, and (c) no additional refinancing of equity is available (based on lenders’ credit policies). When refinancing a cash deficit, the model first attempts to finance the debt using long-term equitys Because long-term interest rates are less than intermediate-term rates, refinancing using long-term debt assures a lower interest cost to the farm manager, thereby improv- ing chances for survival. If the long-term equity ratio is at the min- imum permitted level, the model will next attempt to refinance using intermediate term debt. Refinanc- ing capabilities are terminated if the intermediate and long-term equity ratios reach a pre-set mini- mum level, assuming the financial institution approves loan refinanc- ing for the farm strictly on the basis of financial ratios. In reality, bank- ers evaluate several factors before approving or denying a loan re- quest. Officers of the Federal Credit System, for example, gener- ally examine five factors when evaluating a loan request. These factors include: (1) the person re- questing the loan, (2) purpose of the loan, (3) repayment capacity, (4) collateral taken as security, and (5) financial position and progress “Readers are cautioned to recognize the strengths and limitations of mathe- matical models in social science re- search applications. Mathematical models, such as RICESIM, have been developed to represent reality, to a degree. Because reality is complex and often not quantifyable, models are in fact representing a simplified version of reality. As such, the true value of analysis by modelling is ”to help de- velop insights into system behavior which in turn can be used to guide the development of effective plans and decisions” (Geoffrion 1976). Absolute results are not as useful as directonal and/or magnitudal changes between two sets of results. In this light, the base results of this study should not be overly interpreted as favorable or det- rimental to the future of the Texas rice industry. Rather, comparison of the (Federal Intermediate Credit Bank of Houston 1968). If a financial ratio is used as the sole criteria for ac; ceptance or rejection of a loan, the‘ result will be a bias against farm F“ managers with other favorable fac- tors. The N PV for the farming opera- tion is a second criteria useful in analyzing results and is calculated at the end of each iteration of the model. It represents the present value of ending net worth for the farm, plus yearly family withdraw- als discounted to the present, minus beginning net worth and discounted annual off-farm in- come. A positive NPV value is de- noted as an economic success since after-tax farm income, coupled with after-tax capital gains on as- sets, generated a return greater than after-tax return available from off-farm investments. The per acre pattern of monthly labor demands for each crop re- mains constant over time, assum- ing no technological change occurs during the study period in per acre labor efficiency. Real equipment re- pair costs for all machinery remain constant, as does equipment effi- ciency. Equipment is assumed to have a known economic life. Each equipment piece is replaced when it has reached the end of its economic life, providing the pur- chase does not cause total debt to exceed the insolvency level. If re- placement will cause insolvency, sensitivity analyses’ results to those of the base analysis allows for inferences to be made regarding specific produc- tion management strategies, impacts of alternative government policies, and financial institutions’ credit criteria, etc. 7The equity ratio is a financial ratio obtained by dividing total equity by total farm assets. The equity ratio is equal to the debt ratio (total debt di- vided by total assets) divided by the leverage ratio (total debt divided by total equity) (Penson and Lins 1980). sBecause long-term interest rates are less than intermediate-term rates, re- financing using long-term debt as- sures a lower interest cost to the farm,_ manager, thereby improving chances\ for survival. the equipment purchase is post- poned until the following year. ) Personal income taxes and social ‘security taxes are calculated as- ‘ suming the farmer is married, fil- ing a joint income tax return, and s itemizing personal deductions. The regular income tax liability is computed using either income av- eraging (if qualified) or the stan- dard rate schedules. The model selects the tax strategy that results in the lower income tax liability, based on 1984 tax laws. All invest- ment tax credit allowances are de- ducted from the regular tax liability with the result being compared to the income tax liability under the alternative minimum tax. The farm manager pays the excess of the alternative minimum tax over the regular income tax liability after credits. Income tax schedules for 1984 are included in the model, as well as a procedure to develop tax rate schedules for 1985 and beyond based on changes in the consumer price index. Specific Study Assumptions Data used and results generated for the base strategies are in Ap- pendix B. The simulation analysis was conducted for the 5-year period 1984-88. This period was chosen because expected prices, yields, interest, and inflation rates could be predicted with some de- gree of confidence. The farm size used in the study was 2,310 A. This size of operation was the same as that analyzed pre- viously by Richardson and Bailey (1982). Only 8 percent of the 1982 Liberty County farms were larger than 1,000 A, but these few farms represented almost 73 percent of total harvested acreage. More im- portantly, 38 percent of the farms having irrigated acreage in the county were larger than 2,000 A. The average size of Liberty County farms with more than 2,000 A was almost 2,600 A (U.S. Department of Commerce 1984). The represen- tative farm chosen is larger than the average Liberty County farm but is representative of the farms control- ling most of the county's acreage. It was assumed the farm acreage consisted of leased land, with only 10 A owned and used as the farm- stead. Wholly-leased farms repre- sent about one-half of all operating rice farms in the Upper Gulf Coast region (Mullins et al. 1981). Previ- ous studies have suggested Who}- ly-leased farms are most vulner- able to insolvency under current farm policy (Grant et al. 1984). About 5 percent (116 A) of the farm acreage was in buildings, roads, canals, etc., reducing tillable acre- age to 2,194 A. The farmstead con- tained a home for the farmer, a smaller home for one full-time em- ployee, and a 60- by 120-foot equip- ment shed. The crop rotations examined have historically been two of the most common in Liberty County (Boldt and Kennedy 1982), namely (1) 2 years of soybeans followed by 1 year of rice (SSR), and (2) 1 year of soybeans followed by 1 year of rice (SR). The principal advantages of the SSR rotation are the lower inci- dence of red rice (Eastin 1983), higher expected rice yields, lower demand for inputs (particularly water and labor), and lower short- term demand for financing. The principal advantage of the SR rota- tion is the greater acreage of rice, the more profitable of the two crops. The two crop-share land rental arrangements analyzed were (1) 1/2 of the crop to the landowner for rice acreage and 1/7 of the crop to the landowner for soybean acre- age, and (2) 1/7 of the crop to the landowner for both rice and soy- bean acreage. The 1/2 share ar- rangement is the most common for Texas rice acreage (Mullins et al. 1981; Griffin et al. 1984). The 1/7 share arrangement is the typical tenure arrangement in Liberty County for land in soybean pro- duction and is also common for rice production (Boldt 1983). Under a 1/2 share arrangement, the landowner provides land, wa- ter, and seed, and pays 1/2 of the fertilizer costs, chemical costs, chemical application costs, drying costs, and sales commissions. In return, the landowner receives 1/2 of the harvested crop or equivalent revenue. Under the 1/7 share ar- rangement, the landowner pro- vides only land and pays 1/7 of the drying, hauling, and sales commis- sion costs, receiving in return 1/7 of the harvested crop or equivalent revenue (McQuhae 1983). Finance and Tax In the base analysis, the 10 A farmstead was being purchased by the producer, with an initial pur- chase price of $133,600. The begin- ning (1984) market value of the farmstead was $167,000. Land was initially worth $1,200/A, an aver- age price for cropland in the area (Yates 1983). Buildings were valued at $155,000, of which $105,000 were depreciable. The buildings were depreciated over a 30-year period with a 10 percent salvage value. Market value of the buildings de- clined by 22 percent per year. The initial debt-to-asset ratio on long- term debt was 0.40, a typical debt level for a wholly-leased farm in Liberty County (Ieffrey 1983). Beginning market value of farm machinery was just over $565,000, with equipment purchases repre- senting the sole source of inter- mediate-term debt. The initial debt-to-asset ratio for inter- mediate-term debt was an average position for a tenant farmer in Lib- erty County (Jeffrey 1983). New equipment purchases could be made with a 30 percent downpay- ment and financing available over a 5-year period. Minimum equity levels were set in the model, assuming additional financing could not be obtained below these levels. These equity ratios were 0.33 for both long-term and intermediate-term credit? This figure represents the minimum credit level allowed by Liberty County banks and is extended only to farmers with an otherwise excel- lent financial record (Jeffrey 1983). The producer was 45 years old and married, with three children living at home. He was assumed to be an above-average manager. Twenty percent of the net farm 9This ratio implies 1 out of every 3 dollars of farm assets is owned by the farm manager. This minimum equity ratio is equivalent to a debt-to-asset ratio of 0.67 and a leverage ratio of 2.0 (Penson and Lins 1980). 11 income was assumed to equal total personal itemized deductions on Schedule A of the Federal Income Tax forms. The deductions reduced taxable income to 8O percent of net farm income. The producer's spouse had a full-time off-farm job, earning $16,000 a year. Two chil- dren assisted with the farm labor, receiving no compensation. Family living expenses were allowed to vary from $18,000 to $25,000 per year, depending on farm income. The producer had $20,000 in off- farm investments, earning about 11 percent per year. Other fixed costs for the farm included $3,200 for insurance, $3,000 for accoun- tant and legal fees, $600 for proper- ty taxes, and $5,000 for miscella- neous fixed costs. Social Security costs were calculated according to present legislative mandates through 1988. Initial farm machinery pur- chased before 1982 was depre- ciated for tax purposes using the double-declining-balance method. Farm machinery purchased after 1981 was cost recovered over a 5- year period using the accelerated method. No first-year expensing was taken for capital items (primar- ily equipment) purchased after 1981. Instead, full investment tax credit was claimed on capital pur- chases, thereby requiring a reduc- tion in the initial tax basis of new capital assets. The reduction con- sisted of one-half of investment tax credit claimed (Prentice-Hall, Inc. 1971). A critical assumption in NPV analysis is the discount rate used to discount cash flows and ending net worth. The discount rate used in the study is the expected after-tax rate of return that could be earned if the farm manager's initial equity and borrowed capital were invest- ed off the farm. A pre-tax rate of return equal to 11.24 percent, rep- resenting the geometric“) mean of yearly returns assumed in the model for off-farm investments, mThe geometric mean approach and the arithmetic mean approach are the two methods available to calculate an average return for a time period when returns differ within the time period. 12 TABLE 1. EXPECTED INTEREST AND INFLATION RATES 1984-88 1984 1985 1986 1987 1988 y. Annual Interest Rates: Percent Pre-1984 L.T. Loans* 11.7 11.7 11.7 11.7 11.7 Pre-1984 |.T. Loans* 15.0 15.0 15.0 15.0 15.0 New L.T. Loans 13.1 11.7 10.9 10.5 10.5 New I.T. Loans 14.8 14.9 14.1 13.7 13.7 Refinance L.T. Loans 13.1 11.7 10.9 10.5 10.5 Refinance |.T. Loans 14.8 14.9 14.1 13.7 13.7 Operating Loans 15.2 15.4 15.6 14.2 14.2 Return on Savings 11.8 11.9 11.1 10.7 10.7 Annual Inflation Rates: Used Machinery 0.0 0.0 0.0 1.0 1.0 Off-Farm Investments 11.8 11.9 11.1 10.7 10.7 Farmland Capital Gains 7.1 7.1 7.1 7.1 7.1 All Other Costs 5.4a 4.7 4.5 4.8 5.0 On-Farm Buildings -2.0 -2.0 -2.0 -2.0 -2.0 Source: Penson (1983). * L.T.: Long-Term Loans, * |.T.: Intermediate-Term Loans “Initial prices used in the model for new farm machinery and off-farm storage costs are for 1984. Therefore, inflation rates for these costs were equal to zero in 1984. was used in the discount rate calcu- lations. A geometric mean for long- term interest rates of 11.14 percent was used in calculating the cost of borrowed capital. Interest was the only tax shield available for the off- farm investment. Based on these assumptions, an after-tax discount rate of 10.11 percent was used in NPV calculations for the base scenario. Interest and Inflation Rates Eight types of interest rates were used in the model. Annual values for these interest rates were set for each year in the 5-year simulation period. The various interest and inflation rates used are in Table 1. Interest rates on long-term loans obtained previous to the study period were 11.75 percent, with The principal difference between the two methods is the geometric mean accounts for the effect of compound- ing of returns over time (Weston and Brigham 1981). interest rates on old intermediate- term loans set at 15 percent. New long-term, intermediate-term, and operating loan rates were cal- culated for 1984-87 using the COMGEM (Penson et al. 1984). These rates ranged from 10.5 to 13.1 percent for long-term loans, 13.7 to 14.9 percent for inter- mediate-term loans, and 14.2 to 15.6 percent for operating loans. For 1988, interest rates were held constant at 1987 levels. Annual inflation rates for 14 dif- ferent production costs and re- turns on investment were also specified in the model. In most cases, the general inflation rate predicted by COMGEM for farm inputs was used to inflate produc- tion costs. The annual rates used were: 5.4 percent in 1984, 4.7 per- cent in 1985, 4.5 percent in 1986, 4.8 percent in 1987, and 5.0 percent in 1988. Inflation rates for used equip- ment were 0 percent for 1984-86 and 1 percent in 1987-88. The 1987- 88 rates reflected the expectation that used equipment will become \ more scarce and, thus, more valu- able during the latter part of the 1980's. Increases in land values t iwere at a 7.1 percent annual rate ~ and increased independent of changes in net farm income. The 7.1 percent rate was the approxi- mate increase in the study area land values during 1982-83 (Gilli- land 1984). Although some have argued that land values are closely tied to income (Skees and Reid 1984), others have maintained that farm income is only one of many factors influencing land values (Castle and Hoch 1983). Pope and Goodwin (1984) found agricultural productivity was the fifth most im- portant characteristic considered by purchasers of rural land in Tex- as. Proximity of the representative farm to the Houston metropolitan area causes land values to be rela- tively immune to farm income vari- ations. Production and Management A machinery complement was identified for the study farm, based on crop production requirements. Local farmers examined the com- plement and made final adjust- ments so it would be representa- tive of the Liberty County area (]ef- frey 1983; Yates 1983). The comple- ment was the same under both the SSR and SR rotations, recognizing the desired flexibility of producers to change rotations.“ A list of the initial equipment complement is in Table 2. A 7-year productive life was as- sumed for most equipment. Al- though equipment replacement af- ter 7 years is more often than the optimal replacement rate identified in previous economic analyses (Chisholm 1974; Kay and Rister 1976; Bates et al. 1979), it appears appropriate, given the assumed level of annual equipment usage, timeliness, and anticipated high costs of breakdowns as the equip- ment ages. Exceptions (i.e., longer “Although individual producers may have equipment complements differ- ent from that indicated in Table 2, the total dollar value of the other comple- ments should be similar to the one used in the study. replacement policies) to the 7-year replacement policy were made for assets with low annual usage or high durability, including the grain carts, one pickup truck, the small p tractor, and the levee plow, push, and roller. Current market values, original purchase prices, and cur- rent replacement prices were ob- tained from a local implement dealer (Yates 1983) and from The National Farm and Power Equipment Dealers Association Official Guide, Tractors and Farm Equipment (1983). All replacement equipment was new. Cash production costs for first crop rice and soybeans in 1984 were calculated from 1983 budgets developed for Liberty County by Gerlow (1983) and Boldt and Ken- nedy (1982). (A study by Rister and Griffin (1984) yielded cash costs for ratoon rice.) These costs are pre- sented in Table 3. The exception to using these budgets was water cost. Because water is an important and costly input in rice production, the actual 1984 rate charged by Lib- erty-Chambers Counties Naviga- tion District was used in the base analysis. All costs of production were inflated over the 1984-88 period using the previously men- tioned inflation rates. The farm manager employed two men full-time, with part-time assistance assumed available dur- ing peak seasons. Because of high labor demands in rice production (Texas Agricultural Extension Ser- vice 1983), an additional man was employed for the SR rotation strat- egies. Each man worked from 250 to 350 hours per month, depending on the time of year.” The farm manager worked 2OO to 300 hours per month, working more hours during spring, summer, and fall, than in the winter. In addition, two of the producer's children worked full-time (3OO hours each per month) during May, Iune, Iuly, and August. The two children worked part-time (100-2OO hours per month each) the rest of the year. Monthly per acre requirements 12Work hours included maintenance and repair work, as well as normal field work. used were 1O percent less than those reported in Texas Agricultur- al Extension Service (1983) budgets for the Upper Gulf Coast region, reflecting above average manage- ment of the farm and economies of scale. Monthly labor requirements and labor supplied are given in Appendix B. Only 25 percent of the rice acre- age produced a ratoon crop, con- sistent with 1982 averages for Lib- erty County (Griffin et al. 1984). It was assumed ratoon acreage was fertilized and irrigated before har- vest. The farmer harvested 95 per- cent of the planted soybean acre- age and 99 percent of planted rice acreage. Both harvested acreage percentages are typical for Liberty County (TDA—USDA 1982). All first crop rice was harvested and sold in August. Ratoon rice was harvested in October and sold the following Ianuary. Soybeans were harvested in October, with 7O per- cent of the beans sold in October and 3O percent sold in January (Grant et al. 1984). The percentage of the year operating loans were held varied by crop rotation-tenure strategy, from 36.9 percent for the SR rotation under a 1/7 share ar- rangement to 42.2 percent for the SSR rotation under a 1/2 share ar- rangement. Crop Prices and Yields Key assumptions in the study were the expected mean (average) prices and yields for rice and soy- beans over time (Table 4), and the distributions about each mean. An- nual mean values for rice and soy- bean prices and yields are used in RICESIM to account for expected changes over time caused by tech- nology, long-term shifts in de- mand, etc. Distributions around the means represent price and yield uncertainty resulting from weather, insects, disease, changes in export demand, etc. Use of a random number generator“ in 13A random number generator is a computer routine that generates many random or uncorrelated stan- dard deviates to be used in calculat- ing stochastic variables. The use of 13 TABLE 2. EQUIPMENT COMPLEMENT FOR LIBERTY COUNTY RICE AND SOYBEAN FARM Year Current Original Current _ Equipment Purchased Market Value Purchase Price Replacement Cost y 160 H.P. Tractor 1980 $33,474 $39,798 $61,700 160 H.P. Tractor 1979 31,769 33,568 61,700 160 H.P. Tractor 1983 61,700 61,700 61,700 230 H.P. Tractor 1978 34.945 52,475 94,800 230 H.P. Tractor 1980 48,571 65,823 94,800 65 H.P. Tractor 1975 7,717 10,087 19,900 Combine 1979 51,909 53,886 94,000 Combine 1980 55,882 61,881 94,000 Combine 1983 94,000 94,000 94,000 1/2 Ton Pickup 1976 2,375 3,876 9,000 1/2 Ton Pickup 1978 3,425 4,538 9,000 1/2 Ton Pickup 1983 9,000 9,000 9,000 22' 9" Disk 1980 4,500 9,800 15.300 22' 9" Disk 1982 7,500 11.500 15,300 24' 4" Disk 1978 3,500 9,200 19,300 24' 4" Disk 1981 5,000 11,500 19,300 Rolling Cultivator 1979 1,500 3,900 5,200 Rolling Cultivator 1982 2,000 4,200 5,200 8' Bean Planter 1976 4.500 4,371 10,250 8' Bean Planter 1982 4,500 7,000 10,250 Grain Cart 1975 2,000 1,320 6,800 Grain Cart 1981 3,500 4,718 6,800 16' x 60' Land Plane 1977 3,000 8,000 17,500 16' x 60' Land Plane 1978 7,376 7,600 17,500 150 Levee Boxes 1982 6,000 7,500 11,250 Levee Plow 1981 1,547 1,563 2,800 Levee Push 1981 700 2,100 2,500 Levee Roller 1978 350 350 650 31' Field Cultivator 1981 4,500 5,800 9.800 31' Field Cultivator 1982 5,500 7,100 9.800 25' Field Cultivator 1978 2,500 5.800 9,800 8 Row Bedder 1976 1,036 1,100 5,400 8 Row Bedder 1979 1,500 3,500 5.400 Pipe Harrow 1979 1.000 1,020 2,100 Pipe Harrow 1980 1,100 1,600 2,100 Du-All 1978 3,500 8,600 11,500 Miscellaneous Trucks 1977 50,000 60,000 90,000 Source: Jeffrey 1983; Yates 1983. combination with the distributions (also known as probability density functions) results in prices and yields that are random in a given year but which, when repeated defined distributions in combination with random numbers allows ran- dom variables (e.g., prices and yields) to occur much as they would in actuality. 14 samplings are made, occur with about the same frequency as de- fined in the distribution. Mean Soybean Yields and Prices The 1984 mean yields for soy- beans were obtained from the sub- jectively estimated yield distribu- tions (see following section on development of distributions). Means for subsequent years were calculated by increasing yields by 0.4 bu/A/year, based on expecta- tions of agronomists working in the study region. The COMGEM model was used to predict annual national soybean prices through 1987. The 1987 price was increased by 4 percent to obtain the national soybean price for 1988. Historical data from 1973-82 were used t calculate the differential between 1i Q TABLE 3. 1983 PER ACRE CASH PRODUCTION COSTS FOR RICE AND SOYBEANS’ First Crop Ratoon Item Rice Rice Soybeans Per Acre Costs Seed $33.90 $0.00 $9.45 Fertilizer 51.00 13.50 14.36 Chemicals 67.56 10.00 45.45 Fuel-Lube 18.60 0.00 12.68 Repairs 6.76 0.00 6.17 Water 68.00 14.45 0.00 Harvest 11.20 8.55 9.14 Total $257.02 46.50 $97.25 Per Unit Costs Drying and Storage $ .70/cwt $ .70/cwt $ .25/bushel Custom Haul .40 .40 .20 Sales Commission .13 .13 0.00 Total $ 1.23/cwt $ 1.23/cwt $ .45/bushel "’Additional variable costs (such as labor and interest on operating capital) are internally calculated by RICESlM. Source: Texas Agricultural Extension Service (1983); Boldt and Kennedy (1983); Gerlow (1983); Griffin et al. (1984). the local price and the national soybean price. A significant differ- ential existed between the two prices and increased with time at the approximate rate of inflation. The estimated equation was YT = — 3.728 + 0.05048(T) (1.562) (0.0201) 1'22 = 0.374 Durbin-Watson statistic (D.W.) = 2.163 where YT = differential between Texas and U.S. soybean price, and T=time, as 73, 74, ..., 82. Values reported in the parentheses are standard errors for the es- timated coefficients. Using the re- gression equation, the 1984 local price was predicted to be $0.49/bu higher than the national average (‘price The predicted 1984 U.S. soy- a Jean price was adjusted upward -r by $0.49/bu to represent the Liberty County soybean price. The $0.49/ bu differential was inflated over time at the same rate as soybean prices to adjust yearly U.S. soy- bean price to Texas soybean price. Mean Rice Yields and Prices As with soybeans, the 1984 mean rice yield was estimated using sub- jectively estimated yield distribu- tions. Mean yields for rice over time were estimated based on ex- pectations of agronomists working in the study region. A complicating factor in these estimations was the introduction in 1983 of Lemont, a new long-grain rice variety. In its first year of release, Lemont yield- ed about 11 cwt (25 percent) more rice than traditional varieties pro- duced by the same farmers (Texas Rice Research Foundation 1983). Although this yield level was ob- tained by above average produc- ers, Turner (1983) expects Lemont yields 10 cwt (22 percent) above traditional varieties (i.e., Labelle and Lebonnet) for average produc- ers. The actual process of generating prices and yields in RICESIM con- sisted of (1) generating indepen- dent random normal deviates us- ing the random number generator, (2) correlating the deviates, using the square root of the correlation matrix, (3) transforming the cor- related random normal deviates in- to uniform correlated random de- viates (i.e., transforming the result to a unit scale from 0.0 to 1.0), (4) using each transformed value in a table look-up function of its re- spective empirical distribution to obtain a number representing the deviation from the mean, and (5) adding the deviation value to the specified mean for that variable. Government Program Rice, similar to most other grains produced in the United States, is subject to a government commodi- ty program. The current program is voluntary and specifies (1) a na- tional target price, (2) a national loan rate, and (3) a maximum defi- ciency payment. The applicable de- ficiency payment rate for rice is calculated using either the national target price minus the weighted average national rice price for the first 5 months of the marketing year (i.e., August-December) or the target price minus the loan rate, whichever is lower (Johnson et al. 1982). The maximum deficiency payment that can be received by one person is $50,000. Because it is common for the farm affairs of an operation of this size to be ar- ranged so that two persons qualify for government payments (Lin et al. 1981), a $100,000 payment limi- tation was assumed for the farm. It was assumed the farm manager participated in the farm program during all years analyzed in the simulation period. The national loan rate for rice is a weighted average based on the ap- plicable loan rates for short, medi- um, and long grain rice. The na- tional rice loan rate is used for calculating deficiency payments in all rice-producing states (if higher 15 TABLE 4. EXPECTED (MEAN) AVERAGE RICE AND SOYBEAN PRICES AND YIELDS 1984-88 Cwt of Rice Bu of Soybeans Followin 1 Following2 Ratoon Following Following 0 Year of Soy eans Years of Sovbeans Rice Soybeans Rice y Price Yielda Price Yield“ Price" Yield“ Price Yield” Price Yield" 1984 9.28 46.17 9.54 50.03 8.00 7.76 6.33 22.84 6.33 23.69 1985 9.78 52.31 10.05 56.69 9.34 7.84 7.45 23.31 7.45 24.17 1986 10.14 56.04 10.40 60.73 9.68 7.92 7.92 23.78 7.92 24.67 1987 10.56 56.61 10.83 61.34 10.07 8.00 8.01 24.27 8.01 25.17 1988 11.02 57.18 11.29 61.96 10.50 8.08 8.34 24.76 8.34 25.68 aYield figures are on a per acre basis. °Prices a_re for_ ratoon rice in a SSR rotation and are 93 percent of first crop prices. Ratoon rice prices are also 93 percent of first crop rice prices for the SR rotation. Sources: than the 5-month average market price). In determining the appro- priate loan rate for long grain rice, however, the effective long grain loan value factors are applicable. To simulate the rice farm pro- gram for the representative farm, it was necessary to project Texas long grain rice loan rates and target prices for 1984-88. Because the cur- rent political climate suggests fu- ture government programs will be more austere (Adams 1984), na- tional loan rates and target prices were held constant throughout the study period. Assuming a long grain rice turnout of 55/70 (i.e., head rice/total milling yield) (Brorsen et al. 1984), the average long grain loan rate has averaged 107.894 percent of the national rice loan rate over the 1974-83 period. This percentage was used to adjust the national loan rate in 1984 ($8.00/cwt) to a Texas long grain loan rate equivalent. As a result, the loan rate and target price used in the study were $8.63/cwt and $12.53/cwt, respectively. and constituted all rice acreage in 1986 and after. As a result, rice yields for the representative farm increased 22 percent by 1986. Based on recommendations by Turner (1983), an additional 40 lb of nitrogen were applied to the Le- mont acreage, as well as one addi- tional fungicide treatment, relative to Labelle acreage. After 1986, Tur- ner (1983) estimated yields would increase only 1 percent per year through 1988. Ratoon rice yields were unaffected by the introduc- tion of Lemont, increasing at a 1 percent per year rate. The additional supply of rice at- tributed to Lemont is expected to have a negative effect on domestic rice prices. The extent of the impact will depend on quantity of addi- tional yield per acre achieved under field conditions and popu- larity of Lemont among Southern rice farmers. Based on estimates by Stansel (1983), Lemont was as- sumed to constitute 80 percent of all Texas rice acreage and 5O per- cent of all non-Texas rice acreage in Penson 1983; Grant, Beach, and Lin 1984; Liberty County Farmers and other Agricultural Professionals. 1984, $9.77 in 1985, $10.11 in 1986, $10.52 in 1987, and $10.96 in 1988. Production was predicted to reach a high of 138 million hundred- weight in 1986, falling to 136 mil- lion hundredweight by 1988. The continued increase in production costs, coupled with an unchanging target price, were responsible for the decline in production. Public and private carryover stocks were predicted to increase from about 51 million hundredweight in 1984 to 56.6 million hundredweight in 1988. The Grant, Beach, and Lin (1984) model predicted surplus stocks would continue to increase throughout 1984-88, with a result- ing depressing effect on prices. The decline in production after 1986 suggests stocks may begin to de- crease after 1988. Monthly historical data from 1974-81 was used to estimate the relationship between Texas long grain prices and national prices} The relationship was Texas = * 0.1840 + 1.0469 (National Stansel (1983) estimates about the South by 1988. Using these Price Price) 100,000 A of Lemont will be plant- figures, an econometric simulation 0 1986 O 0198 ed in 1984, with most Texas acreage model developed by Grant, Beach, ( ' _2 ) l ' ) planted to Lemont in 1985 and af- and Lin (1984) was used to estimate R =09“ ter. To account for the introduction expected rice prices for 1984-88. D.W. = 0.623 of this variety, 25 percent of the representative farm's 1984 rice acreage was assumed planted to Lemont, with the remaining 75 per- cent in Labelle. Lemont acreage was increased to 75 percent in 1985 16 The model predicted nominal U.S. rice prices would slowly rise during the period, assuming no change in the government farm program. The predicted prices per hundredweight were: $9.29 in This equation was used to convert “Data for September 1976 to ]uly 1979‘ were unavailable. f . 45% x 501 io-f as-f zs-f HZTTIIWJUFTIT 20-5 fr... .. , . .. IV‘ 2 4 S 8 l ' I ' I ' ‘ I l0 12 l4 l5 CWT /RCRE Source: Subjectively estimated by farmers and agricultural experts in Liberty Co, Texas Figure 2. Yield distribution for ratoon rice. the projected national average price to a Texas long grain price. Ratoon rice prices were 7 percent less than first crop prices because of lower quality (Gerlow 1983; Brorsen et al. 1984). As mentioned previously, one of the principal advantages of the SSR rotation is the reduced incidence of red rice in the rice crop. Eastin (1983) estimates that an incidence of 2.5 percent red rice is expected in rice following 1 year of soybeans, whereas only 0.5 percent red rice is expected when rice follows 2 years of soybeans. Brorsen et al. (1984) found rice prices in Lower Gulf Coast bid/acceptance auction mar- kets were discounted $O.134/cwt "for each 1 percent of red rice pres- ent during 1979-81. Based on these observed discounts, mean prices for rice produced in the SR rotation were discounted $0.268/cwt from prices received for rice produced in the SSR rotation. The discount was held constant over time. Development of Distributions An example plot detailing the probability density function (pdf) for ratoon rice yields is displayed in Figure 2. The figure illustrates probability of yields within a par- ticular range. The probability of ratoon yields between 7 and 9 cwt is about 30 percent, for example, while the probability of yields be- tween 11 and 13 cwt is only about 2 percent. The mean for this dis- tribution is the 1984 mean for ra- toon rice (about 8 cwt). When the mean increases, the distribution shifts to the right, making higher yields possible, while eliminating the possibility of very low yields. Plots of all other yield and price distributions are found in Appen- dix C. Methods used to develop the means and their corresponding distributions are discussed below. The distribution for soybean prices was based on behavior of soybean prices during 1973-82. Thus, the probability of randomly drawing a very high price for soy- beans in a given year of the plan- ning horizon was the same as the percentage occurrence of that high price during 1973-82. The Grant, Beach, and Lin (1984) model was used to predict rice prices between 1973-83. The differences or devia- tions between the predicted price and actual price were used to de- velop a distribution for first crop i ratoon rice prices. Unfortunately, only a few years of farm level data are available in Liberty County from which to esti- mate empirical yield distributions. To overcome this problem, several producers and agricultural-related professionals from the Liberty County area were asked to subjec- tively estimate (November 1983) the probability of 1984 crop yields falling within 1 of 10 yield inter- vals. This procedure is similar to that used by Bessler (1977) to esti- mate producers’ price expecta- tions. The resulting data were com- bined to form composite distribu- tions for the following five crops: (1) soybeans following soybeans, (2) soybeans following rice, (3) rice following 1 year of soybeans, (4) rice following 2 years of soy- beans, and (5) ratoon rice.” Means “The distributions for rice were es- timated assuming Labelle rice was used. Lemont is expected to have a different distribution around the mean, but only a few years of field data exist with which to estimate the new distribution. Because of the lack of data, the Lemont distribution was assumed to be the same as the Labelle distribution. Sensitivity analyses are given in a later part of the report to determine the impact of this assump- tion on the results. 17 for the respective empirical dis- tributions were used as the 1984 means in the model. The mean values were close to county aver- age yields for soybeans and ratoon rice. For first crop rice, the means were 3 to 5 cwt above the county average, reflecting the assumed above average management level of the farmer in rice production. A correlation matrix“ was es- timated for all rice and soybean price and yield variables used in the study (Table 5). Liberty County annual price and yield data for 1973-82 were used as the principal source for estimating the correla- tion matrix. The square root of the correlation matrix was used with means of the yield and price dis- tributions to generate random mul- tivariate prices and yields. As ex- pected, first crop and ratoon crop rice prices were positively cor- related (0.87), as were first crop and ratoon crop rice yields (0.63). First crop and ratoon rice yields and prices were negatively cor- related (-0.42 and -0.24). First crop and ratoon rice and soybean yields exhibited a positive correlation (0.57 and 0.46). Correlation coeffi- cients between other variables were less significant. Because coef- ficients between current and past yields and prices were not signifi- cant, autoregressive influences on current prices were assumed zero. The presence of 2.5 percent red rice in rice grown in the SR rotation caused this rice to be lower/ed to a number three grade rice. Accord- ing to farm program regulations, grade three rice is discounted $0.30/cwt from the base loan rate. 16”Correlation measures the closeness of a linear relationship between two variables. If one variable x can be expressed exactly as a linear function of another variable y, then the correla- tion is 1 or -1, depending on whether the two variables are directly related or inversely related. A correlation of O between two variables means that each variable has no linear predictive ability for the other." (SAS Institute, Inc. 1982). A correlation matrix con- sists of correlation coefficients for all variables, the number of variables determining the size of the matrix. 18 TABLE 5. CORRELATION COEFFICIENTS’ FOR RICE AND SOYBEAN PRICES AND YIELDS. Soybean First Rice Ratoon Rice Soybean July Rice January \ Yield Yield Yield Price Price Rice Price Soybean Yield 1.0 0.5714 0.4698 0.3055 -0.4209 —0.2476 First Rice _ Yield 1.0 0.6323 -0.1485 -0.4289 -0.5923 Ratoon Rice Yield 1.0 -0.1543 -0.7809 -0.8397 Soybean Price 1.0 0.1172 0.2420 July Rice Price 1.0 0.8709 Jan. Rice Price 1.0 "Correlation" measures the closeness of a linear relationship between two variables. If one variable x can be expressed exactly as a linear function of another variable y, then the correlation is 1 or -1, depending on whether the two variables are directly related or inversely related. A correlation of 0 between two variables means that each variable has no linear predictive ability for the other" (SAS Institute, Inc. 1982). The lower half of the diagonal is the reciprocal of the upper half. Ratoon rice was assumed grade four and was discounted $0.60/cwt from the base loan rate (USDA 1983). The discounts were held constant throughout 1984-88. Yields for the previous 5 years from a Liberty County farm of simi- lar size and production levels were used to calculate proven yield levels used in the farm program. Participation in the rice farm pro- gram required setting aside 20 per- cent of farm acreage, with an addi- tional 5 percent of the rice acreage placed in paid diversion. The set- aside and paid diversion was 8O percent effective in reducing pro- duction, i.e., a slippage rate of 2O percent was assumed. The soy- bean farm program consisted sole- ly of a loan rate. The loan rate ($5.02/bu) was also held constant over the study period. Participation in the Federal Crop Insurance Program on only soy- beans was assumed in the base analysis. Rice was not included» since examination of the yield dis- tributions used indicated the prob- ability of yields falling below the guaranteed minimum was small (less than 5 percent)” The low probability was a result of the large increase in expected rice yields as compared with proven rice yields. For soybeans, the insurance initial- ly guaranteed a 14 bu/A yield, about 65 percent of the initial mean soybean yield or level two of the insurance program (USDA-FCIC 1982). Federal Crop Insurance price election for soybeans was at the highest level ($6.50/bu). The land- owner shared in the cost of the insurance premium in proportion to the crop-share arrangement for soybeans. The insurance policy in- cluded protection against hail and fire damage. Base yields for crop insurance increased over time (Table 4). Price election was also increased at the same rate as was assumed for mean soybean prices "When rice was insured in the model, probabilities of survival and success, NPV, and other analysis criteria fell for all four strategies. Dropping crop insurance seemed justified, based on this result. \r. \. Q \! in the model. Premiums were in- creased over time in accordance y ith the increased prices, in- creased yields, and loss experience (Pfluger 1984). The producer was assumed to have participated in the soybean crop insurance pro- gram during the previous 3 years (1981-83). The farm used in cal- culating proven yields for rice was also used for historical soybean yields. The actual farm reported yields below the guaranteed mini- mum during 1982 and 1983. RESULTS AND ANALYSES Base Scenario Simulation results for the four crop rotation-tenure arrangement strategies are in Table 6. The soy- bean—soybean-rice rotation with a 1/7 crop-share arrangement (SSR 1/7) offered the highest probability of survival (82 percent) of the four strategies examined. As indicated in the previous section, the proba- bility of survival is the probability that the producer will maintain the farm's equity level above the mini- mum levels (established by local financial institutions) throughout the 5-year study period. The soy- bean-rice rotation under a 1/7 crop- share arrangement (SR 1/7) offered a 78 percent probability of survival, highest for the two soybean-rice rotation strategies. All four strate- gies exhibited a 5O percent or great- er probability of survival.” Probabilities of survival under each strategy for each year of the 5- year study period are presented in Table 7. Survivability fell rapidly in the second year for the SSR 1/2 strategy, the farm operation failing because of back-to-back years of poor soybean yields and prices or below average soybean and rice yields and prices. The greatest de- crease in survivability for the other three strategies occurred in year 3, lsThe reader is cautioned not to misin- terpret these and subsequent results. The results do not imply 82 percent of farms using the SSR 1/7 strategy will still be in operation in 1988, while the remaining 18 percent will be bank- rupt. Nor should the results be inter- preted as absolute. The results should be viewed as an approxima- tion of the farm manager's probabili- again because of combinations of low soybean and rice prices and (or) low yields several years in suc- cession. Preference rankings between strategies were also the same when using the mean ending equity ratios. The mean ending equity ratios for all iterations include itera- tions that became insolvent during the 5-year study period. The two 1/7 share strategies performed much better, with average ending equity ratios above 0.55. The mean ending equity ratios for iterations surviving the 5-year period were higher than those for all iterations, but were much closer between strategies/However, the 1/7 share strategies had higher ending equi- ty ratios than the 1/2 share strate- gies. Initial equity ratios were 0.60 for all four strategies. It can be concluded that, if a farm of the type modelled survives the 1984-88 pro- duction period, the farm manager will probably improve his/her equi- ty position. The SSR 1/7 strategy also offered the highest probability of economic success. Economic success is de- fined as generating a positive after- tax net present value for the farm. The SSR 1/7 strategy was the only strategy with a probability of economic success greater than 50 percent. By contrast, the SSR 1/2 strategy offered only a 12 percent probability of success, less than one-fourth that of the SSR 1/7 strategy. Both 1/7 share arrange- ments offered probabilities of economic success that were more than twice those of the 1/2 share arrangements. The much higher probability of success is not sur- prising, since land rental costs are less variable under the 1/7 arrange- ment. The farm manager using the 1/7 arrangement receives more of the benefits accrued in a good year ty of still being in farming at the end of 1988, and should be used largely for comparison between results. In this instance, the results indicate the farm manager following the SSR 1/7 strategy has a high probability of sur- vival through 1988 and that the strategy offers a relatively higher probability of survival than do the three alternative strategies. than does the farmer using the 1/2 share arrangement. As expected from examining probability of success figures, the average after-tax NPV was highest for the SSR 1/7 strategy. Because the discount rate represents the after-tax return if an equivalent in- vestment was made in a risk-free off-farm investment, the results imply the farm manager may not receive a return to his investment greater than the return from the off-farm investment. The after-tax NPV cumulative distributions” generated for each strategy are illustrated in Figure 3. One approach frequently used in ranking stochastically-generated observations is stochastic domi- nance. An explanation of the theo- retical framework supporting stochastic dominance as a decision criteria is in Appendix A. Stochas- tic dominance uses paired com- parisons to identify strategies pre- ferred by persons with different attitudes towards risk. In this study, a particular type of stochas- tic dominance approach, known as stochastic dominance with respect to a function (SDRF), was in the ranking process. SDRF permits identification of preferred strate- gies over differing ranges of risk preference levels (Meyer 1977a). Five intervals were chosen for anal- ysis to permit identification of opti- mal strategies for farm managers with different risk preferences. These intervals were: (1) risk pre- ferring, with Pratt coefficient bounds of -0.0003 and 0.0; (2) risk neutral, with coefficient bounds of 0.0; (3) risk averse, with coefficient bounds of 0.0 to 0.0003; (4) risk preferring and risk averse (combi- nation), with coefficient bounds of -0.0001 to 0.0001; and (5) strongly risk averse, with coefficient bounds of 0.0001 to 0.0003. Results of SDRF rankings for the base scenarios are presented in Table 8. In general, the SDRF rankings “The cumulative distribution indicates the probability that returns are below a certain level. For example, in Figure 3, the probability of a NPV below zero for SSR 1/7 strategy is 0.48, or 48 percent. 19 TABLE 6. RESULTS FOR SIMULATING A 2.300 A LIBERTY COUNTY RICE-SOYBEAN FARM UNDER DIFFERENT CROP-SHARE AND CROP ROTATION STRATEGIES--BASE SCENARIO SSR Rotation SR Rotation Analysis Variables 1/2 Share” 1/7 Share 1/2 Share“ 1/7 Share Probability of Survival (%):*’ 50 82 72 78 Probability of Success l%):° 12 52 2O 40 After-Tax Net Present Value($):“ Mean -207,167. -23,183. -132,641. -52,266. Standard Deviation 188,318. 213,605. 177,131. 193,744. Maximum 225,998. 456,226. 250,238. 350,701. Minimum -531,767. -478.900. -490,366. -487,218. Mean Ending Equity Ratio (Surviving Iterations): 0.606 0.679 0.596 0.659 Mean Ending Equity Ratio (All Iterations): 0.381 0.586 0.473 0.555 Mean Yearly Government Payments I$II 29,820. 47,750. 44,003. 56,702. Mean Yearly Cash Farm Income ($): -25,958. 23,677. -3,459. 16,536. ‘Share for rice only; share for soybeans is 1/7. “Probability of survival is the probability that the farm will maintain its equity ratios at greater than minimum levels established for local financial institutions. °Probability of success is the probability of generating a positive after-tax net present value for the farm. “After-tax net present value is the present value of the net annual family withdrawals plus the present value of change in net worth over the 5-year planning horizon. varied depending on the assumed risk attitudes of the farm manager. The SSR 1/7 strategy was preferred or equally preferred for all catego- ries of decisionmakers. The SR 1/7 strategy was preferred or equally preferred with the SSR 1/7 strategy, for risk preferring and combination categories. The SSR 1/2 strategy was, in most cases, the least pre- ferred strategy. The importance of knowing an individual farmer's risk preferences is demonstrated in these results. When widely diver- gent Pratt coefficient bounds were used in the ranking process (imply- ing little knowledge about the indi- vidual’s risk preferences) clear-cut rankings of strategies were not possible. When the bounds were 2O very narrow (as in the risk neutral and strongly risk averse catego- ries), clear identification of pre- ferred strategies was possible. Major factors influencing the general superiority of the 1/7 share strategies in farm survival, economic success, and ending equity position are assumptions re- garding the price discount for red rice, high intermediate-term finan- cial demands, rental arrange- ments, differences in yields, and the value of diversification. The SSR rotations both benefit from higher rice prices because of the lower incidence of red rice in the rice crop. Expected yields for rice are also about 4 cwt (8 percent) per acre higher under the SSR rotation. The result is higher revenue per hundredweight of rice and an ap- proximate $0.60/cwt (or 5 percent) decrease in production costs. Government deficiency pay- ments to the tenant were much higher for the 1/7 share strategy, resulting in more cash income. Under the 1/2 share arrangement, 1/2 of total government payments went to the landowner. The result was higher per acre rents and low- er net returns for the 1/2 share operators. The government pro- gram protected all strategies from price risk, although the payment limitation was reached in some years under the SR 1/7 strategy.” As mentioned before, one im- portant risk in soybean production is high yield variability. On a per acre basis, the Federal Crop Insur- ance program protected producers operating under each strategy equally well from this risk. As a result, yield risk was not a major concern for soybean acreage. Rice yields were much less variable so yield risk was less of a concern. Major risks were associated with soybean prices (where near free market conditions prevail) and combinations of low to moderate yields and prices for soybeans and rice. Producers operating under all four strategies had to meet high levels of principal and interest pay- ments, particularly for farm ma- chinery and equipment. Under the 1/2 share arrangements, not enough profit was generated to meet these high fixed cost cash flows during a bad year. The gov- ernment program provided some protection against large losses in the operation for the 1/7 share pro- ducer, while still allowing the pro- ducer to receive most of the bene- fits from a good year. Good years tended to generate enough surplus income to meet financial obliga- tions during adverse years. In sev- zoAlthough per acre government pay- ments were less under the SR rota- tions, the larger number of rice acres caused the manager using the 1/7 share arrangement to have more total government payments and thus reach the payment limitation sooner than other strategies. \.. ‘of bad soybean prices and/or Q eral instances, insolvency occurred for the SSR 1/2 strategy as a result TABLE 7. PROBABILITY OF 2,300 A LIBERTY COUNTY RlCE-SOYBEAN FARM SURVIVING’ A GIVEN NUMBER OF YEARS UNDER DIFFERENT CROP- SHARE AND CROP ROTATION STRATEGIES - BASE SCENARIO _ — yields, even when rice prices and/ or yields were excellent. Because SSR Rotation 5R Rotation the share received by the landown- er was so large for rice acreage, Year 1/2 Share” 1/7 Share 1/2 Share” 1/7 Share soybeans became the principal CIOp f0!‘ thQ SSR l/Z and SR l/Z 1934 190 10g 1QQ 10g strategies. The 1/2 share arrange- ment seemed to counteract the 1995 78 95 92 94 principal benefit of crop diversifi- 1986 68 86 84 86 cation (i.e., risk reduction). Production and Management 1987 54 86 78 84 Sensitivity Analyses 1988 50 82 72 78 In this and subsequent sections, sensitivity analyses are presented for the four strategies examined in the base scenario. The purposes of sensitivity analyses are threefold. The first is to explore the effect of major assumptions on the results. Researchers usually have more confidence in some assumptions than others. If the model is sensi- tive to an assumption researchers are confident in, important and perhaps new recommendations ]_ can be made to other researchers and farm managers. Do changes in beginning equity position, for ex- ample, cause large changes in sur- vivability of the farm operation? 0- When the model is sensitive to an assumption researchers do not feel D_ confident in, the results can pro- vide evidence for the need to do further research in the area. A second purpose of sensitivity analyses is to address some of the ”what if. . . ” questions generated while identifying the initial set of assumptions. In the base scenario, for example, the farm manager was -<——IF¢F"—¢@D@@ZT Q assumed to participate in the gov- 9' ernment farm program for rice. What if the farmer chose not to o. participate in the farm program? Would he/she be better or worse off? Addressing ”what if. . . ” ques- tions allows examination of differ- ent farming situations and man- 9' \ \ ‘Survivability is defined as a positive net cash flow at the end of a production year with farm intermediate and long-term equity ratios above 0.33. “Share for rice only; share for soybeans is 1/7. I i I i l agement practices, assisting farm -ss0000 -as0000 -1s0000 s0000 250000 500000 managers in designing a manage- ~51 PRESENT vnLug l3) ment strategy and broadening the applicability of the study results beyond farms defined in the base LEGEND: z = SSR V2 _ = SSR v7 analysis. x = SR 1/2 Y = SR 1/7 v 1 Third, sensitivity analyses allow identification of areas of the model that may not accurately reflect the Figure 3. Net present values associated with each strategy 0f base scenario. 21 actual farming situation. If re- ducing variable production costs does not generate results different from the base scenario, for exam- ple, researchers should re-examine both the design of the model and assumptions made in the part of the model dealing with variable production costs. Sensitivity anal- yses are one way of validating the model as a research tool, as well as identifying its strengths and limita- tions in addressing research prob- lems (McCarl and Nelson 1983). Although the following sensitivity analyses are extensive, they repre- sent only a fraction of the analyses that could be performed with the model. The following analyses focus on major assumptions and potential criticisms of the model. In this section, sensitivity results are presented for variable produc- tion costs, management practices of farm managers, alternative land tenure arrangements, and effects of present and potential technolo- gy developments. Variable Production Costs The variable costs used in the study and presented in Table 3 rep- resent average production costs for farm managers of above average management ability. Suppose the farm manager could reduce his/her non-water variable production costs 1O percent below the Table 3 values, still maintaining crop yields and quality at the assumed levels. What impact would this cost reduction have on the farming op- eration? Conversely, what if the farmer were only an average mana- ger, with non-water variable costs averaging 10 percent more than the costs assumed in the base analysis? In Table 9, the results of these two sensitivity scenarios are presented for the four base strategies. A 1O percent increase in costs caused survivability to fall from 12 to 28 percentage points for the four strategies, with the impact most severe on the SR 1/7 strategy. Sub- stantial changes also occurred in probabilities of economic success and average after-tax NPV. All mean NPV values were highly negative, indicating the farmer would be better off to liquidate 22 TABLE 8. PREDICTED PREFERENCE FOR CROP ROTATION AND TENURE ARRANGEMENT STRATEGIES - BASE SCENARIO Risk Preference Class“ Preference Risk Risk Risk Strongly Sets Preferring Neutral Averse Combination Risk Averse Most” SSR1/7 SSR1/7 SSR 1/7 SSR 1/7 SSR 1/7 SR 1/7 Second SR 1/7 SR 1/7 SR 1/7 SSR 1/2 SR 1/7 SR 1/2 SR 1/2 Third SSR 1/2 SR 1/2 SSR 1/2 SR 1/2 SR 1/2 Fourth SSR1/2 SSR 1/2 “Risk aversion coefficients were (—0.0003 to 0.0) for risk preferers, (0.0) for risk neutral, (0.0 to 0.0003) for risk averters, (-0.0001 to 0.0001) for combination preferences, and (0.0001 to 0.0003) for strong risk averters. The results were quite robust to changes in the risk aversion coefficients values (McCarl and Bessler 1986). “The second most preferred set is developed assuming the strategies in the most Next strategies in sets one and two were preferred set were not available. excluded when selecting strategies for the third most preferred set, and so on. Two or more strategies appear together when they are equally preferred; that is, neither strategy dominates the other over the entire range of the risk preference class. farm assets and invest those assets off the farm when costs are 1O per- cent above the base level. Ending equity positions for solvent itera- tions also deteriorated, although the change was not as pronounced as with other evaluation criteria. The 10 percent decrease in costs generally resulted in a stronger change from the base results than the 1O percent increase. Survivabil- ity improved by 12 to 32 percentage points for all expected probabilities of survival, exceeding 82 percent in all instances. Both 1/7 share strate- gies generated a positive after-tax average NPV, with a substantial improvement in average NPV and average ending equity position oc- curring for all four strategies. Although the effect of cost changes differed among strategies, strategies utilizing 1/2 share ar- rangements tended to be less af- fected by cost increases because some of the increases were ab- sorbed by the landowner. Changes in costs would also have a greater impact on the SR strategies, since the cost of rice production is higher than that of soybean production, with a notable exception being the SSR 1/2 strategy when costs de- creased 1O percent. For this strategy, large gains were obtained in survivability, and NPV results, because of the extra cash flow cush- ion provided by lower production costs. In years of below average, but not disastrous, prices and yields, the additional cash flow was sufficient to ensure another year of farm survival. Water Costs Three different scenarios were examined in the area of water costs: (1) water costs were reduced to $40/A and $10/A for first and ratoon crop rice, respectively; (2) the infla- tion rate for water was increased from 4.5 to 7 percent per year (i.e., a 5O percent increase); and (3) wa- ter costs were increased to $100/A and $25/A for first and ratoon crop rice, respectively, with a 7 percent inflation rate for water also as- sumed. These scenarios compare with the base scenario in which water costs were $68/A for first crop and $14.45/A for ratoon rice. These water costs represent the extremes for the Liberty County area (Griffin, Perry, and McCauley 1984). Results for these three * ' scenarios are given in Table 10. TABLE 9. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - CHANGES IN NON-WATER COSTS 10% Increase In Costs 10% Decrease In Costs Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR1/7 SR 1/2 SR 1/7 Probability of Survival I%I: 38 48 50 82 94 90 94 Change from Base: -12 —20 -24 -28 +32 +12 +18 +16 Probability of Success I%I: 8 8 20 48 78 56 80 Chan e from ase: -4 -26 -12 -20 +36 +26 +36 +40 Mean NPV ($): -267,653. -132,883. -224.613. -195,197. -57,868. 143,638. -669. 127,636. ange from Base: -60,486. -109,700. -91,972. -142,931. +149,299. +166,821. +131,9_72. +179,902. \ Mean Ending Equity Ratio (CSholvent Iterations): 0.561 0.638 0.570 0.594 0.651 0.772 0.672 0.763 ange ' from Base: -0.045 -0.041 -0.026 -0.065 +0.045 +0.093 +0.076 +0.104 Mean Yearly Cash Farm Income ($): -44,395. -5,836. -27,336. -25,638. 15,356. 69,653. 33,247. 67,666. Change from Base: -18,437. —29,513. -23,877. -42,174. +41,314. +45,976. +36,706. +51,130. See Table 6 for definition of the analysis variables. Because water costs are paid by the landowners under 1/2 crop-share arrangements, the analysis was limited t0 strategies employing the 1/7 crop-share arrangement. Reducing water costs had a sig- nificant effect on both 1/7 share strategies, particularly on the SR 1/7 strategy. Probabilities of survi- val and success and ending aver- age equity position for the SR 1/7 strategy actually exceeded corre- sponding values for the SSR 1/7 strategy. The stochastic dominance rankings also changed, with the SR 1/7 strategy being preferred by all risk neutral and extremely risk- preferring individuals, and co- preferred with SSR 1/7 in the other three risk classifications. Very little change resulted from an increase in the inflation rate for water. By 1988, the higher inflation rate had made only a $9/A dif- ference in water costs. The effect of increased inflation would be great- er if the study horizon were ex- tended to a 10- or 15-year period. An extreme case was examined in the third situation. The effect of $100/A water costs with a 7 percent per year inflation rate was to great- ly reduce almost all analysis vari- ables. In the SR 1/7 strategy, proba- bility of survival was reduced by more than half and probability of success to 10 percent. The prospect for long-term farm survival (should the manager using the SR 1/7 strategy survive until 1988) was not good, with the ending equity ratio for surviving iterations falling by almost 0.08 from the base results. The SSR 1/7 strategy also suffered a substantial decline in survivability, success, and N PV, although not as severe as occurred for the SR 1/7 strategy. Stochastic dominance rankings changed a great deal as a result of the higher water costs. The SR 1/2 strategy was preferred by all risk- neutral and risk-averse individuals and co-preferred with the SSR 1/7 strategy for risk-preferring indi- viduals. The SR 1/7 strategy be- came the least preferred strategy for most risk categories. It can be concluded from the results pre- sented in Table 9 that the cost of water is an important variable to consider when deciding on a ten- ure arrangement or crop rotation. The 1/2 share arrangement pro- vides protection to the farm mana- ger from high water costs. Management Practices Three scenarios were examined under the general heading of man- agement practices: (1) reducing ra- toon acreage from 25 percent of total acreage to none, (2) reducing labor hours available from each full-time employee by 100 hours per month, and (3) reducing red rice present in the SR rotation from 2.5 to 1.5 percent. Results for these scenarios are summarized in Table 11. Eliminating ratoon acreage had very little overall impact on the results. The most surprising result of this scenario occurred under the 1/7 share strategies, where elimina- tion of ratoon acreage actually re- sulted in an improvement in the mean yearly cash farm income. The cost-sharing component was prin- cipally responsible for this result. Major additional costs incurred to produce ratoon rice were water, fertilizer, and chemicals. All of the water costs and approximately half of the fertilizer and chemical costs were paid by the landowner under the 1/2 share arrangement, while none of these costs were paid by the landowner using a 1/7 share arrangement. As a result, average returns to the farmer for ratoon rice were positive under the 1/2 share arrangement and negative under the 1/7 share arrangement. In both cases, however, the effect of ratoon rice on the representative farm op- 23 TABLE 10. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - CHANGES IN WATER COSTS AND WATER INFLATION RATES 100/A Water $40/A Water Cost 7% Water Inflation and 7% Inflation Analysis Variables SSR 1/7 SR 1/7 SSR 1/7 SR 1/7 SSR 1/7 SR 1/7 Probability Survival (%): 90 90 82 76 54 38 Change from Base: +8 +12 0 -2 -28 -40 Probability Success (%): 64 68 52 34 26 10 Change from Base: +12 +28 0 -6 -26 -30 Mean NPV I$II 61,851. 65,216. -31,866. -68,036. -162,184. -247,214. Change from Base: +85,034. +117,482. -8,683. -15,770. -139,001. -194,948. Mean Ending Equity Ratio (Solvent Iterations): 0.717 0.724 0.669 0.648 0.654 0.581 Change fron1Base: +0038 +0065 -QO10 -0011 -0025 -0078 Mean Yearly Cash Farm Income ($I: 46,812. 49,548. 20,656. 12,756. -12,499. —38,275. Change from Base: +23,135. +33,012. —3,021. -3,780. —36,176. -54,811. See Table 3 for base water prices and Table 1 for base inflation rates. eration was small. Above average labor efficiency was assumed in the base analysis to be the result of above average managerial ability. Reducing avail- able labor hours for each full—time employee (and increasing part- time labor requirements as a re- sult), however, had little impact. After-tax NPV’s were reduced for all strategies examined, but the probabilities of survival and economic success generally did not change, indicating the base results were not sensitive to the assump- tions made concerning labor sup- ply and demand. In the final scenario, red rice was reduced to 1.5 percent in the SR rotations. The reduction in red rice halved the market price discount for rice produced under the SR rotation and eliminated the differ- ential between SSR and SR loan rates and target prices. The values for the analysis variables increased under this scenario for both strate- gies, particularly for the SR 1/7 strategy. In the stochastic domi- nance analysis, one or both of the 1/7 share strategies were preferred 24 at all risk preference intervals. The amount of red rice present in the rice crop, therefore, was an impor- tant variable in the study results and was partly responsible for pre- venting the SR 1/7 strategy from dominating the base scenario. Tenure Arrangements In the base scenario, two crop- share arrangements common to the Upper Gulf Coast area were compared. Many different ar- rangements are available to farm- ers, however, including other share arrangements, cash rent, and ownership of all or part of the farm. In this section, the analysis of ten- ure arrangements is extended to include cash rental arrangements and land ownership. In addition, the effect of reducing the landown- er*s share in the base crop-share arrangements is also examined. Finally, the roles are reversed and optimal strategies for the landown- er are identified. Land Ownership Two scenarios were examined for land ownership, both maintain- ing farm size at 2,310 A. In the first scenario, the farm manager owned 1,160 A of the farm and leased the remaining 1,150 A. In the second scenario, the manager owned all\ 2,310 A. In both scenarios, all other assets were held constant. The overall beginning equity ratio for both scenarios was the same as in the base analysis (i.e., 0.60). NPV discount rates were calculated us- ing the methodology detailed on page 11. A 9.25 percent discount rate was used in calculating after- tax N PV figures for the part-owner, while a 8.97 percent rate was used for the fully-owned farm. Results for these scenarios are presented in Table 12. Results from both scenarios were different from the base re- sults. On one hand, probabilities of survival were 100 percent for all strategies, an increase of as much as 50 percentage points above base results. Probabilities of success also increased for the 1/2 share strate- gies. On the other hand, average after-tax N PV and yearly net cash farm income figures fell for most strategies. Net cash farm income, in particular, declined by large amounts for both 1/7 share strate- gies. Mean ending equity ratios for solvent iterations were also re- duced, but the equity ratios were higher for the part-owner strate- gies when insolvent iterations were included. Since probabilities of survival were 100 percent for all strategies, the mean ending equity ratio for solvent iterations includes those iterations declared insolvent for the tenant because of low prices and yields. A comparison between mean equity ratios for all iterations provides a more accurate picture of the situation indicating the part- owner fared better than the tenant. Despite the large negative aver- age net cash farm income, the part- owner farm operation maintained an equity position close to the ini- tial position because of the high capital gains rate on land.” The greater improvement in the part- zlRecall that a 7.1 percent per year capital gain rate on land was assumed in the base analysis because of the study area's location relative to the Houston metropolitan area. TABLE 11. SENSITIVITY ANALYSES MANAGEMENT PRACTICE gOR LIBERTY COUNTY RICE AND SOYBEAN FARM - EFFECTS OF SELECTED Reduce Red Rice A I _ No Ratoon Acreaqe Poor Labor Manaqement to 15% na ysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR1/7 SR 1/2 SR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 50 82 72 78 50 80 68 78 8O 84 Change from Base: 0 0 0 0 0- -2 -4 0 +8 +6 Probability of Success (%I: 12 52 20 42 10 52 20 40 32 58 Change from Base: 0 0 0 +2 -2 0 0 0 +12 +18 g/lhean NPVI$I: —211,862. —23,586. 138,366. —51,014. —216,516. —35,302. -144,175. -58,491. -101,587. -4,320. ange from Base: -4,695. -403. —5,725. -1,252. -9,349. -12,119. -11,534. —6,225. +31,054. +47,946. Mean Ending Eguity Ratio: 0.600 0.683 0.589 0.662 0.591 0.672 0.591 0.649 0.603 0.686 ange from Base: —0.006 +0.004 —0.007 +0.003 -0.015 -0.007 —0.005 -0.010 +0.007 +0.027 Mean Yearly Cash Eirm Income I$I: -26,011. 25,065. -3,667. 19,113. -29,488. 20,252. -6,777. 14.746. 5.141. 29,940. ange from Base: —53. H.388. —208. +2,597. -3,530. -3,425. —3,318. -1,790. +8,600. +13,404. See Table 6 for definition of the analysis variables. owner 1/2 share strategies over base results was because of higher land rent cost paid when renting the land and using a 1/2 share ar- rangement versus purchasing the land (with 40 percent of the land value still under mortgage). This conclusion can be clearly seen when comparing the full- ownership results with those from the base. When comparing base results with those for full-owners, average NPV for the SSR 1/2 strategy was almost $85,000 more than SSR full- owner strategy, but the SSR 1/7 strategy’s NPV was $100,000 less than the SSR full-owner strategy. Similar results occurred for the SR strategies. Superior performance of the 1/7 share strategies suggests that, if the farm manager were in- terested in maximizing returns to investment, he/ she would be better off selling land and leasing it back under a 1/7 share arrangement. Selling land would provide capital for farm expansion, thereby al- lowing the manager to take advan- tage of returns to scale benefits. Such a strategy would, however, also increase the risk of farm insol- vency. a‘ Stochastic dominance results ‘ were not as distinct for the part- owner as in the base analysis. The TABLE 12. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - PART-OWNER AND FULL-OWNER TENURE SCENARIOS 50% Owned - 50% Leased 100% Qwned’ Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 SSR SR Probability of Survival (%l: 100 100 100 100 100 100 Change from Base: +50 +18 +28 +22 Probability of Success (%): 18 38 22 34 32 34 Change from Base: +6 -14 +2 -6 Mean NPV ($): -159,284. -82,577. -140,'189. -93,535. -123,039. -119,508. Change from Base: +47,883. -59,394. -7,548. -41,269. Mean Ending Equity Ratio (Solvent Iterations): 0.584 0.617 0.594 0.614 0.675 0.677 Change from Base: -0.022 -0.062 -0.002 —0.045 Mean Yearly Net Cash Farm Income ($): -28,590. -5,702. -19,626. -6,388. -14,007. -9.688 Change from Base: -2,632. —29,379. -16,167. -22,924 Mean Ending Equity Ratio (All Iterations): 0.584 0.617 0.594 0.614 0.675 0.677 Change from Base: +0.203 +0.031 +0.121 +0.059 See Table 6 for definition of the analysis variables. a No ”Change from Base" values are presented for these scenarios inasmuch as there are no comparable scenarios in the base scenario. 25 TABLE 13. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN SSR 1/7, SR 1/2, and SR 1/7 strate- FARM - CASH RENTAL ARRANGEMENTS gies were all co-preferred in the combination and risk averse risk classifications. The SSR 1/7 strategy SSR Rotation SR Rotation \ $30lA $40/A dominated in the risk neutral and Analysis Variables $20/A $30/A $40/A $20/A risk preferring classifications, 3nd Probability the 5R 1/ 7 Strafegy 0mm“? _ 1n of Survival 1%); 90 74 50 90 78 52 the extremely risk averse classifica- tiOIL Probability ( ) 8 of Success %: 68 56 28 72 60 2 Cash Rental Arrangements After-tax Net Three cash rental arrangements Present Valuer were exammed m the analysls: Mean (s) 104,315. -19,178. -188,728. 112,820. -5,401. -181,275. (1) $20M’ (2) $30M, and (3) $40/A- Standard Deviation 231,084. 249,279. 252,079. 213,451. 218,178. 230,898. Almost one-half of the 1982 cash Maximum 808,878. 525,835. 430,921. 547,284. 457,557. 380,593. rented aereage in the Texas Rice Minimum -455,988. -528,723. -597,458. -438,427. -488,848. -537,519. Belt was obtained for $20 to $40/A Mean Ending Equity Ratio (Griffin et al. 1984). Average cash (Solvent Iterations): 0.755 0.718 0.887 0.780 0.898 0.848 rent was 29.30/A. Cash rents used 'n th aial sis therefore were Mean Ending Equity 1 e _Y I I Ratio (All Iterations): 0.898 0.574 0.395 0.701 0.587 0.397 representative of land rental costs in the rice-producing region. Re- M83" YearlY Ne‘ Cash Farm Income ($): 58,137. 23,708. -16,251. 61,418. 21,674 -17,877. sults for the three cash rent scenarios are given in Table 13. It comes as no surprise to find that lowering rents improved sur- vival, success, and ending equity position. A comparison between the SSR and SR rotation strategies, however, reveals that the SR rota- tion strategies generated virtually identical probabilities of survival and average after-tax N PV’s as the SSR strategies. The choice between rotations, then, does not seem im- portant from a risk management standpoint since neither rotation seems to reduce risk more than the other. Comparison of stochastic domi- nance rankings between cash rent and base results demonstrated that the $30/A cash rent strategies were roughly co-preferred with the base share rent results for most risk classes. The $30/A cash rent strate- gies tended to rank above base results for risk preferring persons and below base results for risk averse persons. The $20/A cash rent strategies were preferred over all base strategies, but the $40/A strategies were generally not pre- ferred to the base strategies. Riski- ness of the cash rent strategies rela- tive to crop-share strategies can be seen in a comparison of the SSR 1/7 and SSR $30/A strategies. The SSR $30/A strategy averaged about $4,000 more in after-tax NPV but had a probability of survival that 26 See Table 6 for definition of the analysis variables. was 8 percentage points lower than the SSR 1/7 strategy. A comparison between the SSR 1/2 and SSR $40/A strategies yields more impressive results. The SSR $40/A strategy offered an average after-tax N PV that was $40,000 more than the SSR 1/2 strategy, yet both strategies offered the same probability of survival. The use of the 1/2 crop-share rental arrange- ments reduces the probability of farm insolvency when incomes are the same. The value of share- arrangements in reducing risk are quantified in a later section of the report. Reducing Land0wner’s Rental Shares Although the 1/7 and 1/2 share arrangements are examined in the base scenario, they are not the only arrangements used for rice and soybeans in the study region. Grif- fin et al. (1984) found 1/6, 1/8, 1/9, and 1/10 are also common crop- share arfangements for rice. The particular crop-share arrangement used depends on many factors in- cluding land quality, size of acreage being leased, relative bargaining positions of tenant and landowner, and traditional arrangements used in the area. In this sensitivity scenario, the landowner’s share of the rice crop was reduced from 1/7 to 1/10 and from 1/2 to 45 percent. The land- owner’s share arrangement for soybeans was reduced from 1/7 to 1/ 10 for all strategies. Changing the 1/7 arrangement to a 1/10 arrange- ment results in the manager receiv- ing 4.2 percent more of the crop, a smaller change than the 5 percent increase when moving from the 1/2 arrangement to the 45 percent ar- rangement. The larger increase was made recognizing the inferior- ity of the 1/2 arrangement to the 1/ 7 arrangement in the base solution from the farm manager's perspec- tive. Results are reported in Table 14. Small changes in the crop-share rental arrangements caused large changes in analysis variables. Probabilities of survival increased to 80 percent or more for all strate- gies, with large increases noted for 45 percent share strategies. Proba- bilities of success increased by more than probabilities of survival. All strategies except the SSR 45 percent generated positive average after-tax NPV’s. Average ending equity ratios for solvent iterations . also registered significant gains for all strategies. K l/v TABLE 14. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - REDUCTION IN CROP-SHARE LAND RENTAL ARRANGEMENT Analysis Variables SSR 45%” SSR 1/10 SR 45%‘ SR 1/10 Probability of Survival (%): 80 90 88 90 Change from Base: +30 +8 ‘+16 +12 Probability of Success (%): 46 64 62 7O Change from Base: +34 +12 +42 +30 Mean NPV ($): -69,250. 85,144. 20,278. 87,400. Change from Base: +137,917. +108,327. ‘#152,919. +139,666. Mean Ending Equity Ratio (Solvent Iterations): 0.644 0.734 0.692 0.746 Change from Base: +0.038 +0.055 +0.096 +0.087 Mean Government Payment Received ($): 34,097. 49,502. 46,416. 58,290. Change from Base: +4,277. +1,752. +2,413. +1,588. “Share for rice only; share for soybeans is 1/10. See Table 6 for definition of the analysis variables. Although shares were not re- duced by equal amounts for all four strategies, SDRF rankings between strategies did not change from the base scenario. It is interesting, however, to compare the SSR re- duced share strategies with those in the base scenario. The SSR 45 percent and SSR 1/7 strategies gen- erated roughly the same probabili- ties of survival and success and average ending equity ratios, with average NPV and SDRF results favoring the SSR 1/7 strategy. The closeness of results does suggest, however, that the farm manager may be more or less indifferent between the two strategies. Landowners Perspective The base analysis was conducted under the assumption the farm manager had a choice of four possi- ble crop rotation-tenure arrange- ment strategies and that the opti- mal strategy could be implemented by the farm manager. In the case of the tenure arrangements, this as- sumption implicitly assumes the landowner has no voice in the ten- ure decision. In fact, tenure ar- rangements are a result of negotia- tion between tenant and landown- er, with the landowner often dictat- ing the rental terms. In most theo- retical models, the landowner is assumed to make the tenure deci- sion, choosing an arrangement that gives the farmer just enough to entice him/her to rent the land (Sutinen 1975; Cheung 1969). Based on theoretical research above, examining the four strate- gies from the landowner’s view- point is also important. In this sec- tion, the base results from the land- owner’s perspective are pre- sented. As part of this sensitivity analy- sis, several assumptions were made about the landowner. All acreage leased by the farm mana- ger was assumed to be owned by one landowner. The landowner in- herited the farm and in 1984 owned the land, worth $1,200/A, free of any debt. The landowner had an off-farm income of $40,000/year and used $30,000 to $45,000 of his/her on- and off-farm incomes for family living expenses. An after-tax discount rate of 7.32 percent was used in NPV calcula- tions. The landowner was 45 years old, married, with three children. Analysis results for the land- owner are presented in Table 15. Probabilities of survival were 100 percent for all four strategies, a result that was not surprising giv- en the initial debt-free position of the landowner. 22 After-tax N PV fig- ures were positive for all 50 itera- tions of each strategy, because the capital gains rate for land (7.1 per- cent) plus returns to land from farming exceeded the 7.32 percent discount rate. A graph of the N PV figures for all four strategies is giv- en in Figure 4. Given the 100 percent probabili- ties of survival and success, the major difference between strate- gies was the amount by which each strategy exceeded the desired rate of return. The 1/2 share arrange- ments offered an expected return to the landowner nearly double that offered by the 1/7 share ar- rangements. The SR cropping strategies for each share arrange- ment generated higher returns than the SSR rotation strategies for corresponding share arrange- ments. In comparing tenant and land- owner results, areas of both har- mony and disagreement can be found. The best strategy for the tenant (SSR 1/7) was the worst for the landowner. The 1/7 strategies were preferred by the tenant, the 1/2 strategies by the landowner. If tenant and landowner agreed to follow the 1/7 share arrangement, conflict would still arise over the best rotation. If both agree to fol- low the 1/2 share arrangement, however, both would prefer the SR rotation. The 1/2 share arrangement is not always practical for some landown- ers, since it requires substantial in- volvement in the farming opera- ZZWhen debt was increased to 50 per- cent of assets (i.e., a 0.50 equity ratio) probability of survival remained 100 percent. NPV results were lower, however, as returns were used to service debt. Rankings among strate- gies did not change. 27 TABLE 15. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - BASE RESULTS FROM LANDOWNER'S PERSPECTIVE Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%l: 100 100 100 100 Probability of Success (%): 100 100 100 100 After-Tax Net Present Value($): Mean 419,538. 181,023. 484,670. 230,223. Standard Deviation 68,584. 31,145. 83,661. 32,046. Maximum 594,517. 257,754. 658,389. 300,275. Minimum 263,035. 109,097. 294,730. 152,585. Mean Ending Equity Ratio (All Iterations): 1.0 1.0 1.0 1.0 Mean Yearly Government Payments I$): 32,039. 9,163. 44,871. 13,386. Mean Yearly Cash Farm Income (Si): 134,628. 73,432. 151,515. 86,714. See Table 6 for definition of the analysis variables. tion. Nevertheless, about 5O per- cent of the 1982 Texas share- cropped rice acreage utilized the 1/2 share arrangement (Griffin et al. 1984). Assuming these results hold in general for Texas rice farms, it appears that landowners in many cases make the final decision con- cerning the type of share arrange- ment used. This supports assump- tions made in theoretical models of tenure arrangements. Effects of Technology Effects of current and potential technology are examined next. Three major technological issues were identified as particularly rele- vant to Upper Gulf Coast farm managers: (1) increasing ratoon rice yields or quality, (2) the effect of Lemont, and (3) irrigating soy- beans. Ratoon Rice In the base scenario, average ra- toon rice yields increased 1 percent per year throughout the 5-year study period, resulting in a 32-lb increase in yields from 1984 to 1988. The small annual rate of yield increase was based on the assump- tion Lemont would have no effect 28 on ratoon rice yields. In this scenario, Lemont (or some other new technology) was assumed to have a significant impact on ratoon yields, with a yield increase of 200 lb occurring from 1984 to 1988. Costs of production were assumed to remain the same as a result of the additional yield. Results are pre- sented in Table 16. Although ratoon yields in- creased 25 percent, the increase had almost no impact on the sen- sitivity results. This outcome was partly because of the gradual phas- ing in of the yield increases, the full benefits realized only in the last year of the study period. For the most part, however, the small change in results was because of the relatively small role ratoon rice had in the farming operation and the small profits generated from each acre of ratoon rice. For the representative farm, ratoon rice av- eraged less than 8 percent of gross farm revenues under the SSR rota- tion and less than 6 percent of revenues under the SR rotation. In additionmbecause of the high costs of production, each acre of ratoon rice in 1984 generated an average net return above variable costs of less than $4/A. Because of these factors, increasing ratoon rice yields had little impact on the re- sults.” A similar result was obtained in a sensitivity analysis involving ra- toon rice quality. In the base scenario, ratoon rice was discount- ed 7 percent below first crop rice because of quality factors. One might assume this price differential could be eliminated through varietal selection, improved man- agement, better weed control, etc. In this sensitivity scenario, the price differential between first crop and ratoon rice was eliminated completely for all four strategies. As reported in Table 16, the change in quality had little impact on re- sults. This result was because of the relatively small role ratoon rice played in the overall farm opera- tion. Effect 0f Lemont In the base scenario, the Grant, Beach, and Lin (1984) rice econometric model accounted for the effect of Lemont on rice sup- plies when generating mean rice prices. To test the price impact of widespread Lemont adoption, the simulation was repeated assuming that Lemont was not widely adopt- ed in the South. The result indi- cated a difference between the Lemont—influenced price and the price assuming no Lemont price effect, a difference that increased over time to a maximum level of $0.35/cwt in 1988. The increased difference between prices was caused by increased Lemont acre- age in the South over time. Two scenarios were examined in connection with Lemont: (1) What was the effect of the negative price differential on base results? and (2) Given the positive increases in yields, increases in production costs, and the negative impact on prices, has development of Lemont made the farm manager better or 23An additional analysis was per- formed with ratoon yields increasing 450 lb over the base scenario. Little change occurred in the results, with probabilities of survival remaining ' unchanged for all four strategies. ‘e 4Q ‘i worse off? Results for these two 1 - analyses are found in Table 17. Eliminating the negative price ef- rect caused almost no change in the results. Probabilities of survival did not change for three strategies 9- and probabilities of success changed by two percentage points O or less for three strategies. . Changes in N PV and ending equity I ratio were also small for most strat- egies. Two explanations account for this insensitivity. First, the price differential, although $0.35/cwt in 1988, averaged less than $0.21/cwt for the entire 5-year study period. More importantly, however, reve- nues lost as a result of the price 0- effect were almost totally replaced by increased deficiency payments from the federal government. The price effect was most severe for the SR 1/7 strategy because this was the O - only strategy that sometimes reached the $100,000 government —<—I>—~I’_~—+@II@QX'U (D Ono I payment limitation imposed in the model. The other strategies never reached the payment limitation in any of the base simulation itera- tions. In examining the scenario in which Lemont was assumed to not have been developed, there is no doubt that farmers are better off with Lemont. Without Lemont, probabilities of survival declined as —l00000 LEGEND: tive. TABLE 16. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - TECHNOLOGY CHANGES IN RATOON RICE PRODUCTION 100000 *ru II II 300000 SSR 1/2 SR 1 /2 Y 500000 NET PRESENT VFILUE l$l SSR 1 /7 SR 1/7 I 700000 I 900000 Figure 4. Net present values associated with each strategy— landowners perspec- lncrease Ratoon Yields Improve Ratoon Rice Quality Analysis Variables SSR1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival l%): 50 82 72 78 50 82 70 78 Change from Base: 0 0 0 0 0 0 -2 0 Probability of Success (%): 12 52 20 40 12 52 20 40 Change from Base: 0 0 O 0 0 0 0 0 Mean NPV ($): —206,002. —20,567. -129,931. -47,695. -205,471. —20,291. -136.486. -48,377. Change from Base: +1,165. +2,616. +2,710. +4,571. +1,696. +2,892. -3,845. +3,889. Mean Ending Equity Ratio gsholvent Iterations): 0.608 0.682 0.598 0.661 0.609 0.682 0.595 0.662 ange from Base: +0.002 +0.003 +0.002 +0.002 +0.003 +0.003 —0.001 +0.003 Mean Yearly Cash Ezrm Income ($): -25,778. 24,143. -3,117. 17,234. -25,509. 24,448. -4,707. 17,373. ange from Base: +180. +466. +342. +698. +449. +771. —1,248. +837. I See Table 6 for definition of the analysis variables. 29 TABLE OF LEMONT RICE VARIETY 17. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - EVALUATION No Lemont Price Effect Lemont Not Developed Analysis Variables SSR1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 52 82 72 78 34 52 44 42 Change from Base: +2 0 0 0 -16 -30 ~28 -36 Probability of Success (%): 12 54 22 52 8 18 8 8 Change from Base: 0 +2 +2 +12 —4 -34 -12 -32 gllheaannggPV l$lt -201,298. —17,725. -125,796. —34,674. -284,487. -187,056. -240,223. -241,161. from Base: +5,869. +5,458. +6,845. +17,592. -77,320. -163,873. -107,582. -188,895. Mean Ending Equity Ratio gSholvent Iterations): 0.607 0.684 0.601 0.677 0.546 0.625 0.552 0.544 ange from Base: +0.001 +0.005 +0.005 +0.018 —0.060 -0.054 —0.044 -0.115 Average Yearly (Cikovernment Payments ($): 28,358. 44,999. 41,531. 53,335. 28,552. 44,088. 40,652. 54,591. ange from Base: —1,462. -2,751. —2,422. -3,367. -1,268. ~3,662. —3,351. -2,111. See Table 6 for definition of the analysis variables. much as 30 percentage points for the four strategies, with average after-tax NPV’s falling by over $160,000 for the two 1/ 7 share strat- egies. The assumption that the farm manager was an above aver- age manager was an important fac- tor in this result. The farm manager adopted the Lemont variety more quickly than other farmers (100 percent of all rice acreage in 1986 for the manager, versus 40 percent for the South as a whole). Conse- quently, he/she was able to benefit from the positive yield increases before the negative price effects were felt. Because the government commodity program shielded the manager from negative price ef- fects, the farmer benefitted greatly from the development of Lemont. The results also illustrate the em- phasis farmers should make on keeping abreast of and quickly adopting new technology in order to remain competitive in agricul- ture. Irrigated Soybeans Uncertainty associated with tim- ing and amount of rainfall is a serious problem for soybean pro- ducers in the Upper Gulf Coast region. Irrigation is the principal method available to ensure ade- quate supplies of water to the 30 plant, greatly reducing drought- induced plant stress and associated lower crop yields. Despite availa- bility of irrigation to reduce yield risk, few farm managers currently irrigate soybeans in the Upper Gulf Coast region. Three types of irrigation delivery systems could be used to irrigate soybeans. Field flushing, similar to flushing rice, allows levees to be left in the field but requires a preci- sion—levelled field to ensure uni- form water application. Furrow irrigation requires development of a system that delivers water to each furrow, requiring the elimination of levees. The third type of delivery system, sprinkler irrigation, does an excellent job of delivering water to the soybean crop, but requires an expensive capital investment and may not be feasible for rice irrigation. In this analysis, the potential for irrigated soybeans was examined for the representative farm. The representative farm was assumed precision-levelled; therefore, flush irrigation was the least cost ap- proach. Water was assumed availa- ble from the local canal company at a cost currently charged for flush- ing rice fields ($8/A). Two irriga- tions were used on the soybean crop, the first in late Iuly and the second in August. Labor demands were increased accordingly in Iuly and August. Non-water produc- tion costs were increased by $6.32/A, mostly because of slightly higher fertilizer and harvesting costs. Yield distributions for irrigated soybeans were developed by Sij (1984). Plots of the distributions for irrigated soybeans following rice and non-irrigated soybeans follow- ing rice are given in Figure 5. The distribution for irrigated soybeans was narrower, reflecting the ad- vantage of irrigation in reducing yield variance. In addition, expect- ed yield for irrigated soybeans fol- lowing rice and irrigated soybeans following soybeans increased about 45 percent to 34 and 33.5 bu/A, respectively. Results for the irrigated soybean scenario are given in Table 18. All four strategies gained tremen- dously from irrigating soybeans. Probabilities of survival exceeded 86 percent for all strategies, with average NPV also positive in all four cases. The SSR 1/2 strategy benefitted most and the SR 1/2 strategy least from soybean irriga- tion. Soybean irrigation for the rep- resentative farm definitely seems profitable, given the assumptions made about yields and production \ .3) costs. The results also suggest another reason for the poor per- formance of the SSR 1/2 share strategy in the base was its high dependence on soybeans to gener- ate profits to keep the farm in busi- ness. When soybeans became more profitable as a result of irriga- tion, those strategies most depen- dent on soybeans realized the greatest gain in survivability and NPV In SDRF rankings, however, the SSR 1/7 strategy remained the prefered strategy for all but the combination risk preference classification, when the SSR 1/7 and SR 1/7 were the co-preferred strategies. An important point is that the assumptions made in developing this scenario were based on a re- searcher’s expectations, not on field data or farmers’ experiences. Whether mean yields can be great- ly improved and yield variance re- duced while minimizing cost in- creases remains unknown. In par- ticular, the cost of water is an im- portant factor that must considered when evaluating soybean irriga- tion.24 The profitability of soybean irrigation as a means of partially paying for precision land levelling also remains questionable. The re- sults do suggest, however, that irri- gation may substantially help soy- bean farmers and that additional research could further quantify benefits and costs of irrigating soy- beans. Yield and Price Sensitivity Analyses The major advantage in using a farm-level Monte-Carlo simulation model in agricultural economics re- search is the ability to evaluate a farm operation in an environment of uncertainty. In RICESIM, for ex- 24When water costs for soybean irriga- tion were increased to $30/A while maintaining the same yield distribu- tion, probabilities of survival for each strategy were about the same as in the base analysis. Mean NPV figures, however, were approximately $40,000 above base results for each strategy. At higher water costs the farm manager's expected returns _ would still exceed that for non- irrigated soybeans, but risk of farm insolvency would be greater. 50- 30- 0)” 28 18 34 62 68 72 1.5 Mean -92,730. -101,995. -46,590. 40,206. 89,327. 115,665. Std.Dev. 123,823. 134,192. 221,253. 202,474. 188,011. 185,310. P(NPV>0) 24 16 48 60 68 72 2.0 Mean -106,915. -1 10,928. -51,743. 45,377. 89,528. 115,721. Std.Dev. 130,214. 157,865. 152,650. 195,968. 187,820. 185,208. P(NPV>0) 14 24 52 60 68 72 2.5 Mean -100,866. -98,574. -18,554. 43,317. 88,932. 116,584. Std.Dev. 140,775. 189,900. 210,400. 202,209. 188,981. 183,604. P(NPV>0) 16 32 52 60 68 72 3.0 Mean -123,358. -126,038. 48,346. 44,456. 89,541. 116,609. Std.Dev. 136,446. 209,058. 213,204. 202,152. 187,856. 183,560. P(NPV>0) 12 34 52 60 68 72 4.0 Mean —115,059. —106,079. —12,921. 45,060. 89,574. 117,379. Std.Dev. 149,825. 224,287. 211,203. 201,989. 187,846. 182,279. P(NPV>0) 18 40 52 60 68 72 “Maximum permitted leverage ratios. “Represents the probability of NPV being greater than zero (i.e., probability of success). TABLE 33. NET PRESENT VALUE RESULTS FOR REPRESENTATIVE TEXAS RICE AND SOYBEAN FARM WITH DIFFERENT BEGINNING EQUITY POSITIONS AND CREDIT RATIONING LEVELS-PART OWNER FARM Credit Rationing Initial Farm Equitv Positions Policies’ 0.25 0.40 0.60 0.75 0.90 1.0 1.0 Mean -211,088. -202,062. —94,965. 13,877. 153,007. 235,692. Std.Dev. 156,359. 156,941. 220,497. 204,593. 208,385. 199,790. P(NPV>0)” 10 12 38 58 78 86 1.5 Mean -211,088. -237,245. -82,838. 13,877. 153,007. 235,692. Std.Dev. 156,359. 156,570. 198,440. 204,593. 208,385. 199,790. P(NPV>0) 10 8 38 58 78 86 2.0 Mean -211,086. -260,688. -82,553. 13,877. 153,007. 235,692. Std.Dev. 156,361. 231,453. 197,814. 204,593. 208,385. 199,790. P(NPV>0) 10 10 38 58 78 86 2.5 Mean -226, 167. -226,597. -82,398. 13,877. 153,007. 235,692. Std.Dev. 140,136. 249,847, 197,524. 204,593. 208,385. 199,790. P(NPV>0) 6 12 38 58 78 86 3.0 Mean -241,496. -206,015. -82,387. 13,877, 153,007. 235,692. Std.Dev. 147,100. 242,063. 197,499. 204,593. 208,385. 199,790. P(NPV>0) 6 12 38 58 78 86 4.0 Mean -316,847. -193,439. -82,387. 13,877. 153,007. 235,692. Std.Dev. 167,680. 232,511, 197,499. 204,593. 208,385. 199,790. P(NPV>0) 6 12 38 58 78 86 ‘Maximum permitted leverage ratios. "Represents the probability that NPV will be greater than zero. 45 TABLE 34. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - DECREASES IN INTEREST RATES 2% Decrease All Rates 2% Decrease-New Loans Onlv Analysis Variables SSR1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 54 88 80 82 54 86 78 82 Change from Base: +4 +6 +8 +4 +4 +4 +6 +4 Probability of Success (%): 22 62 30 58 16 56 30 52 Change from Base: +10 +10 +10 +18 +4 +4 +10 +12 Pz/lrean NPV I$): —168,613. 27,658. -85,728. -318. -178,603. 12,233. -105,303. -26,602. an e fromgBase: +38,554. +50,841. +46,913. +51,948. +28,564. +35,416. +27,338. +25,664. Mean Ending Equity Ratio gholvent Iterations): 0.650 0.693 0.620 0.682 0.635 0.687 0.610 0.665 a froaggase: +0.044 +0.014 +0.024 +0.023 +0.029 +0.008 +0.014 +0.006 Mean Yearly Cash Ezrm Income I$I: -13,453. 36,215. 9,734. 3,0839. -17,275. 32,853. 4,490. 23,524. an e fromgBase: +12,505. +12,538. +13,193. +14,303. +8,683. +9,176. +7,949. +6,988. See Table 6 for definition of the analysis variables. serve’s decision to stabilize growth of the money supply, growth in the federal government's budget defi- cit, and uncertainty about the fu- ture level of the deficit all combined to cause real interest rates to rise to historically high levels. In the base scenario, real interest rates were assumed to remain at high levels throughout the 1984-88 study period, although rates were lower than 1983 levels. If the deficit were reduced and (or) financial in- stitutions felt more confident about the future, both nominal and real interest rates would be expected to decline. The decline in interest rates would affect agriculture in two ways: (1) Interest costs would be reduced and (2) the flow of foreign capital into the United States would decrease, causing the exchange rate to become more favorable for U.S. exporters. The more favorable exchange rate would increase overseas demand for U.S. agricultural products, thereby increasing U.S. farm prices. In this section, the sensitivi- ty of base results to a decrease in interest rates is examined for the cost side only, assuming the inter- est rate change has no effect on prices. Although this assumption is not accurate, it allows examina- tion of the interest rate effects 46 alone, without the price effects oc- curring simultaneously. In the first scenario, all interest rates listed in Table 1 were reduced 2 percentage points in each year. If pre-1984 loans were made at fixed interest rates, a decrease in the deficit would have no effect on rates for these loans. A second scenario, therefore, was also ana- lyzed, where the pre-1984 long- term and intermediate-term rates were held constant at the base levels and all other rates were re- duced 2 percentage points. Results for these scenarios are summarized in Table 34. The 2 percentage point drop in all interest rates had a significant positive impact on all four strate- gies. The strategies benefitting most from lower interest rate costs differed, depending on the analy- sis variable examined; the SR strat- egies realized the largest gains in average after-tax NPV, the SR 1/2 strategy had the largest increase in probability of survival, and the SSR 1/2 strategy realized the largest in- crease in ending equity ratio. Results were different for some strategies when the 2 percentage point reduction was limited to new loans versus being applied to all loans. Probabilities of survival were within 2 percentage points of the results when all interest rates were reduced, but changes in N PV varied 25 to 5O percent of the all- interest-rate change scenario. Results suggest that, despite about $300,000 in outstanding debt at the beginning of the simulation period, the farm manager is more sensitive to future interest rates than past rates. In this study, the farm manager was not permitted to buy land and only gradually re- placed machinery over time. The remaining reasons for borrowing new capital are for operating and refinancing to pay operating loss- es. Both are likely at work in re- ducing annual costs and increasing probability of survival. In several instances, the farm was declared insolvent in the base scenario when the farm manager's equity position was only slightly below the minimum requirement for con- tinued operation. In these anal- yses, the farm manager survived and was able to continue operation for another year because the 2 per- cent lower interest rate reduced losses enough to enable the farm manager to finance his/her losses with remaining farm equity Changes in Inflation Rates Aside from reducing the federal deficit or increasing financial in- TABLE 35. SENSITIVITY ANALYSES FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - CHANGES IN INFLATION RATES 2% Increase in All Inflation Rates 2% Increase Onlv in Cost Inflation Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival I%): 44 70 62 62 36 62 54 58 Change from Base: —6 -12 -10 -16 -14 -20 -18 -20 Probability of Success (%): 10 44 16 34 8 30 8 22 Change from Base: -2 -8 -4 -6 -4 -22 -12 -18 glean NPV ($): -229,120. —64,825. —169,290. —116,397. -279,019. -131,654. -216,012. -161,182. ange from Base: -21,953. —41,642. —36,649. —64,131. -71,852. -108,471. -83,371. -108,916. Mean Ending Equity Ratio gholvent Iterations): 0.557 0.644 0.551 0.612 0.530 0.625 0.550 0.590 an e fromgBase: -0.049 -0.035 -0.045 -0.047 -0.076 -0.054 -0.046 -0.069 Mean Yearly Cash farm Income ($): -42,366. -2,009. -25,497. -13,318. -46,990. -5,065. -24,844. -11,054. ange from Base: -16,408. -25,686. -22,038. -29,854. -21,032. -28,742. -21,385. -27,590. See Table 6 for definition of the analysis variables. stitutions’ confidence about the fu- ture, a third method to reduce real interest rates is to increase the in- flation rate. Inflation is created principally by increasing the econ- omy’s monetary base (e.g., de- mand deposits, currency, savings deposits, etc.) at a faster than nor- mal rate. In the 1980's era of high federal deficits and constant in- creases in the monetary base, infla- tion could be increased if the Feder- al Reserve financed a larger amount of the federal govern- ment’s borrowings. The effects of inflation can be harmful or beneficial to a farm manager, depending on his/her cir- cumstances. During an infla- tionary period, costs of production rise more rapidly, as do living costs. Crop prices also rise, but may not rise enough to maintain the farm manager's standard of living at pre-inflation levels. Infla- tion also weakens the exchange rate for the dollar, a positive benefit for farmers who produce export- able commodities. Overseas de- mand for U.S. farm products in- creases, raising farm price for these products. Perhaps the most impor- tant benefit of inflation is received by managers owing fixed debts to others. The effect of inflation is to reduce the real amount of fixed debt owed by the farm manager. If a farmer owed 20 percent of his/her farm's value to a bank, for exam- ple, and the value of the farm doubled because of inflation, the farmer would owe only 10 percent of the farm's value to the bank. The manager has done nothing to earn the transfer of additional equity to his/her ownership, but is wealthier as a result of inflation. In this section, the effect of a 2 percentage point increase in infla- tion is examined for the representa- tive farm. All inflation rates were increased 2 percentage points above the values shown in Table 1, with the exception of inflation for land, which was increased 3 per- centage points. In the base scenario, the capital gain rate for land was 50 percent greater than other inflation rates. The capital gain rate in this sensitivity analy- sis, therefore, was also 5O percent greater than the increase in other inflation rates. To enable examina- tion of inflation’s impacts exoge- nous of price impacts, it was as- sumed the higher inflation rates would have no effect on crop prices. To further understand the negative effects of inflation on the representative farm, a second scenario was implemented in which the 2 percentage point in- crease in inflation did not affect crop prices nor the value of farm land, buildings, equipment al- ready owned, and off-farm invest- I ments. Only the negative effects of inflation (i.e., higher production costs and living expenses) were felt in the second scenario. Results for both scenarios are presented in Table 35. The overall effect of inflation on the represent- ative farm, when only crop prices were not affected by higher infla- tion rates, was negative for all four strategies. Particularly hard hit by the effects of inflation were the 1/7 strategies. Because landowners pay part of the costs under a 1/2 share arrangement, the tenant us- ing the 1/2 share arrangement is less vulnerable to the effects of pro- duction cost inflation than when using the 1/7 share arrangement. The SSR strategies were not affect- ed as severely as the SR strategies because the average per acre cost of production across all crops was lower under the SSR rotation. In the second scenario, negative effects of inflation can be seen more clearly in the results. The small increase in inflation of production costs and family living expenses had a strongly negative effect on the farm operation. In comparing the two scenarios, however, one can see that inflation of land and machinery values resulted in defi- nite positive benefits in the first scenario. Differences in average af- ter-tax NPV between scenarios ranged from about $45,000 for the 47 SR 1/7 strategy t0 $67,000 for the SSR 1/7 strategy. A comparison be- tween mean net cash farm in- comes, however, shows little dif- ference between the two scenarios, since all positive benefits of infla- tion are gained through increasing the value of assets. The results in- dicate inflation does have substan- tial positive effects on a farm opera- tion. Had the farm manager owned a large part of the farm, the overall effect of inflation (ignoring crop price effects) probably would have been positive. In addition, favor- able impacts of inflation on crop prices may outweigh any negative effects, even if the inflation impacts on asset values are ignored. A Repeat of 1978-81 Macroeconomic Policy The previous two sections have provided a partial analysis of changes in interest and inflation rates for the representative farm. In both cases, however, crop prices were held constant. In this section, effects of changes in interest and inflation rates, including their ef- fects on prices, are examined by re- enacting 1978-81 macroeconomic policy. During most of the 1960's and 1970's, the Federal Reserve used monetary policy to stimulate the economy during recessionary periods and restrict the economy during over-expansionary periods. During 1975-77, in particular, the Federal Reserve had expanded the money supply at a very rapid rate to aid in the economy's recovery from the 1974-75 recession and to stabilize interest rates at low levels. By 1978, effects of the expanded money supply were showing in the rate of inflation. In 1978, the infla- tion rate was 7.7 percent; in 1979, 11.3 percent; and in 1980, 13.5 per- cent (U.S. Department of Com- merce 1984). With a change in 1978 of the Federal Reserve Board chairman- ship, the Board moved from a poli- cy of regulating interest rates to stabilizing the growth of the mone- tary base (The Wall Street Iournal 1984). The discount rate used by the Federal Reserve began moving upward to 7.5 percent in 1978, 10.3 48 I percent in 1979, 11.8 percent in 1980, and 13.4 percent in 1981. De- spite the high nominal interest rates, however, real interest re- mained low until 1982. During this period, the dollar was weak rela- tive to other currencies and exports of farm products reached all-time highs. In short, the 1978-81 period was characterized by high infla- tion, real interest rates, and high overseas demand for U.S. agricul- tural products. In this scenario, a repeat of 1978- 81 macroeconomic policy was im- plemented for the 1985-88 study period. Assumptions for 1984 were not changed from the base scenario. A model developed by Chambers and Iust (1982) was used to predict standard drawing rights, or exchange rates for the period. The exchange, interest, and infla- tion rates were then used in the Grant, Beach, and Lin (1984) model to predict rice prices for 1985-88. Soybean prices were assumed to move in the same proportion as rice prices. The government pro- grams were held constant through 1988 at 1984 levels. Although the exchange rate started in a stronger position in 1985 than in 1978, by 1988 it had weakened to about the 1979 level. The result of the weakened dollar and higher inflation rate on rice price was startling. Expected U.S. rice price, as predicted by the Grant, Beach, and Lin (1984) mod- el, rose to $10.49/cwt in 1985, $11.47/cwt in 1986, $12.28/cwt in 1987, and $15.82/cwt in 1988.33 The 1988 figure seems particularly large, but in the late 1970's, rice price also increased substantially above earlier levels. Both private and public projected rice carryover declined substantially in the 1985- 88 period, with total carryover fall- 33Because the farm program provisions were frozen at 1984 levels, the rise in expected price for rice and soybeans resulted in the program being much less lucrative to farm operations. Par- ticipation in the program by farmers, therefore, was assumed to drop to 50 percent by 1988. Sensitivity analyses revealed that a 20 percent versus 50 percent rate of participation had very little effect on price. ing from 51 million hundred- weights in 1984 to 36 million hun- dredweights in 1988. The frozen government programs, combined with rapid inflation, moved the rice industry into essentially a free- market position by 1988. Rice acre- age fell over time as a result of the higher inflation rate and fixed target price. The effects of higher prices, in- flation, and interest rates on the representative farm are sum- marized in Table 36. All four strate- gies fared much better under this scenario than under the base scenario. The 1/2 share strategies, in particular, realized large in- creases in probabilities of success and survival. The large gains in mean ending equity ratios were equally impressive, indicating a substantial strengthening in the fi- nancial position of all strategies. Government payments decreased as expected, reflecting the move toward a free market situation. De- spite the large change in absolute results, stochastic dominance rankings for the four strategies did not change from the base scenario. Thus, the representative farm would benefit from a repeat of the 1978-81 macroeconomic policy. Farm Program Sensitivity Scenarios Several sensitivity scenarios dealing with potential farm pro- gram options are examined in this section. In general, the policy scenarios represent potential pro- grams for rice that could be incor- porated into the 1985 or subse- quent farm bills. Scenarios were also designed to examine impacts of nonparticipation in the farm pro- gram, strict enforcement of the $50,000 payment limitation, and the current premium for long-grain rice in the loan program. Effects of altering any provisions of the cur- rent government farm program as presented here are short-term (i.e., 3 to 5 years). The limited planning horizon constrains the usefulness of the results in suggesting longer- term consequences of the policy changes. Non-Participation in Program The current farm program for ‘I, rice is voluntary, relying on mone- tary and risk reduction incentives to encourage participation. In most of the study period, 2O percent of the acreage was required as set- aside acreage to qualify for the rice loan program and deficiency pay- ments. An additional 5 percent of rice acreage was set-aside as paid acreage diversion. No acreage set- aside was required to qualify for the soybean loan. Despite the pro- gram benefits, a farm manager may consider costs of participation are too great, i.e., that he/she is better off operating outside the program. Or, the farm manager may be fun- damentally opposed to any sub- sidization of agriculture. The effect of choosing to remain out of the farm programs for rice and soy- beans is indicated in Table 37. For all four strategies non- participation in the farm programs can only be described as devastat- ing. Survivability fell below 2O per- cent for all strategies and was only 6 percent for the SR 1/7 strategy. Probabilities of economic success were zero for both SR strategies. NPV numbers for all strategies de- clined by large amounts. When the large changes in other analysis var- iables were examined, mean end- ing equity ratios for surviving itera- tions only declined by modest amounts. The mean ending equity ratio for all iterations, however, was well below the minimum re- quired for survival and was actual- ly negative for the SR 1/7 strategy. It is not surprising that the average ending equity ratios were below the 0.33 level, but the depth to which they declined suggests many iterations lost large amounts of money in the last year of opera- tion. The results suggest that a farm similar to the representative farm is very dependent on government farm programs for continued survi- val. Government payments are an essential part of the farm mana- ger’s annual cash flow. Although a similar analysis was not carried out for farms smaller than the repre- sentative farm, Smith (1982) has shown that for Southern High Plains cotton farms smaller acreage operations are more dependent on TABLE 36. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - REPEAT OF 1978-81 MACROECONOMIC POLICY IN 1985-88 STUDY PERIOD Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 78 90 90 92 Change from Base: +28 +8 +18 +14 Probability of Success (%): 56 82 72 80 Change from Base: +44 +30 +52 +40 Mean NPV ($): -1,858. 199,814. 78,927. 203,596. Change from Base: +205,309. +222,987. +211,568. +255,862. Mean Ending Equity Ratio (Solvent Iterations): 0.677 0.788 0.697 0.777 Change from Base: +0.071 +0.109 +0.101 +0.118 Mean Yearly Government Payments ($): 21,236. 32,854. 30,371. 38,584. Change from Base: -8,584. —14,896. -13,632. -18,118. v See Table 6 for definition of the analysis variables. TABLE 37. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - NO PARTICIPATION IN GOVERNMENT FARM PROGRAM Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 10 18 12 6 Change i from Base: -40 -64 -60 -72 Probability of Success (%): 0 6 0 0 Change from Base: -12 -46 -20 -40 Mean NPV I$): -373,559. -370,016. -394,456. -463,102. Change from Base: —166,392. -346,833. -261,815. -410,836. Mean Ending Equity Ratio (Solvent Iterations): 0.610 0.595 0.537 0.510 Change from Base: -0.004 -0.084 -0.059 -0.149 Mean Ending Equity Ratio (All Iterations): 0.143 0.130 0.105 -0.043 Change from Base: -0.238 -0.456 -0.368 -0.598 See Table 6 for definition of the analysis variables. 49 TABLE 38. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - STRICT ENFORCEMENT OF GOVERNMENT PAYMENT LIMITATION Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%I: 42 64 50 48 Change from Base: -8 -18 -22 -30 Probability of Success (96): 10 38 4 22 Change from Base: -2 ~14 -16 -18 Mean NPV ($I: -237,634. -117,176. -222,470. -186,758. Change from Base: -30,467. -93,993. -89,829. -134,492. Mean Ending Equity Ratio (Solvent Iterations): 0.584 0.643 0.567 0.625 Change from Base: -0.022 -0.036 -0.029 -0.034 Mean Yearly Government Payments ($I: 24,962. 31,449. 30,335. 36,224. Change from Base: -4,858. -16,301. -13,668. -20,478. See Table 6 for definition of the analysis variables. farm programs than are large acre- age operations. If this holds in gen- eral for all farms, many operations in the Liberty _County area could benefit from participating in the farm program. Enforcement of $50,000 Payment Limitation In the base scenario, the mana- ger was limited to $100,000/year in government payments, repre- senting a maximum of $50,000/year to both the farmer and a partner. In theory, the government imple- mented the $50,000 payment limi- tation to reduce program costs, judging those farm operations which qualify for more than $50,000 in payments to not need the additional monies. Quite often, however, the limitation can be avoided by legal means. Part of the farm's assets, for example, can be put in the spouse's name. Since the limit is $50,000 per person, the spouse partner becomes eligible for an additional $50,000. In addition, crop-share tenure arrangements are commonly utilized to transfer some government payments to the 5O landowner as part of the land rent, thus reducing the effective rent paid by the farm manager. Incen- tives to side-step the payment limi- tation depend, of course, on the amount of government payments lost by the producer when he/she complies with the limitation. A strict enforcement of the limitation would have an effect on strategies, since all farms exceeded the limita- tion in one or more base scenario iterations. In this scenario, it was assumed that the government strictly enforced the limitation, al- lowing the farm operation no more than $50,000/year in deficiency and diversion payments. Effects of enforcing the govern- ment payment limitation on a per farm basis are in Table 38. The SR rotation strategies suffered more than the SSR strategies as a result of the limit, with probability of survival falling to 5O percent or less for both SR strategies. For all strate- gies, probabilities of success fell to as low as 4 percent and mean after- tax NPV dropped by an average of $87,000 from base scenario levels. Perhaps the most telling statistics were the changes in average gov- ernment payments to the tenant, which fell by over 35 percent in some cases. Although the change in government payments was greater for the SSR 1/7 versus the SR 1/2 strategy, the changes in probabilities of survival and suc- cess were greater for the latter strategy, again demonstrating the greater need the 1/2 share strate- gies have for additional cash flow. A graph of all N PV numbers for the four strategies is given in Figure 7. All distributions lie to the left of their corresponding base strate- gies, indicating their relative in- feriority In particular, the SSR 1/7 and SR 1/7 are much farther apart and SSR 1/2 and SR 1/2 are much closer together when the payment limit is strictly enforced. Several implications can be drawn from these results. When the payment limit is strictly en- forced, both SR rotations are less desirable to the farm manager. The payment limitation can, therefore, have an impact on the choice of an optimal crop rotation, tending to discourage intensive cropping of crops eligible for deficiency pay- ments. Removal of the payment limitation would probably cause many farm managers to push more strongly for a 1/7 share in place of a 1/2 share arrangement when negotiating the land rental ar- rangement, since the 1/7 share ar- rangement becomes more lucrative as the payment limit is raised. Last- ly, the results demonstrate a sub- stantial economic motivation for large farms to find ways to circum- vent the $50,000 payment limita- tion. Increasing Long-Grain Loan Premium Prices for long-grain rice are usu- ally above those of medium and short-grain rices, reflecting con- sumer preference for longer- grained varieties. The price differ- ential is also reflected in govern- ment commodity programs (USDA 1983). As mentioned in the section on study assumptions, the Texas rice loan rate in the model was increased 7.894 percent above the $8.00/cwt national rate assumed for ~rJ'/ 1984-88. The percentage figure re- flected a premium for long-grain rice and the average difference be- tween long-grain loan rates and national loan rates for 1976-82. Throughout the 7-year period, the premium remained close to 7 per- cent. In 1983, however, the pre- mium jumped to 14.475 percent. Because the higher premium oc- curred only in 1 year, the earlier long-grain rice loan premium was used in the base analysis. In this section, the potential importance of a higher premium, should it become permanent, is examined. The loan rate used in the sen- sitivity analysis for all 5 years of the study period was $9.16/cwt, a $1.16/cwt premium above the na- tional loan and an increase of $O.53/cwt over the loan rate in the base scenario. Rice following 1 year of soybeans and ratoon rice was again discounted $0.30/cwt and $O.60/cwt, respectively, reflecting lower rice quality. The $3.90/cwt maximum deficiency payment limit was held constant, requiring target prices to also rise by $0.53 to $13.06/cwt. Results for this analysis are in Table 39. All four strategies examined ben- efitted from the higher loan rate. The two SR strategies, in particular, received a substantial boost from the premium increase, with 6 to 8 percentage point rises in probabili- ties of survival occurring for both strategies. Changes in mean after- tax NPV suggest the 1/7 share strat- egies benefitted most from the higher loan premiums. The principal factor influencing these results is the large increase in average government payments re- ceived under each strategy and the largest increases observed among all scenarios examined in the study. These increases caused gross farm revenues to increase only 1.5 to 3 percent for each strategy. In addi- tion, the higher loan rate reduced downside price risk, since the farm manager was now guaranteed a higher minimum price. The com- bined effect of the higher target price and loan rate was to guaran- tee the farmer a higher return for his/her crop without any increase in operating costs. The additional —<—4v—<|_v<@IJ@QZ"O G 0.' -ssoooo I I I -350000 -150000 ‘I’ I I S0000 250000 450000 NET PRESENT VRLUE l$) LEGEND: Z = SSR 1/2 X‘= SR 1/2 SSR 1/1 SR 1/7 Figure 7. Net present values for each strategy when payment limitation enforced. gross revenue caused a propor- tional increase in net cash farm income. Eliminating Target Price Program Several policy options available to lawmakers writing the 1985 farm bill for rice are considered in this and subsequent analyses. To ex- amine the effect of the different policy options on the representa- tive farm, it was necessary to first determine the effects of the respec- tive policy alternatives on the en- tire U.S. rice industry. In particular, effects of policy on U.S. farm prices are essential in evaluating the poli- cy impacts at the farm level. Be- cause macro- and micro-economic aspects of policy are important to policy makers, both perspectives are reported in the subsequent scenarios. The Grant, Beach, and Lin (1984) model was used to simu- late the macro aspects of the rice industry. The primary purpose of target prices are to stabilize farm income. The target price prpgram has been increasingly criticized as costly to the government and overstimula- tive to agricultural production. Some involved in the rice industry feel that ”as a concept, target price may be very difficult to maintain in the 1985 farm bill" (Adams 1984). In this scenario, the target price program for rice was eliminated, leaving the non-recourse loan as the only farm program in opera- tion. Elimination of the target price, with no accompanying changes in other facets of the farm program, was assumed to substantially re- duce incentives for farm managers to participate in the farm program. As a result, it was assumed only 50 percent of the U.S. rice producers participated in the farm program after 1985. Reduced participation resulted in fewer managers com- plying with the 2O percent set-aside and 5 percent paid diversion provi- sions of the program. Because of the lower realized price for rice, however, some farm managers were assumed to quit producing 51 TABLE 39. fiilglalTlYkTYRElkNALYsls FOR LlBERTY COUNTY R|CE AND SQYBEAN rice_ The {Qtal acreage taken out 0f C ASE IN LOAN RATE PREMIUM FOR TEXAS LONG GRAIN production was assumed to be RICE equal t0 75 percent of the set-aside acreage held by those participating in the program. This acreage Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Voluntarily taken out of production represented 9.4 percent (i.e., Probabimy 0.5 X025 X 0.75) Of all base IiCG of Survival (%): 54 88 80 84 acreage. National farm prices gen- Chanile erated under the scenario, as well fr°m Base‘ +4 *6 *8 *6 as prices used in the base and sub- probabuity , sequent policy scenarios, are pre- of Success 1%); 13 50 35 5g sented in Table 40. This and all Change subsequent policy scenarios ad- fmm Base‘ *6 *8 “5 *2‘) dress potential policies adopted af- Mean NPV ($1; -180,650. 31,010. -82,084. 9,555. ter the 1985 erep Year‘ The 1984 and Change 1985 U.S. rice prices were the same from Base: +26,517. +54,193. +50,557. +61,821. for all policy scenarios. With the elimination of the target Mean Ending Equity Ram price program, the Grant, Beach, (Solvent lterat'ons): 0.629 0.697 0.620 0.701 . . . Change l and Lin (1984) model predicted rice from Base: +0023 +0018 +0.024 +0.042 prices would change very little from the base scenario. Reduced Payments ($1: 35,871. 56,244. 52,105. 65,497. production ‘Fused by lower e)“ change pected rice price more or less offset from Base; +5,g51_ +3,494_ +8,102_ +3795 the increased acreage caused by the lower farmer participation level. A long-term upward trend in price was predicted, however, as carryover stocks level off between 1986-88. The expected results of eliminating the target price pro- gram, then, are slightly higher farm prices, a large reduction in government payments to farmers (with no deficiency payments), and stabilization in production and Mean Government See Table 6 for definition of the analysis variables. TABgLE 4o. u.s. RICE PRICES USED FOR BASE ANALYSIS AND POLICY SCENARIOS StOCk levels- l$/¢WTl The representative farm in RICESIM was assumed to partici- Yea, pate in the farm program because Scenario 1986 1987 1988 of the loan program and paid diver- sion. Results for the four strategies are found in Table 41. Elimination Base: 10.11 10.52 10.96 . of the target price program had a No Target Price Program: 10.21 10.66 11.10 significantly negative impact on Chimge "m" Base‘ *°-l° *°-l4 *°-l4 the representative farm. Probabili- No sebAside, 974 989 1M5 ty _of survival fell 20 percentage Change from Base; -g_37 -()_53 -0131 points below base levels for three of four strategies, with none of the 10% Reduce” °f Ta'9e‘ strategies offering more than a 62 Price and Loan Rate: 9.92 10.40 10.90 Change from Base: -0.19 -0.12 -0.06 Pement Probabilit)’ 0f Survival- Probability of success and average Allotment Program: 10.26 10.78 11.29 aftef-tax 3130 substan- Change fmm Base‘ +0“ lees +033 tial amounts, particularly the 1/7 Free Market; 921 93o 1034 share strategies. One item of inter- Change from Base: -0.9o -1.22 -0.62 est was the larger negative effect of the target price elimination on the SSR 1/7 strategy versus the SR 1/7 Note: 1984 and 1985 rice prices were the same in these scenarios as in the base Strategy, a SufPfiSing result Since analvsis- the SR 1/7 strategy received more 52 income from the government than the SSR 1/7 strategy. On a per acre basis, however, the SR 1/7 some- times received less government payments, because of the payment limitation. From the results, one can conclude that elimination of the target price program would hurt farm managers of the type modelled by the representative farm. The large amounts of carry- over stocks by the end of 1985 prevented prices from rising enough to offset the loss of govern- ment payments. Eliminating Set-Aside One extreme possibility in new policy formulation involves the elimination of a set-aside re- quirement for government pro- gram participation eligibility. Ad- vocates of this policy alternative support it on the basis of its ”max- imum income protection” for pro- ducers. The potential budget expo- sure to the federal government is large, however, especially when likelihood of expanding carryover stocks as a result of no production cutbacks is incorporated into the analysis. If the set-aside requirement was eliminated, the Grant, Beach, and Lin (1984) model predicted rice prices would fall below the base scenario levels by $0.37/cwt in 1986, $0.63/cwt in 1987, and $0.81/cwt in 1988. The increasingly wide differential between prices under this scenario and base level prices was the result of continued rice overproduction. Public and private carryovers were predicted to increase over time, exceeding 60 million hundredweight in 1988. The increasing size of carryover stocks indicates overproduction would become a more severe prob- lem, depressing price and increas- ing government deficiency pay- ment and storage costs. Net gov- ernment payments may decrease, however, as the elimination of di- version payments is greater than the increase in deficiency pay- ments. RICESIM results for the repre- sentative farm are given in Table 42. Eliminating set-aside generated TABLE 41. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - ELIMINATION OF TARGET PRICE PROGRAM AFTER 1985 Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 38 62 52 58 Change from Base: -12 -20 -20 -20 Probability of Success (%): 8 34 10 28 Change from Base: -4 -18 -10 -12 Mean NPV ($l: -255,684. -125,940. -217.366. -146,027. Change from Base: -48,517. -102,757. -84,725. -93,761. Mean Ending Equity Ratio (Solvent Iterations): 0.565 0.650 0.556 0.637 Change from Base: -0.041 -0.029 -0.040 -0.022 See Table 6 for definition of the analysis variables. different results for the representa- tive farm, depending on the par- ticular strategy followed by the manager. The 1/2 share strategies largely gained because of the policy change, with after-tax NPV values rising nearly $15,000 for both strat- egies. The 1/7 share strategies were worse off as a result of the set-aside elimination. The SR 1/7 strategy, in particular, realized a drop in after- tax N PV of almost $75,000 and a 24 percentage point decline in proba- bility of survival. Several factors were responsible for the varied results of this scenario. An increase in govern- ment deficiency payments largely offset the effect of lower rice prices for most strategies. The major ex- ception was the SR 1/7 strategy, which sometimes reached the pay- ment limitation in the base analy- sis. When prices fell, the payment limitation was more of a factor, resulting in a decrease in per acre revenues for rice. The payment limitation also had an effect on the SSR 1/7 strategy, but of equal im- portance was the loss of the paid diversion acreage. This loss was the major reason for the decline in average government payments to the representative farm. For the 1/2 share strategies the payment limi- tation was no problem, resulting in the farm manager receiving the same per hundredweight price for rice as in the base scenario. In addition, acreage brought back in- to production increased total re- turns to the farm manager, suffi- cient in the case of the SSR 1/2 strategy to increase the probability of survival. In summary, elimination of the set-aside requirement for participa- tion in the farm program was bene- ficial if the farm manager was sel- dom reaching the payment limita- tion. When the payment limitation was a factor in limiting deficiency payments, elimination of the set- aside hurt the farm operation. Since the target price program and payment limitation policy is de- signed to help smaller farm opera- tions while minimizing govern- ment costs, one can conclude that small farm managers would be against the set-aside requirement, while farmers with large opera- tions would favor the requirement. From the government's perspec- tive, eliminating the acreage diver- sion payments would more than offset increased deficiency pay- ments, with an expected net reduc- tion in government payments. Overproduction of rice would be- come more a problem, however, with the increase in rice acreage. 53 TABLE 42. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - NO SET-ASIDE REQUIREMENT AFTER 1985 Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 52 72 7O 54 Change from Base: +2 -10 -2 -24 Probabihty of Success (%I: 14 5O 24 32 Change from Base: +2 -2 +4 -8 MeanlNPV($k -192770. -63J10. -116966. -122060 Change fronw Base: +14,397. -39,927. +15,675. -74,797. Mean Endmg Equny Raflo (Solvent Iterations): 0.603 0.673 0.610 0.663 Change from Base -0012 -0006 -0014 +0004 Mean Govenunent Payn1ents($k 28,155. 45,947. 42,103. 56,168. Change frorn Base: -1.665. -1,803. -1,900. -534. See Table 6 for definition of the analysis variables. TABLE 43. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - 10% REDUCTION IN TARGET PRICE AND LOAN RATE Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probabifity of Survival (%): 44 78 68 70 Change from Base: -6 -4 -4 -8 Probabihty of Success Wék 12 44 18 38 Change from -Base: 0 -8 -2 -2 Mean NPV ($): -228,784. -63,098. -158,000. —84,173. Change fron1Base: -21,617. -39,915. -25,359. -31,907 Mean Ending Equity Ratio (Solvent Iterations): 0.595 0.663 0.599 0.666 Change fron1Basa -0011 -0016 +0003 +0007 Mean Yearly Government Payments ($): 27,481. 42,937. 39,723. 52,586. Change from Base: -2,339. -4,813. —4,280. -4,116. See Table 6 for definition of the analysis variables. 54 Reduction of Target Price and Loan Rate An alternative to eliminating the target price program would be to reduce target prices and loan rates. Implementation of this policy could have several advantages. First, reduction of the target price would reduce some of the incen- tive to overproduce that is current- ly plaguing most crops covered in the farm program. Second, reduc- tion of the loan would reduce the probability of farmers forfeiting their crops in the CCC loan to the government, since the lower loan would increase the probability of world market clearing price being above the loan. Lower CCC stocks would reduce government costs associated with storage of these stocks. Third, reduction of the loan and target would also reduce gov- ernment exposure to deficiency payment obligations, thereby re- ducing farm program costs. In this scenario, it was assumed the federal government chose to reduce the loan rate by 1O percent ($O.80/cwt) in 1986, holding the rate at that level through 1988. The $3.90/cwt maximum deficiency payment limitation was not changed, causing target price in 1986-88 to also fall by $0.80 to $10.71/cwt. The set-aside and paid diversion portions of the program were assumed not to change, as was farmer participation rate. The Grant, Beach, and Lin (1984) model projected government car- ryovers would be reduced under the new policy, with 1988 carryover 10 percent below the base level. Public carryovers were also re- duced about 9 percent from the 1988 base, largely because of a 3.5 percent reduction in U.S. rice pro- duction. Production fell because of the target price reduction. Despite the favorable effects of reduced production and lower carryover, farm price fell below base levels by 6 to 19 ¢/cwt in 1986-88. The loan rate reduction was primarily re- sponsible for the lower prices, the loan acting as a floor for domestic rice prices. A 1O percent decline in the floor price caused farm price to fall by 2 percent or less primarily because of the positive price effects of lower production. RICESIM results for the four strategies examined under this scenario are in Table 43. The change in policy had a moderate impact on most analysis variables. Probabilities of survival fell by as much as 8 percentage points below base results for the four strategies analyzed. Average ending equity ratios for solvent iterations changed little, suggesting the poli- cy only hurt the farm operation when it was already in a weak position. Government payments and mean after-tax NPV also de- clined, but the change suggests the new policy would not have nearly the adverse effect on the farm oper- ation as would other policies ex- amined in this study. Three factors were responsible for this result. The target prices and loan rates assumed in the base, combined with rising mean rice prices over time, resulted in the farm manager being less depen- dent on income supports during the last 3 years of the 5—year study period. Changing the program for the last 3 years, then, had less impact on the manager than it would have had if the policy change occurred in 1984. Secondly, in some of the base scenario itera- tions, the farm manager was con- strained by the payment limitation from obtaining all the deficiency payment he/she had qualified for. Reducing the loan rate and target price by 10 percent, therefore, did not cause a 10 percent reduction in the deficiency payments received by the farm manager. Third, the deficiency payment rate was main- tained so the level of income was largely unchanged. The effect of the new farm policy, therefore, was moderate. Allotment Program Until 1974, a combined acreage allotment and marketing quota were used to stabilize rice prices at high levels. Many managers who farmed both during the era of mar- ket controls and since 1974, when a freer market has prevailed, have expressed support for a return to production controls. Supporters believe market controls would TABLE 44. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - IMPLEMENTATION OF ACREAGE ALLOTMENT PROGRAM Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%): 26 56 38 54 Change from Base: -24 -26 -34 -24 Probability of Success (%): 6 20 10 20 Change from Base: -6 -32 -10 -20 Mean NPV ($): -304,963. -170,183. -260,408. -194,111. Change from Base: -97,796. -147,000. -127,767. -141,845. Mean Ending Equity Ratio (Solvent Iterations): 0.557 0.639 0.577 0.603 Change from Base: -0.049 —0.040 -0.019 -0.056 Mean Yearly Government Payments ($I: 25,577. 37,156. 35,094. 48,375. Change from Base: -4,243. -10,594. -8,909. —8,327. See Table 6 for definition of the analysis variables. eliminate many of the overproduc- tion problems plaguing the rice in- dustry, reduce price uncertainty, increase expected price, and re- duce government expenditures. In this scenario, an acreage allot- ment program for rice was adopted after 1985. All farm managers were required to participate in the pro- gram and to set-aside 35 percent of base acreage. The acreage set-aside allowed planting to other crops. The allotment was assumed to re- duce price variability to pre-1974 levels, i.e., 21 percent of base variance levels (Grant et al. 1984). Based on results from the Grant, Beach, and Lin (1984) model, im- plementing an allotment on rice acreage did have some moderately positive effects. Production was re- duced by 6 percent from 1988 base levels and carryover in 1988 was 3 percent below base levels. The small decline in production had some effect on prices, causing prices to rise by $0.15/cwt, $0.26/cwt, and $0.33/cwt above 1986, 1987, and 1988 base levels, respectively. RICESIM results for the repre- sentative farm are given in Table 44. The effect of the allotment on the representative farm was strongly negative. Probabilities of survival fell by 24 to 34 percentage points below base levels. Average after-tax N PV fell by $100,000 or more for all strategies. Government payments fell by about 15 percent, a large change considering the figure in- cludes government payments dur- ing 2 years when the allotment program was not in effect. Again, several factors are re- sponsible for this result. The allot- ment program offered only modest increases in expected rice price. The farm manager gave up the paid acreage diversion program, how- ever, when the allotment program was adopted. Although soybeans were planted on the formerly di- verted acreage, returns were lower and more variable than those as- sociated with the paid diversion program. More importantly, re- ducing rice price variance had a negative impact on the farm opera- tion. In the base analysis, the high rice price variance made possible the occasional observation prices above the target price. The loan and target price programs pro- 55 TABLE 45. SENSITIVITY ANALYSIS FOR LIBERTY COUNTY RICE AND SOYBEAN FARM - RETURN TO FREE MARKET AFTER 1985 Analysis Variables SSR 1/2 SSR 1/7 SR 1/2 SR 1/7 Probability of Survival (%I: 22 42 34 26 Change from Base: -28 -40 -38 -52 Probability of Success (%I: 4 12 4 8 Change from Base: -8 -40 -16 -32 Mean NPV ($): -310,945. -255,036. -304,785. -362,022. Change from Base: -103,778. -231,853. -172,144. -309,756. Mean Ending Equity Ratio (Solvent Iterations): 0.568 0.595 0.525 0.573 Change from Base: -0.038 -0.084 -0.071 -0.086 Mean Ending Equity Ratio (All Iterations): 0.239 0.285 0.238 0.106 Change from Base: -0.142 -0.301 -0.235 -0.449 See Table 6 for definition of the analysis variables. vided price and income protection from low prices in the base analy- sis. When variance was reduced, the probability of observing a price above the target level was reduced to near zero. Without the occasion- al higher prices to provide an occa- sional boost to the farm's financial situation, the farm was worse off than in the base scenario. The allot- ment program, then, does provide a beginning for solving many mac- ro level problems with rice farm policy, but it does so at consider- able cost to the farm manager ex- amined in this analysis. Return to Free Market Another alternative advocated by some in agriculture is a market- oriented farm policy. At the ex- treme, this type of a policy could be implemented by completely eliminating farm programs, includ- ing target price, government CCC loan, and paid acreage diversion. Government would not interfere in any way with the marketplace, al- lowing world supply and demand situations to determine the market price. A free market policy would be a substantial departure from 56 past policy for rice, the crop having been subject to an allotment pro- gram or target price program since 1954 (Holder and Grant 1979). In this scenario, the free market policy after 1985 was adopted for rice only; the loan provisions of the soybean program were in place to examine the effect of the new rice policy. Because the Grant, Beach, and Lin (1984) model was de- veloped using data from a non-free market period, its limitation in this scenario should be recognized. The structural relationships could be altered should agriculture take on a free market orientation for all crops. The model, however, does account for many of the non-policy influences on the rice market and so was used to predict rice prices in a free market. Carryover stocks held by the government at the end of 1985 were projected at 24 million hun- dredweight. With termination of the farm program, the government was assumed to rid itself of excess stocks as rapidly as possible. As a result, rice price was projected to fall below the base scenario price by $0.90/cwt in 1986 and $1.22/cwt in 1987. Contributing to the de-' pressed price situation was an in- crease in rice acreage, caused by eliminating the set-aside re- quirement. By 1988, the govern- ment no longer held rice stocks and production began to fall in re- sponse to low rice prices, causing prices to rise over $1/cwt above 1987 levels. Public holdings of rice stocks increased dramatically, however, as government stocks were eliminated. By 1988, public stocks were projected at 55 million hundredweight, a level close to the 1988 stocks in the base scenario for government and private stock- holders. RICESIM results for the repre- sentative farm are given in Table 45. The effect of the free market policy was a large reduction in all analysis variables. Probabilities of survival fell by as much as 52 percentage points and mean NPV by over $300,000. Probabilities that the rep- resentative farm would be solvent in 1989 ranged from only 22 per- cent for the SSR 1/2 strategy to 42 percent for the SSR 1/7 strategy. In general, the SSR 1/7 strategy con- tinued to be predominant among the four strategies. The SR strate- gies performed more poorly, a not- too-surprising result since the free market scenario was implemented only for rice. In summary, the move to a free market policy had an adverse nega- tive effect in the short run on the viability and financial position of a typical rice and soybean farmer in the Upper Gulf Coast. Prices fell sharply and production was slow to react to the adverse situation. Much of the carryover stocks held in the past by the government were, in essence, shifted to the private sector. Government pay- ments were virtually eliminated. At the micro level, the representa- tive farm was negatively affected by the free market policy. CONCLUSIONS AND RECOMMENDATIONS Many conclusions and recom- mendations can be made from the study results. The results are limit- ed by the examination of only one farm, rather than examination of many different types of farms. Yet, because many scenarios were ex- amined, insight can be gained into commercial farms currently operat- ing in the Upper Gulf Coast area that are similar to the farm studied. As mentioned before, the absolute numbers given in the different scenarios are not as useful as the general pattern they illustrate. The conclusions and recommendations are separated into categories di- rected at (a) farm managers, (b) policymakers, (c) researchers, and (d) other groups. Farm Managers 4 The principal objective of the study was to identify the preferred crop rotation and tenure arrange- ment among those currently used by Liberty County farmers. Of the two principal tenure arrangements examined, a strategy utilizing a 1/7 share arrangement was predomi- nant in every case. The 1/2 share arrangement offered some signifi- cant benefits, including protection from high water costs, a lower risk level for the farm, and a method to sidestep the payment limitation. The price to the farmer for these benefits, nevertheless, was too high. With the large share (1/2) of the crop going to the landowner, the farmer was left with insufficient cash flow to meet farm operation needs. The results suggest that farm managers similar to the study farmer would benefit from the 1/7 share arrangement. Because bene- fits to the landowner are so lucra- tive under a 1/2 share arrangement, the farm manager may find it dif- ficult to obtain a 1/7 share arrange- ment from his/her landowner. Cash rent of less that $30/A and land ownership with low debt are alternatives that may be preferred by the farmer over the 1/7 share arrangement. Recommendations as to an opti- mal crop rotation are not as clear. The SR rotation is somewhat less risky than the SSR rotation, but may generate a smaller return to the farmer. Despite the higher risk level, the SSR rotation can be rec- ommended as the preferred rota- tion with several qualifications at- tached to the recommendation: (1) Government deficiency and di- version payments must be limited to less than $100,000 for the farmer, with more restrictive limits causing the SSR to be even more preferred, (2) red rice must be less of a prob- lem in the SSR than SR rotation, (3) a 1/7 share land rental arrange- ment must be followed, and (4) soybeans must be at least as profit- able as assumed in the base analy- sis. Of course, the presence of so many qualifications makes the choice of a rotation highly depen- dent on the particular farm situa- tion. If the farm manager is re- quired to rent land under a 1/2 share arrangement, for example, he/she would benefit by following a SR rotation. Variable production costs were highly influential in determining the continued viability of the repre- sentative farm. A 10 percent change in variable costs was shown to have a major impact on all analy- sis variables. The importance to farmers of cost containment in their operations cannot be overem- phasized. As an example, consider the scenario in which water costs were reduced by $26 to $40/A. Both 1/7 share strategies realized sub- stantial benefits from this lower water cost. Yet any combined re- duction in all costs of $26/A, while maintaining yield and quality fac- tors, would generate the same re- sults (for those using the 1/7 share strategies). One of the best ways to reduce production costs is through adop- tion of new technology. The Le- mont rice variety, for example, had a positive impact on the represent- ative farm. In part, this positive impact was the result of a reduction in per unit production costs when using the new variety. The as- sumed rapid adoption of Lemont also was a positive factor for the farm manager. By quickly adopting Lemont (or any other new technol- ogy), he/she was able to obtain the benefits inherent with the new va- riety much sooner, thereby increas- ing profits earlier. In addition, the manager enjoyed the benefits (higher yields) before the negative effects (lower prices) had had an opportunity to occur. The Lemont results suggest any new technolo- gy, whether it be a new crop vari- ety, a new small business compu- ter, or a more fuel-efficient tractor, may give the farm manager the competitive edge needed to stay in business. The results for irrigated soybeans suggest that some poten- tially profitable new technologies may not yet be in general use. More economic research is needed, how- ever, to quantify the potential ben- efits and costs of the new tech- nologies. Ratoon acreage had little positive impact and sometimes had a nega- tive effect on the representative farm. The small profit margin and high yield variability were partly responsible for the unimportance of ratoon rice. More important was the small share ratoon rice con- stituted of total farm income. Giv- en current technology, Upper Gulf Coast farmers should carefully consider the decision to produce ratoon rice. Ratoon rice production is more favorable under a 1/2 crop share arrangement or when the farm manager has not reached the deficiency payment limitation. Off-farm income is important, even to a farm operation of the size modelled in this study. This income reduces variability of cash flows to the farm manager and provides a source of cash during bad years. Off-farm income is especially im- portant to a farmer utilizing a 1/2 crop share arrangement because cash flow is more of a problem under this tenure arrangement. The use of leverage in financial management is sometimes referred to as a ”double-edged sword.” Farmers experienced the positive edge of the leverage sword in the 1970's, with large increases in asset (particularly land) values occurring almost every year. Now farmers are learning about the other side of the leverage sword. Based on re- sults in this study, some Upper Gulf Coast farmers are going to continue to suffer because of too much debt. For farm managers in a high to intermediate debt position (i.e., those holding less than 60 percent equity in their operations) the results sound a clear signal; take on no more debt than is neces- 57 sary to survive. In fact, it may be better to liquidate the farm opera- tion if debt is at intermediate to high levels, since the probability of losing remaining equity is high. For farm managers with little or no debt, however, expansion through debt financing may not be harmful in the short run and may be profit- able in the long run. The farm manager who owns all his/her land free of any debt should be able to borrow 2O percent of the farm's asset value and use the money to purchase additional land without seriously risking farm insolvency. Upper Gulf Coast farmers should participate in the govern- ment program as much as possible. To refrain from participating is the equivalent of financial suicide. Sev- eral farm program alternatives sug- gested for the 1985 farm bill were analyzed. All the alternatives ex- amined left the farm manager worse off than continuing the cur- rent program through 1988. Of the alternative programs suggested, the least detrimental program to the representative farm was the 1O percent reduction in target price and loan rate. Policy Makers The farm debt problem has be- come a much discussed topic among government policy makers. The results from the study offer several insights into the proposals that may be enacted by the govern- ment. First, any proposed debt re- lief program should be targeted to those in need. Farm managers in a low debt position simply do not need financial assistance from the government. Second, if the mac- roeconomic scenario assumed in the study becomes a reality, noth- ing short of a massive buy down of debt or large increases in capital gain rates on land will save farm managers in a high debt situation from insolvency. Any debt buy- down program will be extremely expensive to taxpayers. Third, be- cause declines in land value are partly responsible for the current debt crisis, policies aimed at halt- ing or reversing this decline may prove as effective as current pro- posals in dealing with the debt 58 crisis. As demonstrated in the scenario reenacting 1978-81 mac- roeconomic policy, increases in as- set values and improved prices may more than compensate for the negative effects of inflation. An in- flationary policy may well be the best debt relief program the federal government could devise. A continuation of the current rice farm policy was predicted to cause increases in stocks held by private individuals and by the gov- ernment. In addition, an extension of the current program would like- ly continue to be very expensive to taxpayers. By contrast, all pro- posed alternatives for rice farm pol- icy left the representative farm manager worse off, but generated some positive benefits for society as a whole. Elimination of the target price program, reduction of the target price and loan rate levels, an allotment program, and return to a free market all reduced ac- cumulation of CCC stocks and gov- ernment payments. The decline in exports and high interest rates has caused farmers to become more dependent than ever on government farm programs. The President, Secretary of Agri- culture, and many members of Congress are advocating return to a free market situation in agricul- ture (USDA 1985; Stenholm 1985; Helms 1985). Given this scenario, a reasonable alternative could be to hold changes in target price and loan rates to something less than 100 percent of changes in costs. If costs of production increased 5 per- cent in 1 year, for example, target price and loan rate could increase by 90 percent of that amount, or 4.5 percent. By use of such a mecha- nism, government programs would slowly become ineffective and agriculture would return to a free market orientation. Research Scientists Several of the results have im- portant implications to agrono- mists. Development of new tech- nology in agriculture is looked up- on by many agronomists as making all farmers better off. This is not always true. The scenarios involv- ing Lemont provide a case in point. The farm manager was better off with Lemont than without it, be- cause the negative price effects were minimized by the govern- ment farm program. Consider, though, the farmer who does not or cannot adopt Lemont. He/she is not better off and may well be worse off because of Lemont. Tech- nology, though beneficial to society as a whole, may well be harmful to some segments of society. Physical scientists should carefully consider the benefits and costs of a potential technology before commiting re- sources towards its development. When appraising the impact of a new technology, researchers should consider examining more than the expected return of the new technology. Variance and higher statistical moments may al- so be important. In addition, evalu- ations of new technology would be more useful if made in context of the situation that may result from the new technology. When a new technology is expected to reduce prices, for example, technology should be evaluated using the low- er price. To do otherwise results in biased results and a recommenda- tion of technology development that may not be justified. The results also provide impor- tant information about the behav- ior of simulation models. The type of distributional form used to gen- erate random variables has a large impact on the results. Researchers using simulation models should make every attempt to learn about past and expected future behavior of random variables. Historical da- ta and subjective expectations of farmers and physical scientists merit careful consideration when deciding on the type of distribution utilized. Correlation of random variables is also important in a Monte Carlo simulation analysis. As demon- strated in this study, even the use of the same correlation matrix may have a different effect on one crop rotation - tenure arrangement . strategy than on another. Correla- tion commonly occurs between crop yields and between crop prices. Contrary to assumptions made in other studies (Skees and Reid 1984), correlation may also occur between price and yields and so should not be automatically dis- missed. The RICESIM model performed satisfactorily in attaining the ob- jectives of the study. A major ad- vantage in using RICESIM was the freedom allowed in parameteriza- tion of the model. Few assump- tions made in the study were im- posed within the framework of RICESIM. In addition, underlying reason or cause for the results was almost always discernable, al- though at times the results were initially counterintuitive. RICESIM is a complex simula- tion model. Because of its complex- ity and large data requirements, errors were identified in both the data set and the model itself. Solu- tions for the base scenario, for ex- ample, were obtained perhaps a dozen times. Sensitivity analyses were very helpful in identifying errors. In addition, the sensitivity analyses provided additional in- sights into the base and other scenarios. For these reasons, re- searchers using RICESIM should undertake some sensitivity anal- yses before accepting and pub- lishing results. Despite the satisfactory use of RICESIM in the study, several im- provements could be made in the model and data set used for analy- sis. Correlation of random vari- ables using farm level data would be more appropriate than using county data, as was used in this study. Also correlating variables between years would more fully account for interaction that may occur in the real world. Price, and perhaps yield, distributions should widen over time (i.e., variance should increase), reflecting the greater uncertainty one faces when attempting to predict what these parameters will be in the future. Other Groups The financial results provide sev- eral items of interest to lending institutions. A lender's credit poli- cy has a significant impact on sur- vivability of some farm operations. Most farm operations, however, will survive or fail regardless of the credit policy imposed by a financial institution. A credit policy leverage ratio of 1.0 is too restrictive for farm managers at intermediate debt levels, because it probably will pre- maturely force farm operations in- to insolvency. A credit policy of 4.0, on the other hand, is probably too lax because it allows farm mana- gers in a high debt position to con- tinue farming, even though there is little chance they can achieve an acceptable equity position. The 2.0 leverage ratio appears to offer lend- ers a reasonable credit policy al- ternative; liquidating farm opera- tions with little hope of recovery but permitting sufficient credit to allow recovery from bad years. The results indicate that farming in the Upper Gulf Coast region can be profitable in certain situations. De- spite recent events in the agricul- ture economy, lenders should not categorically refuse credit to all farmers. An above-average farm manager who maintains a low debt level on his farm operation will survive in agriculture. Landowners should take note of the crop rotation being followed by the farm manager. When farming under a crop-share tenure arrange- ment, the farm manager 's choice of a crop rotation may or may not be in the best interest of the landown- er. Landowners should be aware of production costs and attempt to contain cost increases where possi- ble, but still allow the farm mana- ger to operate in a profit- maximizing manner. Marten (1985) suggests farm managers re- negotiate cash leases down as a means of ”thriving" in the current year. Results in this study suggest the need to renegotiate crop share leases may also be necessary to reflect the current high cost-low return farming situation. 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U.S. Department of Agriculture— APPENDICES Appendix A According to Hadar and Russell (1969), FSD exists between the two distributions if and only if G(xi)<)] dx>0. T°° for all Xi e X That is, the cumulative area be- tween F and G must be positive. An example of SSD can be found in Figure 7, between the SSR 1/2 strategy and the SR 1/2 strategy. The SR 1/2 strategy almost domi- nates the SSR 1/2 strategy under FSD criteria, but does not because the two distributions cross. Under SSD, however, the SR 1/2 strategy is preferred, since the cumulative area between the two is positive for this strategy. SSD implicitly as- sumes individual aversion to risk, meaning that risk averse decision- makers would choose the strategy that is preferred in the second de- gree. A FSD strategy also domi- nates in the second degree, since the SSD criteria are met by any function that is also dominated in the first degree. Stochastic dominance with re- spect to a function is a technique developed by Meyer (1977a). Though similar to SSD, SDRF dif- fers in that the distributions are ordered based on the expected util- ity or satisfaction derived from each observation. Each monetary value is transformed into its equi- valent utility value using an utility function. The utility function as- sumed in the study is of the form U(x) = - e.“ where r is the level of aversion to risk assumed for the decisionmak- er. As r increases, the decision- maker becomes more averse to risk, giving more utility to minimizing losses rather than max- imizing gains. An r equal to zero indicates risk neutrality, meaning the decisionmaker does not consid- er risk when deciding which strategy to follow. A negative r Appendix B. Data Sets and Base Results F L I P S I M V A GENERAL FIRM LEVEL POLICY SIMULATION MODEL DEVELOPED AND IMPLEMENTED IY JAMES W. RICHARDSON AND CLAIR J. NIXON DEPARTMENT OF AGRICULTURAL ECONOMICS TEXAS AGM UNIVERSITY RELEASE DATE 9 / 30 / I5 SUMMARY OF PROGRAM OPTIONS SELECTED IV THE USER RESULTS FROM SSR ROTATION, LIBERTY COUNTY. FINAL ANALYSES. MULTIVARIATE EMPIRICAL DISTRIBUTIONS USED FOR PRICES AND YIELDS. INTERMEDIATE DEBT. SIMULATE THE REPRESENTATIVE FARM FOR FIRST YEAR TO IE SIMULATED IS I584. THE SIMULATION WILL OE OETERMINISTIC PRINT ALL INPUT DATA AND ALL OUTPUT TABLES 4 CROPS AND O LIVESTOCK ENTERPRISES THE REPRESENTATIVE FARM HAS SUPERIOR MANAGEMENT. 1/7 CROP SHARE ON SDYOEANS, I/2 ON RICE. WHOLLY LEASED FARM ACREAGE, SOZ LONG TERM AND AOZ CROP INSURANCE, SO G PAYMENT LIMIT. STOCHASTIC RUN, 5 YRS, SO ITERATIONS. S YEARS PAYOFF OUTSTANDING LOANS USING SURPLUS CASH NO SPECIAL FINANCIAL BAILOUT PROGRAM IS IN EFFECT ADJUST INCOME TAX SCHEDULE AFTER 1984 FOR CHANGES IN THE CPI FIXED PORTION OF CROPS SOLD IN T AND CCC LOAN USED FOR THE REMAINOER NO MAXIMUM ON ANNUAL INTEREST OEOUCTIONS THE CROP MIX WILL BE CONSTANT OVER TIME IS IN PLACE OEPRECIATION ON OLD MACHINERY WILL DE CALCULATED DY THE DECLINING BALANCE METHOD USE THE FEDERAL INCOME TAX PROVISIONS FOR I982 MACHINERY PURCHASED AFTER ISOO WILL BE RECOVERED USING AN ACCELERATEO SCHEDULE THE USER HAS ELECTED TO REDUCE BASIS FOR INVESTMENT TAX CREDIT THE FARM HAS ELECTED NOT TO TAKE FIRST YEAR EXPENSING ON PURCHASES OF MACHINERY THERE ARE 37 PIECES OF OWNED FARM MACHINERY TO BE DEPRECIATED OLD FARM MACHINERY WILL OE TRADED IN RATHER THAN OE SOLD USER HAS SPECIFIED THE FAMILY CONSUMPTION FUNCTION FOR REGION S THE FARM MAY NOT SELL CROPLAND TO AVOID INSOLVENCY CROPLAND WILL IE LEASED USING A CROP SHARE SCHEME SPECIFIED BY THE USER ANNPAL INFLATION RATES FOR FARMLANO ARE PROVIDED IV THE USER THE FARM WILL NOT IE ALLOWED TO GROW OVER TIME INFORMATION FOR O ALTERNATIVE FARMS IS PROVIDED BY THE USER AN UNLIMITED NONRECOURSE LOAN [PRICE SUPPORT PROGRAM WILL OE IN EFFECT DO NOT PAY INTEREST ON NONREDEEMED NONRECOURSE CCC LOANS LOAN RATES ARE FIXED EV THE ANALYST IN ALL YEARS INTEREST ON FOR LOANS WILL IE CHARGED ANNUALLY FOR 1 YEARS A TARGET PRICE PROGRAM WILL OE IN EFFECT AND TARGET PRICES ARE FIXED AN ALL'RISK CROP INSURANCE PROGRAM IS IN EFFECT A MANDATORY SET'A$IDE OR VOLUNTARY DIVERSION PROGRAM WILL OE IN EFFECT PAYMENT LIMITATIONS ARE IN EFFECT FOR DEFICIENCY PAYMENTS, ALL FARMS ARE ELIGIBLE FOR ALL FARM PROGRAM BENEFITS 62 value indicates the decisionmaker is a risk taker. The r values used in this study ranged from — .0001 (strongly risk taking) to + .0001 (strongly risk averse). Under SDRF, distribution F is preferred t0 distribution G if and only if 2f [G(x) - F(><)] u’(x)dx >0. subject to the constraint r1 5; I 5; I2 where u’(x) is the derivative of the utility function and r1 and r2 consti- tute the range over which the equa- tion holds. The greater the dif- ference between r1 and r2 the more general the recommendation of distributional preference can be made. For example, when r1 and r2 are -<><> and w respectively, the equa- tion criteria is equivalent to FSD. When r1 and r2 are 0 and w, respec- tively, SSD is approximated. DIVERSION PAYMENTS I DISASTER PAYMENTS F’ RESULTS FROM SSR ROTATION, LIBERTY COUNTYQ MULTIVARIATE EMPIRICAL DISTRIBUTIONS USED FO AND VIELDS. WHOLLY LEASED FARM ACREAGE, S01 INTERMEDIATE DEBT. SUPERIOR MANAGEMENT. CR CROPLANO ON INITIAL FARM TOTAL CROPLANO ACRES OWNED TOTAL CROPLANO ACRES LEASED PASTURELAND ACRES OWNED PASTURELAND ACRES LEASED FRACTION CROPLANO THAT IS TILLABLE FRACTION CROPLAND THAT IS IRRIGATED INITIAL BALANCE SHEET FOR THE FARM ASSETS MARKET VALUE OF CROPLAND I FARMSTEAD MARKET VALUE OF BUILDINGS TOTAL VALUE OF OWNED CROPLAND I BUILDINGS MARKET VALUE OF OFF-FARM INVESTMENTS BEGINNING CASH RESERVE MARKET VALUE OF OWNED PASTURELANO MARKET VALUE OF ALL FARM MACHINERY MARKET VALUE OF ALL LIVESTOCK TOTAL VALUE OF ASSETS LIABILITIES TOTAL REAL ESTATE DEBT TOTAL INTERMEDIATE-TERM DEBT INCOME TAXES DUE IN YEAR 1 SELF EMPLOYMENT TAXES DUE IN YEAR I TOTAL DEBT BEGINNING NET WORTH [MARKET VALUE) INITIAL FINANCIAL RATIOS FDR THE FARM EOUITY TO ASSETS RATIO DEBT TO ASSET RATIO LEVERAGE RATIO AVERAGE PER ACRE VALUE OF CROPLANO AVERAGE PER ACRE VALUE OF PASTURELAND LIABILITIES FOR INITIAL FARM REAL ESTATE DEBT LOAN LIFE ON DEBT FRACTION LAND LOAN REMAINING ORIGINAL AMOUNT OF THE LOAN DEBT TO ASSET RATIO INTERMEDIATE TERM DEBT LOAN LIFE ON DEBT FRACTION LOAN REMAINING ORIGINAL AMOUNT OF THE LOAN DEBT TO ASSET RATIO OPERATING LOAN FRACTION OF YEAR LOAN IS USED TERMS FOR NEW LOANS NO. YEARS FOR NEW LAND LOANS NO. YEARS FOR NEW MACH LOANS MINIMUM EOUITV RATIOS FOR SOLVENCY MINIMUM LONG TERM EOUITY MINIMUM INTERMEDIATE TERM EOUITY INFORMATION FOR REFINANCING DEBTS CHARGE TO REFINANCE CASH FLOW DEFICITS NO. YEARS FOR A LONG-TERM LOAN NO. YEARS FOR INTERM-TERM LOAN MINIMUM DOWNPAYMENT LEVELS MINIMUM DOWNPAVMENT FOR FARM MACHINERY MINIMUM DOWNPAVMENT FOR FARMLANO AFTER~TAX DISCOUNT RATE ANNUAL RATE OF RETURN TO PROD ASSETS T-1 CAPITAL GAIN RATE FOR LAND IN T-I CASH RESERVE FOR THE FARM MINIMUM CASH RESERVE BEGINNING CASH RESERVE CAPITAL ASSETS TO BE RECOVERED IDEPRECIATEDI BUILDINGS PLACED INTO USE PRIOR TO I981 SALVAGE VALUE PURCHASE PRICE ECONOMIC IDEPRECIATION] LIFE REGULAR BUILCINGS PLACED INTO USE AFTER 1980 PURCHASE PRICE CALENDAR YEAR PURCHASED SPECIAL PURPOSE BUILDINGS PLACED INTO USE AFTER PURCHASE PRICE CALENDAR YEAR PURCHASED FIXED COSTS PROPERT' TAX RATE ISTAX/SVALUE) TOTAL PERSONAL PROPERTY TAX OTHER TAXES ACCOUNTANT I LEGAL FEES UNALLOCATED MAINTENANCE COSTS INSURANCE ON MACHINERY MISCELLANEOUS FIXED COSTS LAND LEASE COSTS CASH RENT FOR CROPLAND IS/ACRE) CASH RENT FOR PASTURELANO IS/ACRE] ANNUAL INFLATION RATE FOR PER ACRE CASH LEASE COST CAPITALIZATION RATE BETWEEN LAND VALUE I CROPLANO CASH LEASE COST FAMILY CONSUMPTION AND TAX INFORMATION AGE OF OPERATOR NO. OF TAX EXEMPTIONS CLAIMED MARGINAL TAX RATE FOR STATE RATIO OF PERSONAL DEDUC TO NET INCOME DESIRED TAXABLE INCOME AVERAGE ANNUAL OFF-FARM INCOME NON-TAXABLE OFF-FARM INCOME ANNUAL RETURN ON OFF-FARM INVEST MINIMUM FAMILY LIVING EXPENSES MAXIMUM FAMILY LIVING EXPENSES FINAL ANALYSES. R PRICES LONG TERM AND 50% OP INSURANCE, 1/7 CROP SHARE ON SOYBEANS, I/2 ON RICE. STDCHASTIC RUN, 10. 2300. 0 O 0. 0.5300 12000. ISS000. 1S7000. Z0000. .0000 5000 0. SBS202. 0. 757202. BI800. .000 0. 0. .000 228081 ZIZIBI AS5321 0000 0000 S500 0000 000 000 0000 000 000 0000 .000 .8132 .3888 .5306 I200. SSIOO. J0. 0. IBBIOO. 0. ZZGOBI. 5.0000 O0 0100 0000 0000 0000 5000 000 A000 000 0.5000 AS2152. 0.0000 000 .l220 .0000 0000 .0100 .0000 .0000 .3000 .1000 S000. S000. 10500. 105000. J0. 0. 1980 O0 .1011 .0400 0000 0000 0000 000 0000 O0 O0 0.003330 0. 0. D000. 0. 3200. S000. O0 OOIDWII 0 0 0000 0 0000 0000 00 .0000 0000 .0 .2000 0 .0 1S000. 0. ‘B000. 25000. 0000 I100 0000 0000 S0 G PAYMENT LIMIT. 5 YRS, S0 USER'S SPECIFIED CONSUMPTION FUNCTION USED IF THE OPTION IS ELECTED ITERATIONS. 63 03 INCOME TAX PAYMENT DUE IN YEAR 1 SELF-EMPLOYMENT TAX PAYMENT DUE TAXABLE INCOME IN YEAR T'3 TAXABLE INCOME IN YEAR T'2 TAXABLE INCOME IN YEAR T-1 MAXIMUM RISK AVERSION COEFFICIENT HIRED FARM LABOR NO. OF FULL TIME EMPLOYEES INTEREST DEDUCTION IF OPTION IN YEAR 1 IS USED ANNUAL GROSS SALARY FOR FULL-TIME EMPLOYEE HOURLY WAGE RATE FOR PART-TIME LABOR ANNUAL INTEREST RATES 1984 OLD LONG'TERM LOANS 0.1175 OLD INTERMEDIATE~TERM LOANS 0.1500 NEW LONO*TERM LOANS 0.1310 NEW INTERMEDIATE-TERM LOANS 0.1480 REFINANCE LONG'TERM LOANS 0.1310 REFINANCE INTERM-TERM LOANS 0.1480 OPERATING LOANS 0.1520 RECEIVED FOR CASH RESERVES 0.1180 ANNUAL PERCENTAGE CHANGES 1985 .1175 .1500 .1170 .1490 1170 1490 1540 1193 00000000 IN SELECTED COSTS NEW FARM MACHINERY . 0.0470 USED FARM MACHINERY 0.0 0.0 FIXED COST, INS 8 TAX 0.0540 0.0470 SEED COSTS 0.0939 0.0313 FERTILIZER 8 LIME 0.0574 0.0727 CHEMICAL COSTS 0.0720 0.0810 FUEL 8 LUBE COSTS 0.0540 0.0470 REPAIRS ON MACHINERY 0.0540 0.0470 OTHER PROD COST 0.0054 0.0470 CUSTOM COSTS 0.0540 0.0470 HIRED LABOR COSTS 0.0540 0.0470 OFF-FARM INVESTMENT 0.1180 0.1190 PURCHASED INPUTS FOR LIYEST 0.0 0.0 FARMLANO VALUES 0.0710 0.0710 BUILDING VALUES '0.0200 ~0.0200 OFF'FARM STORAGE COSTS 0.0 0.0470 OTHER ANNUAL DATA FOR THE FARM 1984 1985 NEW CAPITAL INVESTED IN FAR 0.0 0.0 CONSUMER PRICE INDEX 310 50 323.90 OTHER FARM INCOME 0.0 0.0 SELF EMPLOYMENT TAX RATE 0.140 0.141 MAXIMUM INCOME SUIJUCT TO SELF EMPLOPYMENT TAX 37209.00 38803.00 SUMMARY OF THE OWNED MACHINERY COMFLEMENT CURRENT ORIGINAL YEAR MARKET PURCHASE PURCHASED VALUE PRICE TRACTOR155HP 1980.0 33474.0 39798.0 TRACTOR155HP 1979.0 31759.0 33558.0 TRACTOR155HP 1983.0 51700.0 51700.0 TRACTOR ISHP 1975.0 7717.0 10087.0 TRCTR 225HP 1978.0 34945.0 52475.0 TRCTR 229HP 1981.0 50897.0 74528.0 COMBINE 7720 1979.0 51909.0 53885.0 COMBINE 7720 1983.0 94000.0 94000.0 COMBINE 7720 1980.0 55882.0 51881.0 PCKUP 1/2TON 1983.0 9000.0 9000.0 PCKUP 1/2TON 1978.0 3425.0 4538.0 PCKUP 1/2TON 1975.0 2375.0 3875.0 DSK 22' 9" 1982.0 7500.0 11500.0 OSK 22' 9“ 1980.0 4500.0 9800.0 DSK 24' 4' 1981.0 5000.0 11500.0 OSK 24' 4“ 1978.0 3500.0 9200.0 ROLL CULT 1982.0 2000.0 4200.0 ROLL CULT 1979.0 1500.0 3900.0 BN PLANT 8‘ 1975.0 4500.0 4371.0 BN PLANT 8' 1982.0 4500.0 7000.0 GRAIN CART 1981.0 3500.0 4718.0 GRAIN CART 1975.0 2000.0 1320.0 LO PL 15XSO 1978.0 7375.0 7500.0 LD PL 15X50 1977.0 3000.0 8000.0 LEYEE BOXES 1982.0 8000.0 7500.0 LEVEE PLOW 1981.0 1547.0 1553.0 LEVEE PUSH 1981.0 700.0 2100.0 LEVEE ROLLER 1978.0 350.0 350.0 FLO CUL 31' 1982.0 5500.0 7900.0 FLO CUL 31' 1981.0 4500.0 7100.0 FLD CUL 25 1978.0 2500.0 5800.0 BEODER 8 ROW 1975.0 1035.0 1100 0 BEODER 8 ROW 1979.0 1500.0 3500 0 PIPE NARROW 1979.0 1000.0 1020.0 PIPE NARROW 1980.0 1100.0 1500.0 DU'ALL 1978.0 3500.0 8500.0 MISC TRUCKS 1977.0 50000.0 50000.0 64 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0000 13800.0000 3.3500 1985 1987 0.1175 0.1175 0.1500 0.1500 0.1090 0.1050 0.1410 0.1370 0.1090 0.1050 0.1410 0.1370 0.1580 0.1420 0.1110 0.1070 0.0450 0.0480 0.0 0.0100 0.0450 0.0480 '0.0640 0.0480 0.0570 0.0480 0.0505 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.1110 0.1070 0.0 0.0 0.0710 0.0710 '0.0200 ~0.0200 0.0450 0.0480 1985 1987 0.0 0.0 339.00 355.20 0.0 0.0 0 143 0 143 40512.00 42572.00 ESTIMATED OEPRECI' SALVAGE ATION VALUE LIFE 3980.0 7.0 3357.0 7.0 0.0 7.0 1009.0 7.0 5248.0 7.0 7452.8 7.0 5389.0 7.0 0.0 7.0 5188.0 7.0 0.0 7.0 454.0 7.0 388.0 7.0 0.0 7.0 980.0 7.0 0.0 7.0 920.0 7.0 0.0 7.0 390.0 7.0 437.0 7.0 0.0 7.0 0.0 7.0 132.0 7.0 750.0 7.0 800.0 7.0 0.0 7.0 0.0 7.0 0.0 7.0 35.0 7.0 0.0 7.0 0.0 7.0 580.0 7.0 110.0 7.0 350.0 7.0 102.0 7.0 150.0 7.0 850.0 7.0 0 7.0 8000. 1988 .1175 .1500 .1050 .1370 .1050 .1370 .1420 .1070 0010001000 .0500 .0100 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .1070 .0710 .0200 .0500 000(I000O()O0O()000 44805.00 zcouomxc necovznv IOEPREC.I LIFE 7.0 7.0 7.0 O~4~4~l~l~l~l~l~l~l~l~l~l~l~l~l~l~l~l~l~i~l~l~l~l~l~l~l~l~l~l~l~l~l OOOCIO0O(7000()OOO()0O0O()0OO()0000()O00O OOOOOOOOCWJOOOOOO 00000000 O00 000000O0(%0O00000 00000000 0.0 ACCUM 000 30479.5 28070. 9255. 9078 45037. 43284. 43855. 14100. 45772. 1350. 3935. 3488. 4255. 7249. 5570. 7978. 1554. 3174. 3934. 2590. 2735. 1188. 5590. 7200. 2775. 905. 1218. 303. 2923. 4118. 5029. 990. 2849. 830. 1183. 7457. 52031. 3 0 bOl-IIHNOQOOVIOUIOOIIOFOOIIO~OOOOUOIIO~INOO O0000000000 000450000 O00 000()OOO()00O()O000 000O()000 O00 CURRENT COST 51700. 81700. 51700. O00 19900. 94800. 94800. 94000. 94000. 94000. 9000. 9000. 9000. 15300. 15300. 19300. 19300. 5200. 5200. 10250. 10250. 8800. 5800. 17500. 17500. 11250. 2800. 2500. S50. 9800. 9800. 9800. 5400. 5400. 2100. 2100. 11500. 80000.0 00000000000000CM000O000O00O000000O OOOOOOOOOOOOOOOO 00000000 000 0000000000000000 00000000 000 0.0 COS T 0000000OO0OO0000 00000000 O00 0O000O000000000O 00000000 000 RECOVERY PERIOD 5. CIIIIGIIGIIUIIIIIIIMMIIIIIMIIIUIGIIMGIIIIIllllfiillillllllllllllflllllllllmllllllllll 00000000000000000000000O0000000000 0 0 0 OR CLASS 05 HARVEST COST 3/YIELD UNIT 00 00 00 00 PT. OCT. .105 0.557 .105 0.557 .294 0.111 .05! 0.588 0.00 000.00 0.00 300.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 CUSTOM WORK 0.0790 0.0790 88 0.3370 87 0.3370 PT. OCT. .000 1.000 .000 1.000 .000 1.000 .000 1.000 10 .301 0.900 .310 0.970 .121 0.351 .155 0.792 .225 0.258 .225 0.255 .211 0.419 .211 0.419 NOV. 0.797 0.797 0.155 0.0 $00.00 250.00 0. 0. 0 0. 0. 0. 0. 0. N INFORMATION FOR 1411141 FARM 2:10. 40455----~----~--------------------------------------------------~--------- 5uMM441 or can» 5415444155 c0515 5:50 FER?-LIME cM5M1c41s ru51-1055 4544145 01554 --5/Ac45-- 151 50145445 5.45 14.35 45.45 12.54 5.11 5.14 0.45 240 50155445 5.45 14.35 45.45 12.55 5.11 5.14 0.45 FIRST 41:: 33.50 51.00 41.55 15.50 5.15 15.20 1.23 441004 41:: 0.0 3.35 2.50 0.0 0.0 5.15 1.23 MONTHLY 14504 450u14:M:n1s 5:4 4:45, 51 0405 5115454155 344. F55. MAR. 40411 M41 JUNE 3u11 4u0. 55 151 50155455 0.240 0.454 0.105 0.545 1.244 0.444 0.255 0.404 0 240 SOYIEANS 0.240 0.454 0.105 0.545 1.244 0.444 0.255 0.404 0 FIRST 41:5 0.215 0.351 1.340 0 515 1.130 1.151 1.213 0.511 0 441004 410: 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.101 0 nouns 0r uur410 FAMILY 14504 414114515 54cn MONTH 400.00 400.00 500.00 500.00 150.00 500.00 500.00 500.00 40 nouns woaxzo 54:4 HONTN 51 4 _ ru11 11M: 5Mr10155 250.00 300.00 350.00 350.00 350.00 350.00 350.00 350.00 30 4uuu41 MEAN 04 MODAL 0404 115105 1554 1545 1545 1551 1544 151 50155415 23.55 24.11 24.51 25.11 25.54 0.0 0. 240 50145445 22.44 23.31 23.14 24.21 24.15 0.0 0. 51451 41:5 50.03 55.55 50 13 51.34 51.55 0.0 0. 441004 41:: 1.54 1.55 1 54 2.00 2.02 0.0 0. 4uuu41 MEAN 04 M0041 c404 PRICES 1544 1555 1545 1541 1544 151 50155445 5.33 1.45 1.52 4.01 5.34 0.0 0. 240 50155455 5.33 1.45 1.52 4.01 5.34 0.0 0. FIRST 41:: 5.54 10.05 10.40 10.43 11.25 0.0 0. 441004 41:5 4.44 5.34 5.54 10.01 10.50 0.0 0. 00151441115 0n 1n: c40wM1x 4:555 ACRES M1n1MuM M4x1MuM 1144405 u04M41 1144150 444155150 54401104 54401104 10 00u515 FRAC. A0455 1544 1 15441 or M11 or M1x :40: n44v:51:0 151 50155445 131.30 554.10 0.0 0.0 0.0 0.55 240 50155445 131.30 554.10 0.0 0.0 0.0 0.55 FIRST 41:5 131.40 124.10 0.0 0.0 0.0 0.55 441004 41:5 131 40 124.10 0 0 0.0 3.00 0.55 0404 50445 1545140 51 5400 14501040 54445 or 45051415 4 c0515 :40! 5550 5541 4 CHEMICAL ru51 4 MACHINERV 01M:4 45051015 00515 11M: 00515 1u5: 4524145 c0515 151 50155445 0.1430 0.0 0.0 0.0 0.0 0.0 0.0 240 50155445 0.1430 0.0 0.0 0.0 0.0 0.0 0.0 41451 41:5 0 5000 1.0000 0.3530 0.5000 0.0 0.0 0.45 441004 41:5 0.5000 0.0 0.35:0 0.5000 0.0 0.0 0.50 M44x511u0 5144145155 550114145 FRACTION MONTH MONTH 101551041 5010 5511 5010 4r154 5010 IN 14x 1:44 4441551 u5x1 1544 151 50155445 2444.500 0.300 10.000 1.000 210 50155445 2340.000 0.300 10.000 1 000 FIRST 41:5 0.0 0.0 1.000 1.000 441004 4105 102.400 1.000 10.000 1.000 55450441 PRICE 1n05x 445. FEB. M44. 44411 M41 JUN! 3011 4u5. 55 151 50155445 1.000 1.000 1.000 1.000 1 000 1 000 1.000 1 000 1 210 50155445 1.000 1.000 1.000 1.000 1 000 1.000 1.000 1.000 1 FIRST 41:: 1 000 1.000 1.000 1.000 1.000 1.000 1 000 1 000 1 441005 4105 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1 000 1 r4c104z0 M4141x 504 0404 115105 4 r41c5s 1 2 3 4 5 1 4 c404 115105 151 50155445 0.0 0.503 0.515 0.355 0.0 0 300 -0.414 -0.244 210 50155445 0.0 0.503 0.515 0.355 0.0 0.300 -0.414 -0.244 FIRST 41:: 0.0 0.0 0.132 0.245 0.0 0.030 0.111 -0.552 441005 41:5 0.0 0.0 0.0 0.533 0.0 0.031 -0.101 -0.440 5404 041055 151 50155445 0.0 0.0 0.0 0.0 0.0 0.551 -0 150 0.242 240 50155445 0.0 0.0 0.0 0.0 0.0 0.551 -0.150 0.242 FIRST 41:5 0.0 0.0 0.0 0.0 0.0 0.0 0.452 0.411 441004 41:5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 000 cuMMu141115 0151415011045 or 05114155 45001 1a: MEAN (04 145101, zxrnzsszu 45 A FRACT!0N or MEAN 1 2 3 4 5 5 1 4 5 :40» 115105 151 50155415 -0.145 -0.541 ~0.314 -0.254 ~0.133 -0.025 0.025 0.135 0 210 50155445 -0.141 -0.530 -0.344 -0.244 -0.114 -0.045 0.032 0.152 0 FIRSY 41:5 -0.355 -0 225 -0.154 -0.115 -0.010 -0.032 0.011 0.052 0 441004 41:: -0.514 -0.311 -0 155 -0.124 -0.055 -0 023 0.024 0.045 0 5404 441055 151 50155455 -0 214 -0.235 -0.043 -0 052 -0.031 0.034 0.044 0.051 0 210 50155445 -0.214 -0.235 -0.043 -0.052 -0 031 0.034 0.044 0.051 0 FIRST 41:5 -0.415 -0.354 -0 222 -0.051 -0 025 0.125 0.111 0.205 0 441004 4105 -0.415 -0.354 ~0.222 -0.051 -0.025 0.125 0.111 0.205 0 0014414405 MATRIX or NIT 1uc0M5s FOR c40r5 1 2 3 4 151 50155445 0.0 0.0 0.0 0.0 240 50155445 0.0 0.0 0.0 0.0 FIRST 41:5 0.0 0.0 0.0 0.0 441004 4105 0.0 0.0 0.0 0.0 0000 0000f! .105 .105 .222 400.00 250.00 0000 .000 .000 .000 .000 65 .000 .000 .000 .000 0000 0000 0000 0000 06 SUMMARY OF POLICY DATA, IY YEAR AND BY CROP 1554 1555 1555 1557 1555 cc: LOAN 00155 151 50755055 5.02 5.02 5.02 5.02 5.02 250 50v5s05s 5.02 5.02 5.02 5.02 5.02 ' FIRST arc: 5.53 5.53 5.53 5.53 5.53 501005 5105 5.03 5.03 5.03 5.03 5.03 15105251 5015 FOR ccc LOANS 0.12 0.12 0.12 0.12 0.12 f 55155551 5015 run FOR LOANS 0.12 0.12 0.12 0.12 0.12 M fl‘ OFF-FARM 510545: 50515 FOR CROPS uuozn LOAN 151 50155055 0.30 0.31 0.33 0.34 0.35 250 50155455 0.30 0.31 0.33 0.34 0.35 FIRST 01:5 0.50 0.52 0.55 0.57 0.50 541005 51:: 0.50 0.52 0.55 0.57 0.50 100551 551055. xr 150v ARI 501 11:0 10 LOAN 541:5 151 50755055 0.0 0.0 0.0 0.0 0.0 250 50v5:055 0.0 0.0 0.0 0.0 0.0 #1551 51:! 12.53 12.53 12.53 12.53 12.53 501005 51:: 11 53 11.53 11.53 11.53 11.53 FLEXIBLE 105051 PRICE---FRACTION or 105051 PRICE 10 LOAN 501: 151 50v5:A5s 0. 0.0 0.0 0.0 0.0 250 50105055 0.0 0.0 0.0 0.0 0.0 FIRST 51:5 0.0 0.0 0.0 0.0 0.0 501005 51:5 0.0 0.0 0.0 0.0 0.0 015501 ~r0n" :51nv PRICE 151 50v5en5s 0.0 0.0 0.0 0.0 0.0 250 50150555 0.0 0.0 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 0.0 0.0 501005 51:: 0.0 0.0 0.0 0.0 0.0 ACTUAL v1:L05 LAST 5 1:055 FOR CALCULATING FARM PROGRAM YIELDS 151 SUY!EAN$ 30.00 32.00 17.00 10.00 5.00 250 50155455 30.00 32.00 17.00 10.00 5.00 FIRST 51:5 41.55 35.53 44.45 45.51 45.32 551005 arc: 2.12 1.55 1.55 1.52 1.54 ACTUAL LAGGED 051055 FOR 4 vsnns useu FOR rL:x15L: LOAN 04155 151 SOVBEANS 0.0 0.0 0.0 0.0 5 250 50v55055 0.0 0.0 0.0 0.0 FIRST arc: 0.0 0.0 0.0 0.0 501005 51:5 0.0 0.0 0.0 0.0 PROGRAM (05 505!) 405500: 151 50755055 731.33 731.33 731.33 731.33 731.33 250 50755055 731.33 731.33 731.33 731.33 731.33 FIRST arc: 731.33 731.33 731.33 731.33 731 33 501005 51:: 731.33 731.33 731.33 731.33 731.33 501105AL ALLOCATION 50:10: 151 50755555 0.0 0.0 0.0 0.0 0.0 250 50155455 0.0 0.0 0.0 0.0 0 0 51551 01:5 1.00 1.00 1.00 1.00 1 00 041005 5105 1.00 1.00 1.00 1.00 1.00 5055005 551 A5105, 01v5n5105 05 LIMITATION (FRACTION) 151 50v55055 0.0 0.0 0.0 0.0 0.0 250 50755555 0.0 0.0 0.0 0.0 0.0 FIRST 51:: 0.25 0.35 0.25 0.25 0.25 501005 RICE 0.25 0.35 0.25 0.25 0.25 SLXPPAGE 5015 (FRACTION) 151 50155055 0.0 0.0 0.0 0.0 0.0 250 s0v55055 0.0 0.0 0.0 0.0 0.0 51551 nxcs 0.20 0.20 0.20 0.20 0.20 501005 51:: 0.20 0.20 0.20 0.20 0.20 0015551 5015 run 0055005 01v:nsx05 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50755555 0.0 0.0 0.0 0.0 0.0 FIRST 51:: 0.0 71.15 34.52 35.45 35.07 501005 5105 0.0 0. 0.0 0.0 0.0 1515555 PRICE won 155 ~r0n~ 151 50155055 0.0 0.0 0.0 0.0 0.0 250 50155055 0.0 0.0 0.0 0.0 0.0 51551 51:5 0.0 0.0 0.0 0.0 0.0 Q 541005 51:: 0.0 0.0 0.0 0.0 0.0 . c4LL PRICE ran 15: -r05~ 151 50155055 0.0 0.0 0.0 0.0 0.0 250 50v05A55 0.0 0.0 0.0 0.0 0.0 FIRST arc: 0.0 0.0 0.0 0.0 0.0 501005 51:: 0.0 0.0 0.0 0.0 0.0 LENGTH 05 505505 0w5s0 nzsznvs 151 50750055 0.0 0.0 0.0 0.0 0.0 250 50755055 0.0 0.0 0.0 0.0 0.0 51051 51:5 0.0 0.0 0.0 0.0 0.0 501005 51:5 0.0 0.0 0.0 0.0 0.0 510500: PAYMENT 5015 ran 15: ~505- 151 SOVIEANS 0.0 0.0 0.0 0.0 0.0 250 50755055 0.0 0.0 0.0 0.0 0.0 FIRST arcs 0.0 0.0 0.0 0.0 0.0 541005 51:5 0.0 0.0 0.0 0.0 0.0 5500001105 0u0a0515: FOR 050» INSURANCE 151 50155055 13.55 13.52 14.20 14.45 14.75 250 SOYIEANS 13.55 13.52 14.20 14.45 14.75 FIRST 51:: 0.0 0.0 0.0 0.0 0.0 501005 RICE 0.0 0.0 0.0 0.0 0.0 rnxcs :L:c1105 FOR 0005 155u505:: 151 s0v5555s 5 50 7 73 5.22 5.25 5.52 250 50755055 5 50 7 73 5.22 5.25 5.52 FIRST arcs 0 0 0.0 0.0 0.0 0.0 041005 51:2 0.0 0.0 0.0 0.0 0 0 rnzmxun 501: ran 0:55 FOR cnow 15555455: 151 50100455 5.31 11.25 12.24 12.50 13.37 250 SOYIEANS 5.13 11.05 12.01 12.35 13.11 FIRST arcs 0.0 0.0 0 0 0.0 0.0 501005 51:5 0.0 0.0 0 0 0.0 0 0 LOAN 501: run FEANUTS unoan 0u015 151 SOYIEANS 0.0 0.0 0.0 0.0 0.0 66 250 50105055 0.0 0.0 0.0 0.0 0.0 P1551 5155 0.0 0.0 0.0 0.0 0.0 501005 5:05 0.0 0.0 0.0 0.0 0.0 L055 0015 505 #555015 501 u505n 0u014 151 50155055 0.0 0.0 0.0 0.0 0.0 250 SOVIEANS 0.0 0.0 0.0 0.0 0.0 FIRST nxcz 0.0 0 0 0.0 0.0 0.0 RATOON RICE 0 0 0.0 0 0 FARM"S POUNOACE 0UOTE FOR PEANUTS IST SOYOEANS 0.0 0.0 0.0 ZMO SOYEEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 ACREACE ALLOTMENT FOR RICE 1ST SOYBEANS 0.0 0.0 0.0 2NO SOYOEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 FRACTION TARGET PRICE FOR LOW YIELO PAYMENT IST SOYBEANS 0.0 0.0 0.0 2NO SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 FRACTION TARGET PRICE FOR PREYENTEO PLANTING PAYMENT 1ST SOYBEANS 0. 0.0 0.0 2ND SOYIEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 FRACTION PROYEN YIELO FOR LOW YIELO PAYMENT 1ST SOYOEANS 0.0 0.0 0.0 2ND SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 FRACTION PROYEN YIELD FOR PREYENTEO PLANTING 1ST SOYBEANS 0.0 0.0 0.0 2ND SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 PARITY PRICE 1ST SOYOEANS 0.0 0.0 0.0 2ND SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 FRACTION OF CROP ELIGIBLE FOR MKTC CERTIFICATE 1ST SOYEEANS 0.0 .0 0.0 2HO SOYIEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 PAYMENT LIMITATION FOR INCOME SUPPORT PAYMENTS 100000.00 100000.00 100000.00 100000. DISASTER PAYMENTS 100000.00 100000.00 100000.00 100000. MAXIMUM NONRECOURSE CCC LOAN 1ST SOYBEANS 0.0 0.0 0.0 2ND SOYBEANS 0.0 0.0 0.0 ring? RICE 0.0 0.0 0.0 RATOON RICE 0-0 0-0 0-0 PERCENT EASE PRODUCTION ELIGIBLE FOR OEFICIENCY PAYMENT 0.0 0.0 0.0 MAXIMUM VALUE OF CROP ELIGIELE FOR OEFICIENCY PAYMENT 0.0 0.0 FLEXIBLE LOAN RATE FORMULAS 1ST SOYBEANS 2ND SOYBEANS FIRST RICE RATOON RICE II A 1.0 MARKETING LOAN RATES 1ST SOYBEANS 2ND SOYBEANS FIRST RICE RATOON RICE MAXIMUM MKTC LOAN BASE NO. OF Y INDICATES OELETING THE LOW EARS DROP LOW 0.0 0. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 OR HIGH 0.0 0.0 0 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0.0 SCALE FARM PROGRAM BENEFITS TO FARM SIZE FARMS LARGER THAN FARMS LARGER THAN FARMS WITH CROP FARMS WITH CROP SALES GREATER THAN S 0. 0 0 0 0100 0 0100 0 0 01)0 0100 0 0 0100 0130 0 0 0 010 0100 0 01000 0 0100 0 0100 0 0 0 0 0 .0 0 0 0 .0 0 0 0 .0 0 0 .0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 100000. 00 100000. 0 0 0 0 0 0 00100 01000 0. ACRES ARE NOT ELIGIBLE FOR ANY FARM PROGRAM 0. ACRES ARE ONLY ELIGIBLE FOR THE CROP SALES GREATER THAN S 0. HISTORY OF FCIC PARTICIPATION NUMBER OF YEARS IN THE PROGRAM 3.00 NUMBER OP LOSS YEARS IN PROGRAM 2.00 TOTAL FCIC INSURANCE PREMIUMS PAID BY FARM 32323.50 TOTAL FCIC INDEMNITY PAYMENTS RECEIVED 111513.00 THE ENO OF ALL INPUT DATA 1 1TOTAL DEPREC I THIS YEARS OEPREC 2552.0 2552.0 MACHINE 1 7.00 33070.00 39796.00 3980.00 9318.51 0.0 0.0 7.00 39798.00 2982.03 81700.00 5.00 0.0 1 ZTOTAL OEPREC I THIS YEARS DEPREC 0233.2 1570.8 MACHINE 2 7.00 31759.00 33550.00 3357.00 5097.71 0.0 0.0 7.00 33568.00 1570.77 S1700.00 5.00 0.0 1 3TOTAL DEPREC A THIS YEARS DEPREC 19217.5 10980.3 MACHINE 3 7.00 91700.00 81700.00 0.0 52005.00 0.0 0.0 7.00 $1700.00 10980.29 51700.00 5.00 0.0 1 0TOTAL OEPREC I THIS YEARS OEPREC 19217.5 0.0 MACHINE 0 7.00 7717.00 10087.00 1009.00 1009.00 0.0 0.0 7.00 10037.00 0.00 19900.00 5.00 0.0 1 STOTAL DEPREC I THIS YEARS OEPREC 20007,5 1150.0 MACHINE 5 7.00 30905.00 52075.00 5208.00 0037.98 0.0 0.0 7.00 52075.00 1189.98 90800.00 5.00 0.0 1 GTOTAL DEPREC I THIS YEARS OEPREC 39531.1 8955.0 MACHINE 5 7.00 50997.00 70528.00 7052.80 3I303.7S 0 0 DROP HIGH FRACTION OF MEAN o o<>00 0 oo<>o 01000 01000 01000 01000 00100 00100 01200 00100 00100 01000 00100 01000 01000 00100 00100 00100 00100 00 00 00100 INSURANCE PROGRAM 0000.00 0.0 0000.00 2017.00 2.00 0000.00 0.0 ARE ONLY ELIGIBLE FOR THE CROP 00 00 00 00 00 ARE NOT ELIGIBLE FOR ANY FARM PROGRAM BENEFITS INSURANCE PROGRAM .0 33070.00 1980.00 .0 31789.00 1979.00 .0 81700.00 1983.00 .0 7717.00 1975.00 .0 30905.00 1978.00 .0 50997.00 33101. 0.0 29801. 0.0 20239 0.0 9078. 07227. 0.0 52239 92 OS .25 00 00 .S0 67 SUMMARY OF PROGRAM OPTIONS SELECTED BY THE USER RESULTS FROM SSR ROTATION, LIBERTY COUNTY. FINAL BASE SIMULATION. MULTIYARIATE EMPIRICAL DISTRIBUTIONS USED FOR PRICES AND YIELDS. WHOLLY LEASED FARM ACREAGE, 50% LONG TERM AND 50% INTERMEDIATE DEBT, 33% CUT OFF POINT. CROP INSURANCE, S0 G PAYMENT LIMIT. 1/7 CROP SHARE ON SOYBEANS AND RICE. STOCHASTIC RUN, S0 ITERATIONS. SIMULATE THE REPRESENTATIVE FARM FOR S YEARS FIRST YEAR TO BE SIMULATED IS 1580. THE SIMULATION WILL BE DETERMINISTIC PRINT ALL INPUT DATA AND ALL OUTPUT TABLES THE REPRESENTATIVE FARM HAS I CROPS AND 0 LIVESTOCK ENTERPRISES PAYOFF OUTSTANDING LOANS USING SURPLUS CASH NO SPECIAL FINANCIAL BAILOUT PROGRAM IS IN EFFECT ADJUST INCOME TAX SCHEDULE AFTER 1884 FOR CHANGES IN THE CPI FIXED PORTION OF CROPS SOLD IN T AND CCC LOAN USED FOR THE REMAINDER NO MAXIMUM ON ANNUAL INTEREST DEDUCTIONS IS IN PLACE THE CROP MIX WILL BE CONSTANT OVER TIME DEPRECIATION ON OLD MACHINERY WILL BE CALCULATED BY THE OECLINING BALANCE METHOD USE THE FEDERAL INCOME TAX PROVISIONS FDR 1l82 MACHINERY PURCHASED AFTER ISBO WILL BE RECOVERED USING AN ACCELERATED SCHEDULE THE USER HAS ELECTED TO REDUCE BASIS FOR INVESTMENT TAX CREDIT THE FARM HAS ELECTED NOT TO TAKE FIRST YEAR EXPENSING ON PURCHASES OF MACHINERY THERE ARE O7 PIECES DF OWNED FARM MACHINERY TO BE DEPRECIATED OLD FARM MACHINERY WILL BE TRADED IN RATHER THAN BE SOLD USER HAS SPECIFIED THE FAMILY CONSUMPTION FUNCTION FOR REGION B THE FARM MAY NOT SELL CROPLAND TD AVOID INSOLVENCY CROPLAND WILL BE LEASED USING A CROP SHARE SCHEME SPECIFIED BY THE USER ANNUAL INFLATION RATES FOR FARMLAND ARE PROVIDED BY THE USER THE FARM WILL NOT BE ALLOWED TO GROW OVER TIME INFORMATION FOR 0 ALTERNATIVE FARMS IS PROVIDED BY THE USER AN UNLIMITED NONRECDURSE LOAN (PRICE SUPPORT PROGRAM WILL BE IN EFFECT DO NOT PAY INTEREST ON NONREDEEMED NONRECOURSE CCC LOANS LOAN RATES ARE FIXED BY THE ANALYST IN ALL YEARS INTEREST ON FOR LOANS WILL BE CHARGED ANNUALLY FOR 1 YEARS A TARGET PRICE PROGRAM WILL BE IN EFFECT AND TARGET PRICES ARE FIXED AN ALL~RISK CROP INSURANCE PROGRAM IS IN EFFECT A MANDATORY SET~ASIDE OR VOLUNTARY DIVERSION PROGRAM WILL BE IN EFFECT PAYMENT LIMITATIONS ARE IN EFFECT FOR DEFICIENCY PAYMENTS, DIVERSION PAYMENTS I DISASTER PAYMENTS ALL FARMS ARE ELIGIBLE FOR ALL FARM PROGRAM BENEFITS RESULTS FROM SSR ROTATION, LIBERTY COUNTY. FINAL BASE SIMULATION. MULTIYARIATE EMPIRICAL DISTRIBUTIONS USED FOR PRICES AND YIELDS. WHDLLY LEASED FARM ACREAGE, 50% LONG TERM AND I01 INTERMEDIATE DEBT, 33% CUT OFF POINT. CROP INSURANCE, 50 G PAYMENT LIMIT. 1/7 CROP SHARE ON SDYBEANS AND RICE. STOCHASTIC RUN, 50 ITERATIDNS. CROPLAND ON INITIAL FARM TOTAL CROPLAND ACRES OWNED 10.0000 TOTAL CROPLAND ACRES LEASED 2300.0000 PASTURELAND ACRES OWNED 0.0 PASTURELAND ACRES LEASED 0.0 FRACTION CROPLAND THAT IS TILLABLE 0.9500 FRACTION CROPLAND THAT IS IRRIGATED 0.5300 INITIAL BALANCE SHEET FOR THE FARM ASSETS MARKET VALUE OF CROPLAND 8 FARMSTEAO I2000.0000 MARKET VALUE OF BUILDINGS 155000.000 TOTAL VALUE OF OWNED CROPLAND Q BUILDINGS 157000.000 MARKET VALUE OF OFF-FARM INVESTMENTS 20000.0000 BEGINNING CASH RESERVE S000.0000 MARKET VALUE OF OWNED PASTURELAND 0.0 MARKET VALUE OF ALL FARM MACHINERY 585202.000 MARKET VALUE OF ALL LIVESTOCK 0.0 TOTAL VALUE OF ASSETS 757202.000 LIABILITIES TOTAL REAL ESTATE DEBT B5B00.0000 TOTAL INTERMEDIATE~TERM DEBT 228001.000 INCOME TAXES DUE IN YEAR 1 0.0 SELF EMPLOYMENT TAXES DUE IN YEAR 1 0.0 TOTAL DEBT 2S2BB1.000 BEGINNING NET WORTH (MARKET VALUE] 554321.000 INITIAL FINANCIAL RATIOS FOR THE FARM EOUITY TO ASSETS RATIO 0.5132 DEBT TD ASSET RATIO 0.385! LEVERAGE RATIO 0.B308 AVERAGE PER ACRE VALUE OF CROPLAND I200.0000 AVERAGE PER ACRE VALUE OF PASTURELAND 0.0 LIABILITIES FOR INITIAL FARM REAL ESTATE DEBT B5B00.0000 LOAN LIFE ON DEBT 30.0000 FRACTION LAND LOAN REMAINING 0.5000 ORIGINAL AMOUNT OF THE LOAN I3J500.000 DEBT TO ASSET RATIO 0.4000 INTERMEDIATE TERM DEBT 22SOB1.000 LOAN LIFE ON DEBT 5.0000 FRACTION LOAN REMAINING 0.5000 ORIGINAL AMOUNT OF THE LOAN 452182.000 DEBT TO ASSET RATIO 0.l000 68OPERATING LOAN FRACTION OF YEAR LOAN IS USED 0.3820 TERMS FOR NEW LOANS 01 NO. YEARS FOR NEW LAND LOANS 3Q_QQ°Q IO. YEARS FOR NEW MACH LOANS 5_QQqQ MINIMUM INTERMEDIATE TERM EOUITY INFORMATION FOR REFINANCING DEBTS CHARGE TO REFINANCE CASH FLOW OEFICITS NO. NO. YEARS FDR MINIMUM DOWNPAYMENT LEVELS MINIMUM OOWNPAYMENT FOR MINIMUM DOWNPAYMENT FOR AFTER'TAX DISCOUNT RATE YEARS FOR A LONG'TERM LOAN INTERM-TERM LOAN FARM MACHINERY FARMLAND ANNUAL RATE OF RETURN TD PROD ASSETS T'1 CAPITAL GAIN RATE FOR LAND CASH RESERVE FOR THE FARM MINIMUM CASH RESERVE IEGINNING CASH RESERVE CAPITAL ASSETS TO OE RECOVERED INTO USE PRIOR TO 8UILOINGS PLACED snuvncz vnnue runcnns! PRICE ECONOMIC IDEPRECIATIONI REGULAR BUILCINGS PLACED runcunsz PRICE CALENDAR YEAR runcnnszn SPECIAL PURPOSE BUILDINGS PLACED PURCHASE PRICE CALENDAR YEAR PURCHASED FIXED COSTS PROPERTY TAX RATE OTHER TAXES ACCOUNTANT 8 LEGAL FEES IN T'1 lozrnscxnrco) was: LIFE INTO USE AFTER (STAX/SVALUEI TOTAL PERSONAL PROPERTY TAX UNALLOCATEO MAINTENANCE COSTS INSURANCE ON MACHINERY MISCELLANEOUS FIXED COSTS LAND LEASE COSTS CASH RENT FOR CROPLAND CASH RENT FOR PASTURELANO ANNUAL INFLATION RATE FOR PER ACRE CASH LEASE COST CAPITALIZATION RATE BETWEEN ls/Acne) IS/ACRE) 1980 LAND VALUE 4 CRDPLANO CASH LEASE COST FAMILY CONSUMPTION AND TAX ACE OF OPERATOR NO. DESIRED TAXABLE INCOME INFORMATION OF TAX EXEMPTIONS CLAIMED MARCINAL TAX RATE FOR STATE RATIO OF PERSONAL OEOUC TO NET AVERAGE ANNUAL OFF-FARM INCOME NON-TAXABLE OFF'FARM ANNUAL RETURN ON OFF~FARM INCOME INVEST MINIMUM FAMILY VIVINC EXPENSES MAXIMUM FAMILY LIVING EXPENSES USER'S SPECIFIED CONSUMPTION FUNCTION USED CONSUMPTION I 0.0 6 INCOME TAX PAYMENT DUE INCOME INCOME INCOME TAXABLE TAXABLE TAXABLE IN YEAR I-3 IN YEAR T'2 IN YEAR T~1 MAXIMUM INTEREST DEDUCTION RISK AVERSION COEFFICIENT HIRED FARM LABOR NO. OF FULL TIME EMPLOYEES .0 3 IN YEAR 1 SELF-EMPLOYMENT TAX PAYMENT DUE IF OPTION INCOME IN YEAR INTO USE AFTER IF IOISPOSIBLE IS USED ANNUAL GROSS SALARY FOR FULL'TIME EMPLOYEE HOURLY WAGE RATE FOR PART-TIME LABOR ANNUAL INTEREST RATES OLD LONG~TERM LOANS OLD INTERMEDIATE-TERM LOANS NEW LONG-TERM LOANS NEW INTERMEDIATE-TERM LOANS REFINANCE LONG-TERM LOANS REFINANCE INTERM-TERM LOANS OPERATING LOANS RECEIVED FOR CASH RESERVES ANNUAL PERCENTAGE CHANGES NEW FARM MACHINERY USED FARM MACHINERY FIXED COST, INS I TAX SEED COSTS FERTILIIER 8 LIME CHEMICAL COSTS FUEL I LUBE COSTS REPAIRS ON MACHINERY OTHER PROD COST CUSTOM COSTS HIRED LABOR COSTS OFF-FARM INVESTMENT . PURCHASED INPUTS FOR LIVEST FARMLAND VALUES BUILDING VALUES OFF-FARM STORAGE COSTS OTHER ANNUAL DATA FOR THE FARM NEW CAPITAL INVESTED CONSUMER PRICE INDEX OTHER FARM INCOME IN FAR SELF EMPLOYMENT TAX RATE MAXIMUM INCOME SUBJUCT TO SELF EMPLOPYMENT TAX 1984 .1175 .1500 .1310 .1480 .1310 .1480 .1520 .1180 000100001! 1985 IN SELECTED COSTS SUMMARY OF THE OWNED MACHINERY COMPLEMENT YEAR PURCHASED TRACTOR158HP 1980.0 vuqcvqoacnua qevn 0 0.1175 0.1500 0.1170 0.1490 0. 0 0 0 1170 .1450 .1540 .1193 0.0 0.0470 0.0 0.0 0 0540 0.0470 0 0939 0.0313 0 0574 0.0727 0 0720 0.0810 0 0540 0.0470 0 0540 0.0470 0 0054 0.0470 0 0540 0.0470 0.0540 0.0470 0.1180 0.1190 0.0 0.0 0 0710 0.0710 -0.0200 ~0.0200 0.0 0.0470 1984 1985 0.0 0.0 310.80 323.50 0.0 0.0 0 140 141 37209.00 38803.00 CURRENT ORIGINAL MARKET PURCHASE VALUE PRICE 33474.0 39798.0 11719 O 33558 O 0.3333 0.0100 20.0000 5.0000 0.3000 0.3000 0.1011 0.0400 5000.0000 5000.0000 10500.0000 105000.000 30.0000 1980 b 00000 .0000 .0000 .0 .2000 .0 0.0 1S000.0000 0.1100 18000.0000 25000.0000 THE OPTION IS ELECTED INCOME ' 0.0 I 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0000 13800.0000 3.3500 1988 1987 0.1175 0.1175 0.1500 0.1500 0.1050 0.1050 0.1410 0.1370 0.1090 0.1050 0.1410 0.1370 0.1550 0.1420 0.1110 0.1070 0.0450 0.0480 0.0 0.0100 0.0450 0.0480 -0.0840 0.0480 0.0570 0.0480 0.0505 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.1110 0.1070 0.0 0.0 0.0710 0.0710 ~0.0200 0.0200 0.0450 0.0480 1988 1987 0.0 0.0 335.00 355.20 0.0 0.0 0.143 0 143 40812.00 42572.00 ESTIMATED DEPRECI~ SALVAGE ATION VALUE LIFE 3580.0 7.0 3357.0 7.0 1988 .1175 .1500 .1050 .1370 .1050 .1370 .1420 .1070 000100001) .0500 .0100 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .1070 .0710 .0200 .0500 001D000100004D001)00 44805.00 ECONOMIC RECOVERY LIFE 7.0 7.0 0(>0O1>001D001D001®00 0017001000 0100 01D001J001D001®00(>00 0010001200 0100 ACCUM. (DEPREC.] 30479.5 25070.: 0001>000O1)00001)O0 000013000 000 00001D000<)0001>000 000013000 000 MACHINERY REPLACEMENT REPLACE. CODE 0.0 0.0 000()00001D0000()00 000()0000 000 0001®0O001>0O001D00 000120000 000 CURRENT COST 81700.0 81700.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0.0 0. 0.0 0 0 0 0.0 0.0 0 69 COST RECOVERY PERIOD OR CLASS 5.0 5.0 000 04 05 70 MARKETING STRATACIES vnncroa asnv 1215.0 1111.0 rncrn zzsnw 1s1a.o 34945.0 TRCTR 225MP 1581.0 50857.0 COMBINE 112° 1s1s.o 51sos.o COMBINE 1120 1sa:.o s4ooo.o CDHIINE 112a 1100.0 ssaa2.o rcxun v/zvun 1sa:.o 9000.0 rcxun 1/zrou 1s1a.o :42s.o rcxup 1/zrou 1s1s.o 2:1s.o osx 22' 9* 1sa2.o 1soo.o OSK 22‘ 5“ 1580.0 4500.0 osx 24- 4~ 1sa1.o sooo.o nsx 24' 4- 1s1a.o :soo.o ROLL CULT 1022.0 2ooo.o ROLL cunt 1s1s.o 1500.0 an PLANT 5' 191s.o 4500.0 an PLANT a‘ 1122.0 4500.0 cnnln cnnr 1921.0 :soo.o cnnxn CART 1s1s.o 2oeo.o LO PL xsxso 1s1a.o 1:1s.o LD PL 1sxso 1211.0 :ooo.o LEVI! uoxzs 1922.0 $000.0 LEVEE PLOW 1581.0 1547.0 LEYEE PUSH 1881.0 700.0 LEVEE nouuzn 1s1s.o :so.o run cuu 11' 1sa2.o 5500.0 FLO CUL 31‘ 1581.0 4800.0 run CUL 2s 1s1a.o 2500.0 aznnza a now \|1s.o 1oas_o nennzn a now 1s1s.o 1500.0 urn: uAnnow 1s1s.o 1000.0 PIPE HARROW 1580.0 1100.0 OU-ALL 1s1a.o :soo.o Misc rnucxs xs11.o soooo.o Iuronnnflou ran xnxrxnn rnan 2:10. SUMMARY OF CROP ENTERPRISE COSTS 10087.0 1005.0 7.0 7.0 5078.0 2.0 15500.0 52475.0 5248.0 7.0 7.0 48037.0 0.0 54800.0 74828.0 7482.8 7.0 7.0 43284.2 0.0 54800.0 53888.0 5388.0 7.0 7.0 43858.7 0.0 54000.0 54000.0 0.0 7.0 7.0 14100.0 0.0 54000.0 51881.0 5188.0 7.0 7.0 45772.5 0.0 54000.0 5000.0 0.0 7.0 7.0 1350.0 0.0 5000.0 4538.0 454.0 7.0 7.0 3535.3 0.0 5000.0 3878.0 388.0 7.0 7.0 3488.0 2.0 5000.0 11500.0 0.0 7.0 7.0 4255.0 0.0 15300.0 5800.0 580.0 7.0 7.0 7245.0 0.0 15300.0 11500.0 0.0 7.0 7.0 5870.0 0.0 15300.0 5200.0 520.0 7.0 7.0 7578.1 0.0 15300.0 4200.0 0.0 7.0 7.0 1554.0 0.0 5200.0 3500.0 350.0 7.0 7.0 3174.5 0.0 5200.0 4371.0 437.0 7.0 7.0 3534.0 0.0 10250.0 7000.0 0.0 7.0 7.0 2550.0 0.0 10250.0 4718.0 0.0 7.0 7.0 2738.4 2.0 5800.0 1320.0 132.0 7.0 7.0 1188.0 2.0 8800.0 7800.0 750.0 7.0 7.0 8550.8 0.0 17500.0 8000.0 800.0 7.0 7.0 7200.0 0.0 17500.0 7500.0 0.0 7.0 7.0 2775.0 0.0 11250.0 1583.0 0.0 7.0 7.0 508.5 2.0 2800.0 2100.0 0.0 7.0 7.0 1218.0 2.0 2500.0 350.0 35.0 7.0 7.0 303.5 2.0 850.0 7500.0 0.0 7.0 7.0 2523.0 0.0 5800.0 7100.0 0.0 7.0 7.0 4118.0 0.0 5800.0 5800.0 580.0 7.0 7.0 5025.7 0.0 5800.0 1100.0 110.0 7.0 7.0 550.0 0.0 5400.0 3500.0 350.0 7.0 7.0 2845.2 0.0 5400.0 1020.0 102.0 7.0 7.0 830.3 0.0 2100.0 1800.0 180.0 7.0 7.0 1183.5 0.0 2100.0 8500.0 880.0 7.0 7.0 7457.8 0.0 11500.0 80000.0 8000.0 7.0 0.0 52031.4 2.0 50000.0 ACRES-°--°1---'--'~----*----"--~--------~--------'---------~—------—--~--- SEED FERT'LIME CHEMICALS FUEL~LU8E REPAIRS OTHER HARVEST COST "5/ACRE'~ 5/YIELD UNIT 1ST SOYOEANS 5.45 14.38 45.45 12.88 8.17 5.14 0.4500 2NO SOYIEANS 5.45 14.38 45.45 12.58 5.17 5.14 0.4500 FIRST RICE 33.50 51.00 57.55 18.80 5.78 75.20 1.2300 RATOON RICE 0.0 3.38 2.50 0.0 0.0 5.75 1.2300 8Y CROP ENTERPRISE FE8. MAR. APRIL MAY JUNE JULY AUG. SEPT. OCT. NOV. 0.458 0.105 0.545 1.248 0.484 0.255 0.404 0.105 0.557 0.757 0.458 0.105 0.548 1.248 0.484 0.255 0.404 0.105 0.557 0.757 0.387 1.380 0.518 1.730 1.151 1.273 0.577 0.254 0.111 0.155 0.0 0.0 0.0 0.0 0.0 0.0 0.101 0.088 0.888 0.0 400.00 800.00 800.00 750.00 500.00 500.00 800.00 800.00 800.00 800.00 300.00 350.00 350.00 350.00 350.00 350.00 350.00 300.00 300.00 250.00 1585 1585 1587 1588 24.17 24.57 25 17 25.88 0.0 0.0 0.0 0. 23.31 23.78 24 27 24.78 0.0 0.0 0.0 0. 58.55 80.73 81.34 81.58 0.0 0.0 0.0 0. 1.58 1.58 2.00 2.02 0.0 0.0 0.0 0. 1585 1588 1587 1588 7.45 7.52 8.01 8.34 0.0 0.0 0.0 0. 7.45 7.52 8.01 8.34 0.0 0.0 0.0 0. 10.05 10.40 10.83 11.25 0.0 0.0 0.0 0. 5.34 5.88 10.07 10.50 0.0 0.0 0.0 0. ACRES MINIMUM MAXIMUM LINKAGE NORMAL HARVESTEO FRACTION FRACTION TO DOUBLE FRAC. ACRES YEAR1 OF MIX OF MIX CROP HARVESTED 854.70 0.0 0.0 0.0 0.55 854.70 0.0 0.0 0.0 0.55 724.10 0.0 0.0 0.0 0.55 724.10 0.0 0.0 3.00 0 55 LANOLORO SHARE OF RECEIPTS 4 COSTS SEEO FERT 8 CHEMICAL FUEL 8 MACHINERY OTHER CUSTOM S COSTS LIME COSTS LUBE REPAIRS COSTS WORK 0.0 0.0 0.0 0.0 0.0 0.0 0.0750 0.0 0.0 0.0 0.0 0.0 0.0 0.0750 0.0 0.0 0.0 0.0 0.0 0.0 0.0750 0.0 0.0 0.0 0.0 0.0 0.0 0.0750 C FRACTION MONTH MONTH SOLO AFTER SOLO IN TAX YEAR HARVEST NEXT YEAR 0.300 10.000 1.000 0.300 10.000 1.000 0.0 7.000 1.000 1.000 10.000 1.000 MONTHLY LAOOR REOUIREMENTS PER ACRE, JAN. 1ST SOYIEANS 0.240 2NO SOYBEANS 0.240 FIRST RICE 0.275 RATOON RICE 0.0 HOURS OF UNPAID FAMILY LABOR AVAILABLE EACH MONTH 400.00 HOURS WORKED EACH MONTH IY A FULL TIME EMPLOYEE 250.00 ANNUAL MEAN OR MOOAL CROP YIELDS 1584 1ST SOYIEANS 23.85 2NO SOYOEANS 22.84 FIRST RICE 50.03 RATOON RICE 1.54 ANNUAL MEAN OR MOOAL CROP PRICES 1584 1ST SOYOEANS 8.33 2NO SOYOEANS 8.33 FIRST RICE 5.54 RATOON RICE 8.88 CONSTRAINTS ON THE CROPMIX ACRES PLANTEO YEAR 1 1ST SOYIEANS 731.30 2NO SOYBEANS 731.30 FIRST RICE 731.40 RATOON RICE 731.40 CROP SHARE LEASING 8Y CROP CROP RECEIPT 1ST SOYEEANS 0.1430 2NO SOYOEANS 0.1430 FIRST RICE 0.1430 RATOON RICE 0.1430 IECINNIN 1ST SOYOEANS 4231.801 2NO SOYIEANS 4080.000 FIRST RICE 0.0 RATOON RICE 1204.200 INVENTORY SOLO NEXT (IllIlllllIIUIIIUGIIIIHIIIIIKIIIIIIIIIUIUIUIIIIGIIIIGIIDUIIIIDUIIISHLIIUI OOOO OOOO 0000000000000000000OOOOOOOOOOOOOOO OEC. 0.105 0.105 0.222 0.0 400.00 250.00 0000 0000 0000 0000 08 SEASONAL PRICE INDEX JAN. FEB. MAR. 45511 MAY JUNE JULY 4u5. 5557. 157 50755455 1.000 1 000 1.000 1.000 1.000 1.000 1 000 1.000 1.000 250 50755455 1.000 1 000 1.000 1 000 1.000 1.000 1.000 1.000 1.000 51557 5105 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1 000 1 000 547005 5105 1.000 1 000 1.000 1.000 1.000 1.000 1 000 1.000 1.000 54070550 M47515 505 c505 715505 5 551055 1 2 4 5 5 7 5 0505 715105 157 50755455 0.0 0.503 0.515 0 355 0.0 0.300 -0.414 -0.245 250 50755455 0.0 0.503 0.515 0 355 0.0 0.300 -0.414 -0.244 51557 51c5 0.0 0.0 0.732 0.245 0.0 0.030 0.177 -0.552 547005 51:5 0.0 0.0 0.0 0 533 0.0 0.031 -0.101 -0.540 5505 551055 157 50755455 0.0 0.0 0.0 0.0 0.0 0.551 -0.150 0 242 250 50755455 0.0 0.0 0.0 0.0 0.0 0.551 -0.150 0.242 51557 51:5 0.0 0.0 0.0 0.0 0.0 0.0 0.452 0.471 547005 51:5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 CUHMULATXV! 0157515071055 or 05714755 450u7 755 MEAN 105 75550). 555555550 45 4 554c7105 or 5545 1 2 3 4 5 5 4 5 c505 715L05 157 50755455 -0.755 -0.541 -0.375 -0.254 -0.133 -0.025 0.025 0.135 0.301 250 50755455 -0.751 -0.530 -0.345 -0.254 -0.174 -0.055 0.032 0.152 0.310 51557 5105 -0.355 -0.225 -0.154 -0.115 -0.070 -0.032 0.011 0.052 0.121 547005 5105 -0.514 -0.317 -0.155 -0.125 -0.055 -0.023 0.024 0.045 0.155 5505 551055 157 50755455 -0.274 -0.235 -0.053 -0 052 -0.031 0.035 0.045 0.057 0.225 250 50755455 -0.274 -0.235 -0.043 -0 052 _ -0.031 0.035 0.044 0.057 0.225 51557 51:5 -0.415 -0.354 -0.222 -0.057 -0.025 0.125 0.171 0.205 0.211 547005 5105 -0.415 -0.354 -0.222 -0.057 -0.025 0.125 0.171 0.205 0.211 c0745145c5 MATRIX 05 557 1500555 505 c5055 1 2 3 4 157 50755455 0.0 0.0 0.0 0.0 250 50755455 0.0 0.0 0.0 0.0 51557 51:5 0.0 0.0 0.0 0.0 547005 51:5 0.0 0.0 0.0 0.0 5unn457 or 505107 0474, 57 7545 450 57 c505 1554 1555 1555 1557 1554 cc: LOAN 54755 157 50755455 5.02 5.02 5.02 5.02 5.02 250 50755455 5.02 5.02 5.02 5.02 5.02 51557 51c5 5.53 4.53 4.53 4.53 4.53 547005 5105 5.03 5.03 4.03 4.03 4.03 15755557 5475 505 ccc LOANS 0.12 0.12 0.12 0.12 0.12 15755557 5475 505 505 10455 0.12 0.12 0.12 0.12 0.12 055-5455 5705405 c0575 FOR c5055 u5055 L045 157 50755455 0.30 0.31 0.33 0.34 0.35 250 50755455 0.30 0.31 0.33 0.34 0.35 51557 5105 0.50 0.52 0.55 0.57 0.50 547005 51c5 0.50 0.52 0.55 0.57 0.50 745057 551055, 15 7557 455 507 7150 70 L045 54755 157 50755455 0.0 0.0 0.0 0.0 0.0 250 50755455 0.0 0.0 0.0 0.0 0.0 51557 51:5 12.53 12.53 12.53 12.53 12 53 547005 5155 11.53 11.53 11.53 1.53 11.53 rL5x15L5 745557 551:5---55407105 or 745057 551:5 70 LOAN 5475 157 50755455 0.0 0. 0.0 0.0 0.0 250 50755455 0. 0.0 0.0 0.0 0.0 51557 51c5 0.0 0.0 0.0 0.0 0.0 547005 51:5 0.0 0.0 0.0 0.0 0.0 015557 ~r05- 55757 55105 157 50755455 0.0 0.0 0.0 0.0 0.0 250 50755455 0.0 0.0 0.0 0.0 0.0 51557 51:5 0.0 0.0 0.0 0.0 0.0 547005 5155 0.0 0.0 0.0 0.0 0.0 ACTUAL 715Lu5 LAST 5 75455 505 CALCULATING 5455 5505545 715105 157 50755455 30.00 32.00 17.00 10.00 5.00 250 50755455 30.00 32.00 17.00 10.00 5.00 51557 51:5 41.45 35.43 44.45 45.51 45.32 547005 51:5 2.12 1.55 1.54 1.52 1.54 4c7u41 LAGGED 551055 505 4 75455 u550 505 FLEXIBLE LOAN 54755 157 50755455 .0 0.0 .0 0.0 250 50755455 0.0 0.0 0.0 0.0 51557 51:5 0.0 0.0 0.0 0.0 547005 51:5 0.0 0.0 0.0 0.0 r50554M (05 5455) 4055405 157 50755455 731.33 731.33 731.33 731.33 731.33 250 50755455 731.33 731 33 731.33 731.33 731.33 51557 5105 731.33 731.33 731.33 731.33 731.33 547005 5105 731.33 731.33 731.33 731.33 731.33 54710541 4110047105 540705 157 50755455 0.0 0.0 0.0 0.0 0.0 250 50755455 0.0 0.0 0.0 0,0 0 0 FIRST RICE 1 00 1.00 1.00 1.00 1.00 547005 51:5 1 00 1.00 1.00 1.00 1.00 4055405 557 45105. 017555105 05 L1M1747105 1554:7105) 157 50755455 0.0 0.0 ,0 0.0 0,0 250 50755455 0.0 0.0 0 0 0.0 0.0 0 0000 0000 . 000 . 000 .000 .000 .000 .570 .35! .712 .288 .208 .41! .415 . 000 .000 .000 71 anroon nxc: 0.2s 0.:s 0. SLIPPACE RATE (FRACTION) 1s1 sovoznns 0.0 0.0 0. 2n0 sovozons 0.0 0.0 0. FIRST arcs 0.20 0.20 0 nnvuon RICE 0.20 0.20 0 rnvmenr ants ron ncnsnoz DIYERSION 1ST sovuznns 0.0 0.0 2no sovoznns 0.0 0.0 rxnsr RICE 0.0 71.19 3 nnroon nxcs 0.0 0.0 rnxooza PRICE ron TH! -r0n- 1ST sovoenns 0.0 0.0 2n0 sovoznns 0.0 0.0 rxnsv nxce 0.0 0.0 nnroon nxc: 0.0 0.0 CALL rnxcz won THE "won" 1s1 sovoznns 0.0 0.0 2n0 sovoenns 0.0 0.0 rxnsv nxc: 0.0 0.0 nnvoon nxc: 0.0 0.0 LENGTH or rnnnen ownoo nzsznve 1s1 sovoenns 0.0 0.0 2n0 sovoenns 0.0 0.0 rlnsr arc: 0.0 0.0 naroon nxcz 0.0 0.0 STORAGE PAYMENT RATE FOR THE "FOR" 1s1 sovoznns 0.0 0.0 2n0 sovoenns 0.0 0.0 rxnsr nxcz 0.0 0.0 naruon RICE 0.0 0.0 rnouucvxon GUARANTEE won cnow xnsunnncz 1ST sovuznns 1: as 13.92 14. 2n0 sovaenns 1:.ss 12.92 14. FIRST arcs 0.0 0.0 0. nnroon axe: 0.0 0.0 0. PRICE ELECTION ron caov xnsuanncz 1ST sovaeans s.s0 1.1: a 2n0 sovnznns s.s0 1.1: 0 rrnsr nxcs 0.0 0.0 0 nnvoon nxc: 0.0 0.0 0 rnamxun RATE PER ACRE ran cnon xnsunnncz 151 sovoonns s.:1 11.2: 12. 2no sovozans 0.1: 11.00 12. r1nsr nxcs 0.0 0.0 0 RATOON arc: 0.0 0.0 0 LOAN nave ron PEANUTS unozn QUOTE 1ST sovosnns 0.0 0.0 2n0 sovoznns 0.0 0.0 rxnsr nxcs 0.0 0.0 anroon nxc: 0.0 0.0 LOAN ant: won rznnuws nor unozn ouorn IST sovuznns 0.0 0.0 2nu sovosnns 0.0 0.0 FIRST arcs 0.0 0.0 nnroon axes 0 0 0.0 0 FARM“S rounonoz ouovz ron rennurs 1sr sovosans 0.0 0.0 2no sovoznns 0.0 0.0 FIRST nxcs 0.0 0.0 nnroon n10: 0.0 0.0 ncnznoz ALLOTMENT run axe: 1ST sovosnns 0.0 0.0 2n0 snvninns 0.0 0.0 rxnsw nxc: 0.0 0.0 nnroon 21:: 0.0 0.0 rnncrxon TAREET rnxcs FOR LOW vxsuo PAYMENT 1s1 sovoenns 0.0 0.0 2n0 sovaEAns 0.0 0.0 rznsr nxcz 0.0 0.0 maroon nxce 0.0 0.0 rnnctxon 100051 waxes won PREVENTED PLANTING PAYMENT 1sr sovoznns 0.0 0.0 2n0 s0vo:Ans 0.0 0.0 rxnsr nxcs 0.0 0.0 nnroon arc: 0.0 0.0 rnncrron rnoven vxzuo run LOW YIELD wnvmenr 1sr sovoenns 0.0 0.0 2no sovoeans 0.0 0.0 rrnsr nxc: 0.0 0.0 nnroon axc: 0.0 0.0 FRACTION rnoven YIELD roa rnsvsnrzn nunnvxno 1s1 scva!Ans 0.0 0.0 2no sovoznns 0.0 0.0 rxnsr n1cs 0.0 0.0 nnroon nxcs 0.0 0.0 PARXTV rnzcz 1ST sovoanns 0.0 0.0 2nn sovosnns 0.0 0.0 FIRST nxcz 0.0 0.0 nnroon arcs 0.0 0.0 rnacvxon or snow ELIGIBLE run nxvo cznfxrxcarz 1s? sovoznns 0.0 .0 2n0 sovosans 0.0 0.0 rrasv axc: 0.0 0.0 nnvoon arcs 0.0 0.0 vnvnznr LIMITATION run INCOME suvwoar Pnvnznfs 100000.00 100000.00 100000. oxsnsrza wnvnenrs 100000.00 100000.00 100000. nnxxmum nonnzcounss cc: LOAN 1sr sovoznns 0.0 0.0 2n0 sovoenns 0.0 0.0 FIRST nxcs 0.0 0.0 72 maroon nxc: 0.0 0.0 PERCENT BASE PRODUCTION ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 0.0 0. MAXIMUM VALUE OF CROP ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 0000 0000 0000 0000 0500 0000 0000 000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 25 .20 .20 0000 0000 20 20 000 0000 0000 0000 0000 0000 00 00 0 0.0 14. 14. 100000. 100000. 0000 0000 0000 0000 00100 0000 0000 0000 000 0000 OONN 000C 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 .25 .20 .20 0000 0000 0000 IS 45 .25 .25 .80 .35 000 0000 0000 0000 00 00 0 0 100000. 100000. 0000 0000 0000 0000 04000 0000 0000 0000 0000 OOIID 00 O00 0000 000 0000 0000 0000 0000 0000 0000 0000 0000 0000 .25 .20 .20 0000 0000 0 0000 0000 0000 0000 0000 0000 0000 0000 00 00 0000 FLEXIBLE LOAN RATE FORMULAS 0 0 0. 0 0 0100 0 .0 0 .0 0 O 0100 0 OROP HIGH FRACTION OF MEAN 0 O O O 0 O O O O INSURANCE PROGRAM NO. OF YEARS OROP LOW 1ST SOYBEANS 0.0 0.0 0.0 2NO SOYBEANS 0.0 0.0 0.0 FIRST RICE 9-9 9-9 9-9 RATOON RICE 0.0 0.0 0.0 1* A 1.0 INDICATES OELETING THE LOW OR HIGH MARKETING LOAN RATES 1ST SOYBEANS 0.0 0.0 0.0 2NO SOYIEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 MAXIMUM MKTG LOAN BASE 0.0 0.0 0 0 SCALE FARM PROGRAM IENEFITS TO FARM SIZE FARMS LARGER THAN 0. ACRES ARE NOT ELIGIBLE FOR ANY FARM PROGRAM FARMS LARGER THAN 0. ACRES ARE ONLY ELIGIBLE FOR THE CROP FARMS WITH CROP SALES GREATER THAN S 0. FARMS WITH CROP SALES GREATER THAN S 0. HISTORY OF FCIC PARTICIPATION NUMBER OF YEARS IN THE PROGRAM 3.00 NUMBER OF LOSS YEARS TOTAL FCIC TOTAL FCIC IN PROGRAM INSURANCE PREMIUMS PAID BY FARM INDEMNITY PAYMENTS RECEIVED 2.00 32323.50 111513.00 THE END OF ALL INPUT OATA 1 ITOTAL OEPREC 8 THIS YEARS OEPREC 2582.4 2852.4 MACHINE 1 7.00 33474.00 35758.00 3580.00 5318.51 0.0 0.0 7.00 35758.00 2852.43 51700.00 5.00 0.0 1 2TOTAL OEPREC 8 THIS YEARS OEPREC 4233.2 1570.8 MACHINE 2 7.00 31785.00 33558.00 3357.00 5457.71 0.0 0.0 7.00 33588.00 1570.77 81700.00 5.00 0.0 1 3TOTAL OEPREC 8 THIS YEARS OEPREC 15217.5 14584.3 MACHINE 3 7.00 81700.00 51700.00 0.0 52445.00 0.0 0.0 7.00 81700.00 14584.25 81700.00 5.00 0.0 1 4TOTAL OEPREC 8 THIS YEARS OEPREC 15217.5 0.0 MACHINE 4 7.00 7717.00 10087.00 1005.00 1005.00 0.0 0.0 7.00 10087.00 0.00 15500.00 5.00 0.0 1 5TOTAL OEPREC 8 THIS YEARS OEPREC 20407.5 1150.0 MACHINE 7.00 34545.00 52475.00 5248.00 5437.58 0.0 0.0 7.00 52475.00 1185.58 54800.00 5.00 0.0 1 8TOTAL OEPREC 8 THIS YEARS OEPREC 38531.1 8555.4 MACHINE 5 7.00 50857.00 74528.00 7452.80 31343.75 0.0 0.0 7.00 74528.00 8555.35 54800.00 5.00 0.0 1 7TOTAL OEPREC 8 THIS YEARS OEPREC 41453.7 2882.8 MACHINE 7.00 51505.00 53885.00 5385.00 10015.25 0.0 0.0 7.00 53885.00 2882.85 54000.00 5.00 0.0 1 ITOTAL OEPREC 8 THIS YEARS OEPREC 84322.3 22828.5 MACHINE 8 7.00 54000.00 54000.00 0.0 75500.00 0.0 0.0 7.00 54000.00 22828.57 54000.00 5.00 0.0 1 5TOTAL OEPREC 8 THIS YEARS OEPREC 58524.5 4502.3 MACHINE 5 7.00 55882.00 81881.00 5188.00 15108.13 0.0 0.0 7.00 51881.00 4502.32 54000.00 5.00 0.0 1 10TOTAL OEPREC 8 THIS YEARS OEPREC 71110.2 2185.7 MACHINE 10 7.00 5000.00 5000.00 0.0 7550.00 0.0 0.0 7.00 5000.00 2185.71 5000.00 5.00 0.0 1 11TOTAL OEPREC 8 THIS YEARS OEPREC 71258.5 148.7 MACHINE 11 7.00 3425.00 4538.00 454.00 802.55 0.0 0.0 7.00 4538.00 148.55 5000.00 5.00 0.0 1 12TOTAL OEPREC 8 THIS YEARS OEPREC 72115.5 0.0 MACHINE 12 7.00 2375.00 3875.00 388.00 388.00 0.0 0.0 7.00 3875.00 0.00 5000.00 5.00 0.0 1 13TOTAL OEPREC 8 THIS YEARS OEPREC 74185.5 2070.0 MACHINE 13 7.00 7500.00 11500.00 0.0 7245.00 0.0 0.0 7.00 11500.00 2070.00 15300.00 5.00 0.0 1 14TOTAL DEPREC 8 THIS YEARS DEPREC 74515.7 728.5 MACHINE 14 7.00 4500.00 5800.00 580.00 2551.02 0.0 0.0 7.00 5800.00 728.85 15300.00 5.00 0.0 1 15TOTAL OEPREC 8 THIS YEARS OEPREC 75255.7 1380.0 MACHINE 15 7.00 5000.00 11500.00 0.0 4830.00 0.0 0.0 7.00 11500.00 1380.00 15300.00 5.00 0.0 1 18TOTAL DEPREC 8 THIS YEARS OEPREC 78557.5 301.5 MACHINE 18 7.00 3500.00 5200.00 520.00 1221.85 0.0 0.0 7.00 5200.00 301.85 15300.00 5.00 0.0 1 17TOTAL OEPREC 8 THIS YEARS OEPREC 75733.7 755.0 MACHINE 17 7.00 2000.00 4200.00 0.0 2545.00 0.0 0.0 7.00 4200.00 755.00 5200.00 5.00 0.0 1 18TOTAL OEPREC 8 THIS YEARS OEPREC 75540.5 207.2 MACHINE 18 7.00 1500.00 3500.00 350.00 725.14 0.0 0.0 7.00 3500.00 207.18 5200.00 5.00 0.0 1 15TOTAL OEPREC I THIS YEARS OEPREC 75540.5 0.0 MACHINE 15 7.00 4500.00 4371.00 437.00 437.00 0.0 0.0 7.00 4371.00 0.00 10250.00 5.00 0.0 1 20TOTAL OEPREC 8 THIS YEARS OEPREC 82082.4 1250.0 MACHINE 20 7.00 4500.00 7000.00 0.0 4410.00 0.0 0.0 7.00 7000.00 1250.00 10250.00 5.00 0.0 1 21TOTAL DEPREC 8 THIS YEARS OEPREC 82548.5 585.2 MACHINE 21 7.00 3500.00 4718.00 0.0 1581.55 0.0 0.0 7.00 4718.00 555.15 5800.00 5.00 0.0 1 22TOTAL OEPREC 8 THIS YEARS OEPREC 82848.5 0.0 MACHINE 22 7.00 2000.00 1320.00 132.00 132.00 0.0 0.0 7.00 1320.00 0.00 8800.00 5.00 0.0 1 23TOTAL OEPREC 8 THIS YEARS OEPREC 82857.5 245.4 4000.00 0.0 4000.00 O O O O O O O O O 0 .20 254.00 2.00 ARE ONLY ELIGIBLE FOR THE CROP 0 O O O O O O O O 0 0 0 O O O O O O O O O O O 0 0 O O 0 O O O O O O O O 0 0 ho ARE NOT ELIGIBLE FOR ANY FARM PROGRAM BENEFITS INSURANCE PROGRAM .0 33474.00 1580.00 .0 31755.00 1575.00 .0 51700.00 1583.00 .0 7717.00 1575.00 .0 34545.00 1578.00 .0 50857.00 1581.00 .0 51505.00 1575.00 .0 54000.00 1583.00 .0 55882.00 1580.00 .0 5000.00 1583.00 .0 3425.00 1578.00 .0 2375.00 1575.00 .0 7500.00 1582.00 .0 4500.00 1580.00 .0 5000.00 1581.00 .0 3500.00 1578.00 .0 2000.00 1582.00 .0 1500.00 1575.00 .0 4500.00 1575.00 .0 4500.00 1582.00 .0 3500.00 1581.00 .0 2000.00 1575.00 33141 0.0 25841. 0.0 24235. 0.0 5078. 47227. 0.0 52235. 0.0 48725. 0.0 38528. 0.0 .52 38 15 .71 .00 .84 73 F L I P S I M V A GENERAL FIRM LEVEL POLICY SIMULATION MODEL DEVELOPED AND IMPLEMENTED BY JAMES W. RICHARDSON AND CLAIR J. NIXON DEPARTMENT OF AGRICULTURAL ECONOMICS TEXAS AIM UNIVERSITY RELEASE DATE 9 /-SO / BE SUMMARY OF PROGRAM OPTIONS SELECTED IY THE USER RESULTS FROM SR ROTATION, LIBERTY COUNTY. FINAL ANALYSIS. MULTIYARIATE EMPIRICAL DISTRIBUTIONS USED FOR PRICES AND YIELDS. WHOLLY LEASED FARM ACREAGE, S01 LONG TERM AND (OZ INTERMEDIATE DEBT. SUPERIOR MANAGEMENT. CROP INSURANCE, SO G PAYMENT LIMIT. I/7 CROP SHARE ON SOYBEANS, I/2 ON RICE. STOCHASTIC RUN, S YRS, SO ITERATIONS. SIMULATE THE REPRESENTATIVE FARM FOR S YEARS FIRST YEAR TO BE SIMULATED IS 1984. THE SIMULATION WILL BE DETERMINISTIC PRINT ALL INPUT DATA AND ALL OUTPUT TABLES THE REPRESENTATIVE FARM HAS A CROPS AND O LIVESTOCK ENTERPRISES PAYOFF OUTSTANDING LOANS USING SURPLUS CASH ND SPECIAL FINANCIAL BAILOUT PROGRAM IS IN EFFECT ADJUST INCOME TAX SCHEDULE AFTER 1985 FOR CHANGES IN THE CPI FIXED PORTION OF CROPS SOLD IN T AND CCC LOAN USED FOR THE REMAINDER NO MAXIMUM ON ANNUAL INTEREST OEDUCTIONS IS IN PLACE THE CROP MIX WILL BE CONSTANT OVER TIME DEPRECIATION ON OLD MACHINERY WILL OE CALCULATED BY THE DECLINING BALANCE METHOD USE THE FEDERAL INCOME TAX PROVISIONS FOR I982 MACHINERY PURCHASED AFTER I950 WILL BE RECOVERED USING AN ACCELERATED SCHEDULE THE USER HAS ELECTED TO REDUCE EASIS FOR INVESTMENT TAX CREDIT THE FARM HAS ELECTED NOT TO TAKE FIRST YEAR EXPENSING ON PURCHASES OF MACHINERY THERE ARE J7 PIECES OF OWNED FARM MACHINERY TO BE OEPRECIATED OLD FARM MACHINERY WILL IE TRADEO IN RATHER THAN BE SOLD USER HAS SPECIFIED THE FAMILY CONSUMPTION FUNCTION FOR REGION G THE FARM MAY NOT SELL CROPLANO TO AVOID INSOLYENCY CROPLAND WILL DE LEASED USING A CROP SHARE SCHEME SPECIFIED BY THE USER ANNUAL INFLATION RATES FOR FARMLAND ARE PROVIDED IY THE USER THE FARM WILL NOT BE ALLOWED TO GROW DYER TIME INFORMATION FOR O ALTERNATIVE FARMS IS PROVIDED DY THE USER AN UNLIMITED NONRECOURSE LOAN (PRICE SUPPORT PROGRAM WILL DE IN EFFECT DO NOT PAY INTEREST ON NONREDEEMED NONRECOURSE CCC LOANS LOAN RATES ARE FIXED BY THE ANALYST IN ALL YEARS INTEREST ON FOR LOANS WILL BE CHARGED ANNUALLY FOR 1 YEARS A TARGET PRICE PROGRAM WILL BE IN EFFECT AND TARGET PRICES ARE FIXED AN ALL'RISK CROP INSURANCE PROGRAM IS IN EFFECT A MANDATORY SET'ASIDE OR VOLUNTARY DIVERSIDN PROGRAM WILL BE IN EFFECT PAYMENT LIMITATIONS ARE IN EFFECT FOR DEFICIENCY PAYMENTS, DIVERSIDN PAYMENTS I DISASTER ALL FARMS ARE ELIGIBLE FOR ALL FARM PROGRAM BENEFITS 74 PAYMENTS N RESULTS FROM SR ROTATION, LIBERTY COUNTY. FINAL ANALYSIS. MULTIVARIATE EMPIRICAL DISTRIBUTIONS USED FOR PRICES LONG TERM AND 40% S0 G PAYMENT LIMIT. AND YIELDS. WHOLLY LEASED FARM ACREAGE, 501 INTERMEDIATE DEBT. SUPERIOR MANAGEMENT. CROP INSURANCE, 1/7 CROP SHARE ON SOYBEANS, I/Z ON RICE. STOCHASTIC RUN, CROPLAND ON INITIAL FARM TOTAL CROPLAND ACRES OWNED TOTAL CROPLAND ACRES LEASEO PASTURELANO ACRES OWNED PASTURELAND ACRES LEASEO FRACTION CROPLAND THAT IS TILLABLE FRACTION CROPLAND THAT IS IRRIGATED INITIAL BALANCE SHEET FOR THE FARM ASSETS MARKET VALUE OF CROPLAND I FARMSTEAD MARKET VALUE OF BUILDINGS TOTAL VALUE OF OWNED CROPLAND I BUILDINGS MARKET VALUE OF OFF-FARM INVESTMENTS BEGINNING CASH RESERVE MARKET VALUE OF OWNED PASTURELANO MARKET VALUE OF ALL FARM MACHINERY MARKET YALUE OF ALL LIVESTOCK TOTAL YALUE OF ASSETS LIABILITIES TOTAL REAL ESTATE DEBT TOTAL INTERMEDIATE'TERM DEBT INCOME TAXES DUE IN YEAR 1 SELF EMPLOYMENT TAXES DUE IN YEAR 1 TOTAL DEBT BEGINNING NET WORTH [MARKET VALUE) INITIAL FINANCIAL RATIOS FOR THE FARM EOUITY TO ASSETS RATIO DEBT TO ASSET RATIO LEVERAGE RATIO AVERAGE PER ACRE VALUE OF CROPLAND AVERAGE PER ACRE VALUE OF PASTURELAND LIABILITIES FOR INITIAL FARM REAL ESTATE DEBT LOAN LIFE ON DEBT FRACTION LAND LOAN REMAINING ORIGINAL AMOUNT OF THE LOAN DEBT TO ASSET RATIO INTERMEDIATE TERM DEBT LOAN LIFE ON DEBT FRACTION LOAN REMAINING ORIGINAL AMOUNT OF THE LOAN DEBT TO ASSET RATIO OPERATING LOAN FRACTION OF YEAR LOAN IS USED TERMS FOR NEW LOANS NO. YEARS FDR NEW LAND LOANS NO. YEARS FOR NEW MACH LOANS MINIMUM EOUITY RATIOS FOR SOLVENCY MINIMUM LONG TERM EOUITY MINIMUM INTERMEDIATE TERM EOUITY INFORMATION FDR REFINANCING DEBTS CHARGE TO REFINANCE CASH FLOW DEFICITS NO. YEARS FDR A LONG'TERM LOAN ND. YEARS FOR INTERM'TERM LOAN MINIMUM DDWNPAYMENT LEVELS MINIMUM OOWNPAYMENT FOR FARM MACHINERY MINIMUM DOWNPAYMENT FDR FARMLAND AFTER~TAX DISCOUNT RATE ANNUAL RATE OF RETURN TO PROD ASSETS T'1 CAPITAL GAIN RATE FOR LAND IN T'1 CASH RESERVE FOR THE FARM MINIMUM CASH RESERVE BEGINNING CASH RESERVE CAPITAL ASSETS TO BE RECOVERED (DEPRECIATED1 BUILDINGS PLACED INTO USE PRIOR TO 1981 SALVAGE VALUE PURCHASE PRICE ECONOMIC IDEPRECIATIONI LIFE REGULAR BUILCINGS PLACED INTO USE AFTER I880 PURCHASE PRICE CALENDAR YEAR PURCHASED SPECIAL PURPOSE BUILDINGS PLACED INTO USE AFTER PURCHASE PRICE CALENDAR YEAR PURCHASED FIXED costs PROPERTY TAX an?! (STAX/SVALUE) rornn PERSONAL raowsnrv fax ornzn rnxzs ACCOUNTANT | LEGAL FEES UNALLDCATED MAINTENANCE cosfs INSURANCE on MACHINERY MISCELLANEOUS rxxzn cosfs LAND LEASE CDSTS CASH RENT FOR CROPLAND IS/ACRE) CASH RENT FOR PASTURELANO IS/ACRE] ANNUAL INFLATION RATE FOR PER ACRE CASH LEASE COST CAPITALIZATION RATE BETWEEN LAND VALUE I CROPLAND CASH LEASE COST FAMILY CONSUMPTION AND TAX INFORMATION AGE OF OPERATOR ND. OF TAX EXEMPTIONS CLAIMED MARGINAL TAX RATE FOR STATE RATIO OF PERSONAL OEDUC TO NET INCOME DESIRED TAXABLE INCOME AVERAGE ANNUAL OFF-FARM INCOME NON-TAXABLE OFF-FARM INCOME ANNUAL RETURN ON OFF-FARM INVEST MINIMUM FAMILY LIVING EXPENSES MAXIMUM FAMILY LIVING EXPENSES '10 2300 0. 0 0 0 13000 155000 1S7000 20000 5000 0 535202 0 757202 Bll00 ZZBOI1 0. 0 ZSZBII AS4321 1200 OIS00 30 0 133800. 0 22l081 S 0 452182 0 O00 5000 5000 10500 105000. 30 0. 1S80 0O .0000 .0000 0 .0 .O500 .5300 .0000 .000 .000 .0000 .0000 .0 .000 .0 .000 .0000 .000 0 .0 .000 .000 .B132 .3868 .B30B .0000 .0000 .0000 .5000 000 .4000 .000 .0000 .5000 .000 .4000 .3380 .0000 .0000 .3333 .3333 .0100 .0000 .0000 .3000 .3000 .1011 .0500 .0000 .0000 .0000 000 .0000 O0 OO 0.003330 0 0 3000 0 3200 5000 O0 A5 5 0 0 0 . 0 1B000 0 18000 25000 .0 .0 .0000 .0 .0000 .0000 O0 .0000 .0000 .0 .2000 .0 .0 .0000 .1100 .0000 .0000 5 YRS, S0 uszn~s srecxrxzn consunwvrou FUNCTION uszo 1r tn: OPTION 15 :L:c1:n ITERATIONS. 75 02 03 INCOME TAX PAYMENT OUE IN YEAR 1 SELF'EMPLOYMENT TAX PAYMENT OUE IN YEAR 1 TAXABLE INCOME IN YEAR T'3 TAXABLE INCOME IN YEAR T'2 TAXABLE INCOME IN YEAR T-1 MAXIMUM INTEREST DEDUCTION IF OPTION IS USED RISK AVERSION COEFFICIENT HIRED FARM LABOR NO. OF FULL TIME EMPLOYEES ANNUAL GROSS SALARY FOR FULL-TIME EMPLOYEE HOURLY WAGE RATE FOR PART'TIME LABOR ANNUAL INTEREST RATES 1584 OLD LONG'TERM LOANS 0.1175 OLD INTERMEDIATE-TERM LOANS 0.1500 NEW LONG-TERM LOANS 0.1310 NEW INTERMEDIATE'TERM LOANS 0.1480 REFINANCE LONG-TERM LOANS 0.1310 REFINANCE INTERM'TERM LOANS 0.1480 OPERATING LOANS 0.1520 RECEIVED FOR CASH RESERVES 0.1180 1585 0.117 .150 .117 .145 .117 .145 .154 .115 00043000 ANNUAL PERCENTAGE CHANGES IN SELECTED COSTS NEW FARM MACHINERY 0.0 USED FARM MACHINERY 0.0 FIXED COST, INS 8 TAX 0.0540 SEED COSTS 0.1145 FERTILIIER 8 LIME 0.0744 CHEMICAL COSTS 0.0813 FUEL 8 LUBE COSTS 0.0540 REPAIRS ON MACHINERY 0.0540 OTHER PROO COST 0.0054 CUSTOM COSTS 0.0540 HIRED LABOR COSTS 0.0540 OFF-FARM INVESTMENT 0.1180 PURCHASED INPUTS FOR LIVEST 0.0 FARMLAND VALUES 0.0710 BUILDING VALUES ~0.0200 OFF-FARM STORAGE COSTS 0.0 OTHER ANNUAL DATA FOR THE FARM 1584 NEW CAPITAL INVESTED IN FAR 0.0 CONSUMER PRICE INOEX 310 50 OTHER FARM INCOME 0.0 SELF EMPLOYMENT TAX RATE 0.140 MAXIMUM INCOME SUOJUCT TO SELF EMPLOPYMENT TAX 37205.00 .047 .047 .085 .058 .047 .047 .047 .047 .047 .115 .071 .020 .047 I 000<30000(>0O040000 5 0 0 0 0 0 0 3 0 0 .0204 5 5 0 0 0 0 0 0 0 0 0 38803.00 SUMMARY OF THE OWNEO MACHINERY COMPLEMENT ORIGINAL CURRENT YEAR MARKET PURCHASED VALUE TRACTOR155HP 1580.0 33474.0 TRACTORISEHP 1575.0 31755.0 TRACTOR155HP 1583.0 81700.0 TRACTOR 55HP 1575.0 7717.0 TRCTR 225HP 1578.0 34545.0 TRCTR 225HP 1581.0 50857.0 COMBINE 7720 1575.0 51505.0 COMOINE 7720 1583.0 54000.0 COMBINE 7720 1580.0 55882.0 PCKUP 1/2TON 1583.0 5000.0 PCKUP 1/2TON 1578.0 3425.0 PCKUP 1/2TON 1575.0 2375.0 OSK 22’ 5" 1582.0 7500.0 OSK 22' 5" 1580.0 4500.0 DSK 24‘ 4" 1581.0 5000.0 DSK 24' 4" 1578.0 3500.0 ROLL CULT 1582.0 2000.0 ROLL CULT 1575.0 1500.0 8N PLANT 8' 1575.0 4500.0 IN PLANT 8' 1582.0 4500.0 GRAIN CART 1981.0 3500.0 GRAIN CART 1575.0 2000.0 LO PL 15X50 1578.0 7375.0 LD PL 15X80 1577.0 3000.0 LEVEE BOXES 1582.0 5000.0 LEVEE PLOW 1581.0 1547.0 LEVEE PUSH 1581.0 700.0 LEVEE ROLLER 1578.0 350.0 FLO CUL 31’ 1582.0 5500.0 FLO CUL 31' 1581.0 4500.0 FLO CUL 25 1578.0 2500.0 BEODER 8 ROW 1575.0 1035.0 OEDDER 8 ROW 1575.0 1500.0 PIPE HARROW 1575.0 1000.0 PIPE HARROW 1580.0 1100.0 OU'ALL 1578.0 3500.0 MISC TRUCKS 1577.0 50000.0 76 PURCHAS PRICE 35758. 33558. 51700. 10087. 52475. 74528. 53885. 54000. 51881. 5000. 4538. 3875. 11500. 5800. 11500. 5200. 4200. 3500. 4371. 7000. 4718. 1320. 7500. 8000. 7500. 1553. 2100. 350. 7500. 7100. 5800. 1100. 3500. 1020. 1500. 8500. 50000. 0 0 0 0010001300l00(>004®00()00()O0(J0O1D0O(D00()00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0000 13800.0000 3.3500 1585 1587 0.1175 0.1175 0.1500 0.1500 0.1050 0.1050 0.1410 0.1370 0.1050 0.1050 0.1410 0.1370 0.1550 0.1420 0.1110 0.1070 0.0450 0.0480 0.0 0.0100 0.0450 0.0480 '0.1201 0.0480 0.0531 0.0480 0.0585 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.0450 0.0480 0.1110 0.1070 0.0 0.0 0.0710 0.0710 -0.0200 0 0200 0.0450 0.0480 1585 1587 0.0 0.0 335.00 355 20 0.0 0.0 0.143 0 143 40512.00 42572.00 ESTIMATED DEPRECI' SALVAGE ATION VALUE LIFE' 3580.0 7.0 3357.0 7.0 0.0 7.0 1005.0 7.0 5248.0 7.0 7452.8 7.0 5388.0 7.0 0.0 7.0 8188.0 7.0 0.0 7.0 454.0 7.0 388.0 7.0 0.0 7.0 580.0 7.0 0.0 7.0 520.0 7.0 0.0 7.0 350.0 7.0 437.0 7.0 0.0 7.0 0.0 7.0 132.0 7.0 750.0 7.0 800.0 7.0 0.0 7.0 0.0 7.0 0.0 7.0 35.0 7.0 0.0 7.0 0.0 7.0 580.0 7.0 110.0 7.0 350.0 7.0 102.0 7.0 150.0 7.0 850.0 7.0 8000.0 7.0 1588 .11 .15 .10 .13 .10 .13 .14 .10 oooooboo .01 .05 .05 .05 .05 .05 .05 .05 .05 .10 .07 .02 u 00<)004000<>001D0|D00 44805. ECONOMIC ascuvsnv (DEPREC.) LIF 7. 7 7. O4~444-J44-JJ~444-J44~J4J~l4J~J44~J44~J44~J4J 75 00 50 70 50 70 20 70 .0500 00 00 00 00 00 00 .0500 00 00 00 70 10 00 .0500 00 E 0 .0 0 00()00(J0010010001000l@00()O0()O0l00040004D00 00lD00<)0040004000400 0040001000 000 0OlD00()000lD00()000 0048004000 000 ACCUM. 30475.5 28070. 5255. 5078. 48037. 43284. 43855. 14100. 45772. 1350. 3535. 3488. 4255. 7245. 5570. 7578. 1554. 3174. 3534. 2550. 2735. 1188. 5550. 7200. 2775. 505. 1218. 303. 2523. 4118. 5025. 550. 2845. 830. 1183. 7457. 52031. 3 0 DOIRUNO~JO0\fl0M()O0\Obl@O@0-0O4®0U0lDO4lJ00 000()0O()O0lD00l0000 00()00()00 000 0()0004@0OO()00()000 0010001300 MACHINERY REPLACEMENT REPLACE. 000 CODE .0 .0 .0 0 0 0 N0l000()00()NNiJ000lJNO<)0001@OOlJ0Ol@00l00N 00l000()00lD00lDOI©O04000()00(JO0()00l@001000 004D001D004000l0O0lD0 0010001000 000 O01D0001D00|D00()000 0010001000 000 CURRENT COST 81700. 51700. 51700. 15500. 54800. 54800. 54000. 54000. 54000. 5000. 5000. 5000. 15300. 15300. 15300. 15300. 5200. 5200. 10250. 10250. 5800. 5800. 17500. 17500. 11250. 2800. 2500. 550. 5800. 5800. 5800. 5400. S400. 2100. 2100. 11500. 50000. 0000C)0000(J0000K)0O0()00000l©000(>0001D0 000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0.0 0. 0.0 0. 0.0 0.0 0.0 0. COST RECOVERY PERIOD OR CLASS 5.0 5.0 5.0 IIUIUIIIIHIIUIUICIIllullllllllfilfllflllllfiflflllllllllllflllllllflUlllllllllllfllfilll 00¢)000()0OO()0O0()000()000()000()00O()000 INFORMATION FOR SUMMARY OF CROP IST SOYOEANS INO SOYBEANS FIRST RICE RATOON RICE 1ST SOYIEANS 2ND SOYBEANS FIRST RICE RATOON RICE HOURS OF UNPAID AVAILABLE EACH MONTH HOURS WORKED EACH MONTH EV A FULL TIME EMPLOVEE IST SOYBEANS ZNO SOVIEANS FIRST RICE RATOON RICE 1ST SOYIEANS 2ND SOYIEANS FIRST RICE RATOON RICE CONSTRAINTS ON THE CROPMIX IST SOYOEANS 2ND SOYIEANS FIRST RICE RATOON RICE CROP SHARE LEASING BY CROP 101 50v000ns 200 sovaznns 01051 01:5 001000 01:5 MARKETING STRATACIES IST SOVIEANS 2NO SOYBEANS FIRST RICE RATOON RICE SEASONAL PRICE IST SOYBEANS 2N0 SOYIEANS FIRST RICE RATOON RICE CROP YIELOS IST SOYIEANS ZNO SOYBEANS FIRST RICE RATOON RICE CROP PRICES IST SOYBEANS ZNO SOYUEANS FIRST RICE RATOON RICE CROP YIELOS IST SOYIEANS 2N0 SOYBEANS FIRST RICE RATOON RICE CROP FRICES IST SOYOEANS IND SOYIEANS FIRST RICE RATOON RICE COYARIANCE MATRIX OF IST SOYIEANS ZNO SOYIEANS FIRST RICE NO . 0.797 0.797 0.155 0.0 S00.00 250.00 0. 0. 0. 0. 0. 0. 0. 0. N .000 .000 .000 .000 1011101 FARM 2310. Acn5s----~-----------------------------------------------—-------—--------~ 0010000150 00510 0050 PERT-LIME CHEMICALS FUEL-LUBE 0000100 01000 u00v051 c0s1 --S/ACRE-- S/YIELD uu11 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.45 14.30 45.45 12.00 0.11 0.14 0.4500 33.00 51.00 01.50 10.00 0.10 10.20 1.2300 0.0 3.30 2.50 0.0 0.0 5.15 1.2300 MONTHLY LABOR 000u1n0n0u1s PER ACRE, 0v 0000 zursnrnrss 300. FEE. MAR. 00010 nnv JUNE JULY nun. 5001. 0:1. 0.240 0 450 0.105 0.040 1.240 0.404 0.200 0.004 0.105 0. 51 0.240 0.450 0.105 0.040 1.240 0.404 0.205 0.404 0.10s 0.551 0.210 0.301 1.300 0.510 1.130 1.101 1.213 0.011 0.204 0.111 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.101 0.000 0.000 FAMILY 10000 400.00 400.00 000.00 000.00 150.00 .000.00 000.00 000.00 000.00 000.00 250.00 300.00 350.00 300.00 350.00 350.00 300.00 350.00 300.00 300.00 ANNUAL MEAN on noun; 0000 110100 1004 1000 1040 1001 1000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.00 24.11 24.01 25.11 25.00 0.0 0.0 0.0 40.11 52.31 50.04 50.01 51.10 0.0 0.0 0.0 1.04 1.00 1.00 2.00 2.02 0.0 0.0 0.0 ANNUAL MEAN on MODAL 0000 PRICES 1004 1005 1000 1001 1000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.33 1.40 1.02 0.01 0.34 0.0 0.0 0.0 0.20 0.10 10.14 10.00 11.02 0.0 0.0 0.0 0.02 0.10 0.43 0.02 10.25 0.0 0.0 0.0 0:055 0:005 n1u1uuu MAXIMUM LINKAGE NORMAL PLANTED NARVESTED 00001100 00001100 10 DOUBLE 000:. ACRES 1000 1 YEAR! or MIX or MIX can» n0av5s150 0.0 0.0 0.0 0.0 0.0 0.0 1001.00 1042.40 0.0 0.0 0.0 0.05 1001.00 1000.40 0.0 0.0 0.0 0.00 1001.00 1000.30 0.0 0.0 3.00 0.00 10001000 SHARE 00 00051015 0 cus1s :00! 5000 PERT 0 CHEMICAL rue; 0 n0cn1u0nv 01n50 cus10n 00001015 00010 LIME c0510 LUBE 0000100 c0515 wonx 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 1430 0.0 0.0 0.0 0.0 0.0 0.0 0.0100 0.5000 1.0000 0.3030 0.5000 0.0 0.0 0 0000 0.3310 0.0000 0.0 0.3030 0.0000 0.0 0.0 0.0001 0.3310 000100100 00001100 MONTH MONTH 1nv5u100v 0010 u0x1 5010 AFTER 0010 1n 10x 1000 n00v0s1 u5x1 venn 0.0 0.0 0.0 0.0 3104.000 0.300 10.000 1.000 0.0 0.0 1.000 1.000 1053.500 1.000 10.000 1.000 xnnex 300. PEI. MAR. 00011 MAY JUNE JULY nus. 5501. 0c1. 1.000 1.000 1.000 1.000 1.000 1 000 1.000 1.000 1.000 1.000 1.000 1.000 1 000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1 000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 00010050 MATRIX F0! can» 110100 0 001050 1 2 4 0 0 1 0 0.0 0.503 0.010 0.305 0.0 0.300 -0.410 -0.240 0.0 0.503 0.510 0.305 0.0 0 300 -0.010 -0.240 0.0 0.0 0.132 0.205 0.0 0.030 0.111 -0.502 0.0 0.0 0.0 0.533 0.0 0.031 -0.101 -0.040 0.0 0.0 0.0 0.0 0.0 0.051 -0.100 0.242 0.0 0.0 0.0 0.0 0.0 0.001 -0.100 0.242 0.0 0.0 0.0 0.0 0.0 0.0 0.402 0.011 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.000 cunnuunrrvs 0xs1n10u110us 00 n0v1015s 000u1 1n: MEAN 100 105001. zxrnesszu 05 A FRACTION or MEAN 1 2 3 4 0 0 1 0 0 10 -0.101 -0.030 -0.300 -0.204 -0.110 -0.005 0.032 0.152 0.310 0.010 -0.100 -0.541 -0.310 -0.250 -0.133 -0.020 0.020 0.135 0.301 0.000 -0.421 -0.210 -0.100 -0.121 -0.011 -0.042 -0.004 0.034 0.121 0.300 -0.014 -0.311 -0.100 -0.120 -0.005 -0 023 0.024 0.005 0.100 0.102 -0.214 -0.230 -0.003 -0.052 -0.031 0.030 0.040 0.001 0.220 0.200 -0.214 -0.230 -0.003 -0.052 -0.031 0.030 0.040 0.001 0.220 0.200 -0.410 -0.304 -0.222 -0.001 -0.025 0.120 0.111 0.200 0.211 0.410 -0.410 -0.304 -0.222 -0.001 -0.025 0 120 0.111 0.200 0.211 0.410 ~01 INCOMIS I00 00000 1 2 3 4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 RATOON RICE U OOIDON fl .-05 .105 .222 400.00 250.00 0000 0000 77 .000 .000 .000 .000 OOIDO O<>OO OOIIO 00100 08 SUMMARY OF’ POLICY DATA, IY YEAR AND IY CROP 1554 1555 1555 1551 1555 ccc L055 55155 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 5.02 5.02 5.02 5.02 5.02 F1551 51:5 5.53 5.33 5.55 5.3: 5.33 551005 51:5 5.05 5.03 5.03 5.03 5.05 15155551 5515 F05 cc: 10555 0.12 0.12 0.12 0.12 0.12 15155551 5515 F05 F05 10555 0.12 0.12 0.12 0.12 0.12 OFF-FARM 5105555 c0515 F05 05055 u5055 LOAN 151 50155555 0.30 0.51 0.33 0.34 0.55 250 50155555 0.30 0.31 0.33 0.34 0.55 F1551 51:5 0.50 0.52 0.55 0 51 0.50 551005 5105 0.50 0.52 0.55 0 51 0.50 155551 551055, 1F 1551 555 501 1150 10 LOAN 55155 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0 0 0.0 F1551 5105 12.23 12.23 12.23 12 2: 12.23 551005 51:5 11.5: 11.53 11.53 11 5: 11.5: FL5x15L: 155551 PRICE---FRACTION 0F 155051 551:5 10 LOAN 5515 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 51:: 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 015501 “FOR” 55151 PRICE 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 5155 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 551051 115105 LAST 5 15555 F05 05500151150 FARM 5500555 115105 151 50155555 0. 0. 0.0 .0 0.0 250 50155555 30.00 32.00 11.00 10.00 5.00 F1551 51:5 41.55 35.53 44.45 45.51 45 32 551005 51:5 2.12 1.55 1.55 1.52 1 54 551051 150050 551055 F05 4 15555 0550 F05 FLEXIBLE LOAN 55155 151 50155555 0. 0. 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 F1551 51c5 0.0 0.0 0.0 0.0 551005 51c5 0.0 0.0 0.0 0.0 5500555 (05 5555) 5055505 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 1051.00 1051.00 1051.00 1051.00 1051.00 F1551 5105 1051.00 1051.00 1051.00 1051.00 1051.00 551005 51:5 1051.00 1051.00 1051.00 1051.00 1051.00 55110551 5110051105 F5c105 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0 0 0.0 0.0 F1551 51:5 1.00 1.00 1 00 1.00 1.00 551005 51:5 1.00 1.00 1 00 1.00 1.00 5055505 551 55105, 011555105 05 LIMITATION 1F55c11051 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 51:5 0.25 0.35 0.25 0.25 0.25 551005 5155 0.25 0.55 0.25 0.25 0.25 51155555 5515 lF55c11051 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 5155 0.20 0.20 0.20 0.20 0.20 551005 5155 0.20 0.20 0.20 0.20 0.20 5515551 5515 F05 5555505 011555105 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 51551 51:5 0.0 11.15 53.52 35.05 35.55 551005 5155 0.0 0.0 0.0 0.0 0.0 1510555 F5155 F05 155 "FOR" 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 51551 51:5 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 c511 F5105 F05 155 "FOR" 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 51:: 0.0 0.0 0.0 0.0 0.0 551005 51:: 0.0 0.0 0.0 0.0 0.0 155515 05 F55n55 0w550 5555515 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 51551 51:5 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 5105505 5515551 5515 F05 155 "FUR" 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 51:5 0.0 0.0 0.0 0.0 0.0 551005 51c5 0.0 0.0 0.0 0.0 0.0 5500051105 005555155 F05 0505 155055505 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 13.55 13.52 14.20 14.45 14.15 F1551 51:5 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 551:5 51501105 FOR 5505 155055555 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 5.50 1.13 5.22 5.25 5.52 F1551 51:5 0.0 0.0 0.0 0.0 0.0 551005 5105 0.0 0.0 0.0 0.0 0.0 5555105 5515 555 5:55 F05 c505 155055555 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 5.1: 11.05 12.01 12.35 13.11 F1551 51:5 0.0 0.0 0.0 0.0 0.0 551005 51:5 0.0 0.0 0.0 0.0 0.0 L055 5515 F05 5555015 u5055 0u015 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 78 F1551 51c5 0.0 0.0 0.0 0.0 0.0 551005 5105 0.0 0.0 0.0 0.0 0.0 L055 5515 F05 5555015 501 05055 00015 151 50155555 0.0 0.0 0.0 0.0 0.0 250 50155555 0.0 0.0 0.0 0.0 0.0 F1551 51:5 0.0 0.0 0.0 0.0 0.0 RATODN RICE FARM”S POUNOAGE QUOTE 1ST SOYBEANS 2NO SOYBEANS FIRST RICE RATOON RICE ACREAGE ALLOTMENT FOR 1ST SOYBEANS 2ND SOYBEANS FIRST RICE RATOON RICE FRACTION TARGET 1ST SOYBEAN5 2ND SOYBEANS FIRST RICE RATOON RICE PRICE FRACTION TARGET PRICE 1ST SOYIEANS 2ND SOYBEAN5 FIRST RICE RATOON RICE FRACTION PRDYEN 1ST SOYBEANS 2ND SOYBEANS FIRST RICE RATOON RICE YIELD FRACTION PRDYEN 1ST SOYBEANS 2ND SOYOEANS FIRST RICE RATOON RICE YIELD rnnxrv waxes asr sovaenus zun SOYBEANS rxnsv arc: nnroon nxpz FRACTION OF CROP ELIGIOLE FOR MKTG CERTIFICATE 1ST SDYBEANS 2NO SOYBEANS FIRST RICE RATOON RICE PAYMENT LIMITATION FOR INCOME_SUPPORT PAYMEN DISASTER PAYMENTS MAXIMUM NONRECOURSE CC 1ST SOYOEANS 2ND SOYIEANS FIRST RICE RATOON RICE PERCENT BASE PRODUCTION ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 0 0 0.0 0 0 FOR PEANUTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 RICE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FOR LOW YIELD PAYMENT .0 0.0 0.0 .0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FOR PREVENTEO PLANTING PAYMENT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FOR LOW YIELD PAYMENT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FOR PREYENTEO PLANTING 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TS 100000.00 100000.00 100000.00 100000. 100000.00 100000.00 100000.00 100000 C LOAN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0.0 0.0 MAXIMUM VALUE OF CROP ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 FLEXIBLE LOAN RATE FOR MULAS 0 0 0 0 00100 01000 00100 01000 00100 01500 01000 01000 01300 00100 00170 00120 001I0 01000 00130 00100 00100 00100 01000 01300 6 0000 0000 00 100000. .00 100000. DROP HIGH FRACTION OF MEAN 00110 00100 00100 00100 00100 00100 01000 01000 01I00 01000 01000 00100 00100 01000 00100 00100 00100 0000 0000 00 00 0 INSURANCE PROGRAM NO. OF YEARS DROP LOW 1ST SOYBEANS 0.0 0.0 0.0 2NO SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 II A 1.0 INDICATES DELETING THE LOW OR HIGH MARKETING LOAN RATES 1ST SOYBEANS 0.0 0.0 0.0 2ND SOYBEANS 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 MAXIMUM MKTG LOAN OASE 0.0 0 0 0.0 SCALE FARM PROGRAM BENEFITS TO FARM SIZE FARMS LARGER THAN 0. ACRES ARE NOT ELIGIBLE FOR ANY FARM PROGRAM FARMS LARGER THAN 0. ACRES ARE ONLY ELIGIBLE FOR THE CROP FARMS WITH CROP SALES GREATER THAN S 0. FARMS WITH CROP SALES GREATER THAN S 0. HISTORY OF FCIC PARTICIPATION NUMBER OF YEARS IN THE PROGRAM 3.00 NUMBER OF LOSS YEARS IN PROGRAM 2.00 TOTAL FCIC INSURANCE PREMIUMS PAID BY FARM 24243.70 TOTAL FCIC INDEMNITY PAYMENTS RECEIVED 83538.37 THE END OF ALL INPUT DATA 1 ITOTAL OEPREC 8 THIS YEARS OEPREC 2552.4 2552.4 MACHINE 1 7.00 33474.00 35758.00 3580.00 5318.51 0.0 0.0 7.00 35758.00 2552.43 51700.00 5.00 0.0 1 2TDTAL OEPREC 8 THIS YEARS OEPREC 4233.2 1570.8 MACHINE 2 7.00 31755.00 33558.00 3357.00 5457.71 0.0 0.0 7.00 33558.00 1570.77 51700.00 5.00 0.0 1 3TOTAL OEPREC 8 THIS YEARS OEPREC 15217.5 14584.3 MACHINE 3 7.00 51700.00 51700.00 0.0 52445.00 0.0 0.0 7.00 51700.00 14584.25 51700.00 5.00 0.0 1 JTOTAL OEPREC I THIS YEARS OEPREC 15217.5 0.0 MACHINE 4 7.00 7717.00 10087.00 1005.00 1005.00 0.0 0.0 7.00 10087.00 0.00 15500.00 5.00 0.0 1 STOTAL OEPREC I THIS YEARS OEPREC 20407.5 1150.0 MACHINE 5 7.00 34545.00 52475.00 5283,00 5437,33 0.0 0.0 7.00 52475.00 1185.58 54800.00 5.00 0.0 1 5TOTAL OEPREC 8 THIS YEARS OEPREC 38531.1 8555.4 MACHINE 5 7.00 50857.00 74528.00 7452.80 31343.75 0.0 0.0 7.00 74528.00 8555.35 4000.00 0.0 4000.00 2017.40 2.00 4000.00 ARE ONLY ELIGIBLE FDR THE CROP ARE NOT ELIGIBLE FOR ANY FARM PROGRAM BENEFITS INSURANCE PROGRAM .0 33474.00 1580.00 .0 31755.00 1575.00 .0 51700.00 1553.00 .0 7717.00 1575.00 .0 34545.00 1578.00 .0 50857.00 1581 00 33141 0.0 25541 0.0 24235 0.0 5078. 47227. 0.0 52235. 0.0 .52 .05 .28 00 50 79 SUMMARY OF PROGRAM OPTIONS SELECTED OY THE USER D1 RESULTS FROM SR ROTATION, LIBERTY COUNTY. FINAL ANALYSIS. MULTIVARIATE EMPIRICAL DISTRIBUTIONS USED FDR PRICES AND YIELDS. WHOLLY LEASED FARM ACREAGE, S01 LONG TERM ANO 40% INTERMEDIATE DEOT. SUPERIOR MANAGEMENT. CROP INSURANCE, SO G PAYMENT LIMIT. 1/7 CROP SHARE ON SOYOEANS AND RICE. STOCHASTIC RUN, 5 YRS, SO ITERATIONS. i ‘i SIMULATE THE REPRESENTATIVE FARM FOR 5 YEARS FIRST YEAR TO IE SIMULATED IS I884. THE SIMULATION WILL OE DETERMINISTIC PRINT ALL INPUT DATA AND ALL OUTPUT TABLES THE REPRESENTATIVE FARM HAS A CROPS AND O LIVESTOCK ENTERPRISES PAYOFF OUTSTANDING LOANS USING SURPLUS CASH NO SPECIAL FINANCIAL BAILOUT PROGRAM IS IN EFFECT ADJUST INCOME TAX SCHEDULE AFTER 1984 FOR CHANGES IN THE CPI FIXED PORTION OF CROPS SOLD IN T AND CCC LOAN USED FOR THE REMAINDER NO MAXIMUM ON ANNUAL INTEREST DEDUCTIONS IS IN PLACE 3 THE CROP MIX WILL DE CONSTANT OVER TIME DEPRECIATION ON OLD MACHINERY WILL IE CALCULATED IY THE DECLINING BALANCE METHOD USE THE FEDERAL INCOME TAX PROVISIONS FOR I982 ' MACHINERY PURCHASED AFTER 1980 WILL IE RECOVERED USING AN ACCELERATED SCHEDULE THE USER HAS ELECTED TO REDUCE OASIS FOR INVESTMENT TAX CREDIT THE FARM HAS ELECTED NOT TO TAKE FIRST YEAR EXPENSING ON PURCHASES OF MACHINERY THERE ARE O7 PIECES OF OWNED FARM MACHINERY TO BE DEPRECIATED OLD FARM MACHINERY WILL IE TRADED IN RATHER THAN IE SOLD USER HAS SPECIFIED THE FAMILY CONSUMPTION FUNCTION FDR REGION S THE FARM MAY NOT SELL CROPLAND TO AVOID INSOLVENCY _ CROPLAND WILL IE LEASED USING A CROP SHARE SCHEME SPECIFIED IV THE USER 4 ANNUAL INFLATION RATES FDR FARMLAND ARE PROVIDED IY THE USER THE FARM WILL NOT OE ALLOWED TO GROW OVER TIME INFORMATION FOR O ALTERNATIVE FARMS IS PROVIDED IV THE USER AN UNLIMITED NONRECDURSE LOAN (PRICE SUPPORT PROGRAM WILL OE IN EFFECT DO NOT PAY INTEREST ON NONREDEEMED NONRECOURSE CCC LOANS LOAN RATES ARE FIXED BY THE ANALYST IN ALL YEARS INTEREST ON FOR LOANS WILL IE CHARGED ANNUALLY FOR 1 YEARS A TARGET PRICE PROGRAM WILL IE IN EFFECT AND TARGET PRICES ARE FIXED AN ALL-RISK CROP INSURANCE PROGRAM IS IN EFFECT A MANDATORY SET-ASIDE OR VOLUNTARY DIVERSION PROGRAM WILL OE IN EFFECT PAYMENT LIMITATIONS ARE IN EFFECT FOR DEFICIENCY PAYMENTS, DIVERSION PAYMENTS I DISASTER PAYMENTS ALL FARMS ARE ELIGIBLE FDR ALL FARM PROGRAM BENEFITS M... 4i S“... _ I‘ _ ,_.I,.,_._..., ..LA........_......I......IL.A._. . . oz RESULTS rnon sn ROTATION, LIIERTY cauntv. FINAL ANALYSIS. MULTIVARIATE EMPIRICAL DISTRIBUTIONS usen won PRICES AND YIELOS. WHOLLY LEASED FARM ACREAGE, sex LONG team AND 4oz INTERMEDIATE nest. suwenxon MANAGEMENT. cnor INSURANCE, so s PAYMENT LIMIT. 1/1 can» SHARE on SOYBEANS ANO nxce. STOCHASTIC nun, s vns, so ITERATIDNS. CROPLANO on INITIAL FARM TOTAL CROPLANO ACRES owneu 1o.oooo totAL CROPLANO ACRES LEASEO 2:oo.oooo PASTURELAND ACRES ownen o.o PASTURELAND ACRES LEASEO o.o FRACTION CROPLAND tnAt rs ttLLAaLe o.ssoo FRACTION CROPLAND THAT 1s IRRIGATED o.saoo INITIAL aALAnce sneet ran tne FARM \ Assets u MARKET vALue or CROPLAND a FARMSTEAO 12ooo.oooo nnnxet vALue or BUILDINGS 1ssooo.ooo TOTAL VALUE or awneo CROPLAND a BUILDINGS 1s7ooo.ooo MARKET vALue or OFF-FARM INVESTMENTS 20ooo.oooo aecxnnxnc cnsn nesenve sooo.oooo MARKET vALue or owneo PASTURELAND o.o MARKET VALUE or ALL FARM MACHINERY ssszo2.ooo nnnxet vALue or ALL LIVESTOCK o.o TOTAL VALUE or Assets 1st2o2.ooo LIABILITIES TOTAL REAL ESTATE neat ssaoo.oooo TOTAL rntennenxnte-team neat z2soa1.ooo INCOME tAxes oue 1n YEAR 1 o.o SELF EMPLOYMENT TAXES oue IN YEAR 1 o.o TOTAL neat zszaa1.ooo BEGINNING net wontn (MARKET VALUE) AaA:21.ooo xn1t1AL FINANCIAL RATIOS ran tn: FARM eouxtv to Assets RATIO o.s1:2 nest to Asset RATIO o.:asa LEVERAGE aattu o.s:oa AVERAGE PER ACRE VALUE or CROPLAND |zoo.oooo AVERAGE PER ACRE VALUE or PASTURELAND c.o LIABILITIES won INITIAL FARM REAL estAte neat ssaoo.cooo LOAN LIFE on nest :o.oooo FRACTION LAND LOAN REMAINING o.sooo ORIGINAL AMOUNT or tne LOAN 1::soo.ooo neat to Asset RATIO o.4ooo v INTERMEDIATE team neat 22soa1.ooo ’ LOAN LIFE on neat s.oooo FRACTION LOAN REMAINING o.sooo ORIGINAL AMOUNT or tne LoAn 4sz1s2.ooo neat to Asset RATIO o.4ooo 80 OPERATING LOAN FRACTION or YEAR LoAn 1s usen 0.3690 teams ron new LOANS as no. YEARS run new LAND LOANS 3q_¢q°° NO. YEARS FOR NEW MACH LOANS $_QQQQ MINIMUM INTERMEDIATE TERM EOUITY CASH RESERVE FOR THE FARM MINIMUM CASH RESERVE BEGINNING CASH RESERVE CAPITAL ASSETS TO BE RECOVERED BUILDINGS PLACED sanvnce VALUE runcnnsz rnxcs ECONOMIC luarnzcxnrxnnl PURCHASE PRICE CALENDAR YEAR PURCHASED SPECIAL PURPOSE BUILDINGS PLACED PURCHASE PRICE CALENDAR YEAR PURCHASED FIXED COSTS PROPERTY TAX RATE TOTAL PERSONAL PROPERTY TAX OTHER TAXES ACCOUNTANT 8 LEGAL FEES INSURANCE ON MACHINERY MISCELLANEOUS FIXED COSTS LAND LEASE COSTS NDN'TAXABLE OFF-FARM INCOME ANNUAL RETURN ON OFF'FARM INVEST MINIMUM FAMILY LIVING EXPENSES MAXIMUM FAMILY LIVING EXPENSES USER'S SPECIFIED CONSUMPTION FUNCTION USED IF THE OPTION INTO USE PRIOR TO LIFE REGULAR BUILCINGS PLACED INTO (STA!/SVALUEI 0. INFORMATION FOR REFINANCINC DEBTS 0.3333 CHARGE TO REFINANCE CASH FLOW OEFICITS 0.0100 NO YEARS FOR A LONG'TERM LOAN 20.0000 NO. YEARS FOR INTERM'TERM LOAN 5.0000 MINIMUM OOWNPAYMENT LEVELS MINIMUM OOWNPAYMENT FOR FARM MACHINERY 0.3000 MINIMUM DOWNPAYMENT FOR FARMLAND 0.3000 AFTER-TAX DISCOUNT RATE 0.1011 ANNUAL RATE OF RETURN TO PROD ASSETS T'1 0.0 CAPITAL GAIN RATE FOR LAND IN T'1 0.0400 5000.0000 5000.0000 IDEPRECIATEDI 1951 10500.0000 105000.000 30.0000 USE AFTER 1580 0.0 0.0 INTO USE AFTER 1540 0.0 0.0 01o 003330 0 0 3000.0000 UNALLOCATED MAINTENANCE COSTS 0.0 3200.0000 5000.0000 CASH RENT FOR CROPLANO IS/ACRE) 0.0 CASH RENT FOR PASTURELAND 15/ACREI 0.0 ANNUAL INFLATION RATE FOR PER ACRE CASH LEASE COST 0.0 CAPITALIZATIDN RATE BETWEEN LAND VALUE 8 CROPLANO CASH LEASE COST 0.0 FAMILY CONSUMPTION AND TAX INFORMATION AGE OF OPERATOR 45.0000 NO. OF TAX EXEMPTIONS CLAIMED 5.0000 MARGINAL TAX RATE FOR STATE 0.0 RATIO OF PERSONAL DEDUC TO NET INCOME 0.2000 DESIRED TAXABLE INCOME 0.0 AVERAGE ANNUAL OFF-FARM INCOME 0.0 15000.0000 0.1100 18000.0000 25000.0000 IS ELECTED CONSUMPTION I 0.0 0 0.0 I [DISPOSIBLE INCOME ' 0.0 I INCOME TAX PAYMENT DUE IN YEAR 1 0.0 SELF-EMPLOYMENT TAX PAYMENT DUE IN YEAR I 0.0 TAXABLE INCOME IN YEAR T~3 0.0 TAXABLE INCOME IN YEAR T-2 0.0 TAXABLE INCOME IN YEAR T-1 0.0 MAXIMUM INTEREST DEDUCTION IF OPTION IS USED 0.0 RISK AVERSION COEFFICIENT 0.0 HIRED FARM LABOR NO. OF FULL TIME EMPLOYEES 3.0000 ANNUAL GROSS SALARY FOR FULL'TIME EMPLOYEE 13800.0000 HOURLY WAGE RATE FOR PART'TIME LABOR 3.3500 ANNUAL INTEREST RATES 1584 1885 I585 1587 OLD LONG'TERM LOANS 0.1175 0.1175 0.1175 0.1175 OLD INTERMEDIATE-TERM LOANS 0.1500 0.1500 0.1500 0.1500 NEW LONG-TERM LOANS 0.1310 0.1170 0.1080 0.1050 NEW INTERMEDIATE-TERM LOANS 0.1480 0.1450 0.1410 0.1370 REFINANCE LONG~TERM LOANS 0.1310 0.1170 0.1050 0.1050 REFINANCE INTERM'TERM LOANS 0.1480 0.1450 0.1410 0.1370 OPERATING LOANS 0.1520 0.1540 0.1550 0.1420 RECEIVED FOR CASH RESERVES 0.1180 0.1183 0.1110 0.1070 ANNUAL PERCENTAGE CHANGES IN SELECTED COSTS NEW FARM MACHINERY 0.0 0.0470 0.0450 0.0480 USED FARM MACHINERY 0.0 0.0 0.0 0.0100 FIXED COST, INS 8 TAX 0.0540 0.0470 0.0450 0.0480 SEED COSTS 0.1145 0.0204 -0.1201 0.0480 FERTILIZER 8 LIME 0.0744 0.0855 0.0831 0.0480 CHEMICAL COSTS 0.0813 0.0585 0.0885 0.0480 FUEL 4 LUBE COSTS 0.0540 0.0470 0.0450 0.0480 REPAIRS ON MACHINERY 0.0540 0.0470 0.0450 0.0480 OTHER PROD COST 0.0054 0.0470 0.0450 0.0480 CUSTOM COSTS 0.0540 0.0470 0.0450 0.0480 HIRED LABOR COSTS 0.0540 0.0470 0.0450 0.0480 OFF~FARM INVESTMENT 0.1180 0.1150 0.1110 0.1070 PURCHASED INPUTS FOR LIVEST 0.0 0.0 0.0 0.0 FARMLANO VALUES 0.0710 0.0710 0.0710 0.0710 BUILDING VALUES -0.0200 -0.0200 -0.0200 0.0200 OFF-FARM STORAGE COSTS 0.0 0.0470 0.0450 0.0480 OTHER ANNUAL DATA FOR THE FARM 1584 1585 1588 1587 NEW CAPITAL INVESTEO IN FAR 0.0 0 0 0.0 0.0 CONSUMER PRICE INDEX 310.50 323 50 335 00 355.20 OTHER FARM INCOME 0.0 0 0 0.0 0.0 SELF EMPLOYMENT TAX RATE 0 140 0 141 0 143 0 143 MAXIMUM INCOME SUBJUCT TO SELF EMPLOPVMENT TAX 37205.00 38803.00 40512.00 42572.00 SUMMARY OF THE OWNED MACHINERY COMPLEMENT CURRENT ORIGINAL ESTIMATED DEPRECI' YEAR MARKET PURCHASE SALVAGE ATION PURCHASED VALUE PRICE VALUE LIFE TRACTORISBHP 1580.0 33474.0 35758.0 J9l0_0 7_Q TRACTOPISGMP 1575 0 31755.0 33588 O .7357 O 1_Q 1588 .1175 .1500 .1050 .1370 .1050 .1370 .1420 .1070 0010001000 .0500 .0100 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .0500 .1070 .0710 .0200 .0500 n 0000000000000000 44§os.oo ECONOMIC RECOVERY LIFE 7.0 7 O 0000000000000000 00000000 000 0000000000000000 00000000 000 ACCUM. [OEPREC.I 30475.5 2novo.3 0000000000000000 00000000 000 0000000000000000 00000000 000 MACHINERY REPLACEMENT REPLACE. CODE 0.0 0O 0000000000000000 00000000 0000000000000000 00000000 CURRENT COST 51700.0 61700 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 0.0 0. 0.0 0. 0.0 0.0 0.0 81 0 COST RECOVERY PERIOD OR CLASS 5.0 5.0 04 05 TRACTOR SSHP TRCTR ZZSHP TRCTR Z29HP COMBINE 7720 COM9!NE 7720 COMBINE 7720 PCKUP 1/ZTON PCKUP 1/ZTON PCKUP 1/ZTON DSK 12‘ 9” OSK 22‘ 9“ OSK 24‘ 4“ OSK 24‘ 4“ ROLL CULT ROLL CULT IN PLANT I’ ON PLANT 8‘ GRAIN CART GRAIN CART LO PL 18XSO LO PL 16X60 LEVEE BOXES LEVEE PLOW LEVEE PUSH LEVEE ROLLER FLO CUL I1‘ FLO CUL 31' FLO CUL 25 IEDDER I ROW IEOOER 8 ROW PIPE NARROW PIPE NARROW OU~ALL MISC TRUCKS INFORMATION FOR SUMMARY OF CROP 1ST SOVIEANS IND SOYIEANS FIRST RICE RATOON RICE MONTHLY LABOR REQUIREMENTS PER ACRE, 1ST SOYBEANS 2ND SOYIEANS FIRST RICE RATOON RICE HOURS OF UNPAIO 1975. 1978. 1981. 1979. 1983. 1980. 1983. 1978. 197$. 1982. 1990. 1981. 1979. 1982. 1979. 1978. 1982. 1981. 1975. 1978. 1977. 1982. 1981. 1981. 1978. 1982. 1981. 1978. 1579. 1979. 1979. 1980. 1975. 1977. 00100013OOKDOOOGDOOIDOOIDOOlDOOlDOOl0OO<)001D INITIAL FARM ENTERPRISE COSTS FAMILY LABOR AVAILABLE EACH MONTN HOURS WORKED EACH MONTH BY A FULL TIME EMPLOYEE ANNUAL MEAN OR MODAL CROP YIELOS 151 50145445 240 s0v4544s FIRST 41:5 441004 41:5 ANNUAL MEAN OR MOOAL CROP PRICES 1ST SOVBEANS ZND SOYBEANS FIRST RICE RATOON RICE CONSTRAINTS ON THE CROPMIX 1ST SOYBEANS 2ND SOVBEANS FIRST RICE RATOON RICE CROP SHARE LEASING BY CROP 1ST SOYBEANS 2NO SOYBEANS FIRST RICE RATOON RICE 82 MARKETING STRATACIES 1ST SOYEEANS 2ND SOYIEANS FIRST RICE RATOON RICE UIIIIUIGIIIIIMUIIIIIIIIUIIIIIIIIIIIIIIGIIIIIIIIIIIGIUIIIIIIIIUIIIIIICIUIIIUIIII 1111.0 10041.0 1009.0 1.0 1.0 9014.0 2.0 19900.0 34945.0 52415.0 5244.0 1.0 1.0 45031.0 0.0 94400.0 50491.0 14524.0 1452.4 1.0 1.0 43244.2 0.0 94400.0 51909.0 53445.0 5349.0 1.0 1.0 43455.1 0.0 94000.0 94000.0 94000.0 0.0 1.0 1.0 14100.0 0.0 94000.0 55442.0 51441.0 4144.0 1.0 1.0 45112.9 0.0 94000.0 9000.0 9000.0 0.0 1.0 1.0 1350.0 0.0 9000.0 3425.0 4534.0 454.0 1.0 1.0 3935.3 0.0 9000.0 2315.0 3415.0 344.0 1.0 1.0 3444.0 2.0 9000.0 1500.0 11500.0 0.0 1.0 1.0 4255.0 0.0 15300.0 4500 0 9400.0 940.0 1.0 1.0 1249.0 0.0 15300.0 5000.0 11500.0 0.0 1.0 1.0 4410.0 0.0 19300.0 3500.0 9200.0 920.0 1.0 1.0 1914.1 0.0 19300.0 2000.0 4200.0 0.0 1.0 1.0 1554.0 0.0 5200.0 1500.0 3900 0 390.0 1.0 1.0 3114.9 0.0 5200.0 4500.0 4311.0 431.0 1.0 1.0 3934.0 0.0 10250.0 4500.0 1000.0 0.0 1.0 1.0 2590.0 0.0 10250.0 3500.0 4114 0 0.0 1.0 1.0 2135.4 2.0 5400.0 2000.0 1320.0 132.0 1.0- 1.0 1144.0 2.0 5400 0 1315.0 1500.0 140.0 1.0 1.0 5590.5 0.0 11500.0 3000.0 4000.0 400.0 1.0 1.0 1200.0 0.0 11500.0 5000.0 1500.0 0.0 1.0 1.0 2115.0 0.0 11250.0 1541.0 1553.0 0.0 1.0 1.0 905.5 2.0 2400.0 100.0 2100.0 0.0 1.0 1.0 1214.0 2.0 2500.0 350.0 350.0 35.0 1.0 1.0 303.5 2.0 550.0 5500.0 1900.0 0.0 1.0 1.0 2923.0 0.0 9400.0 4500.0 1100.0 0.0 1.0 1.0 4114.0 0.0 9400.0 2500.0 5400 0 540.0 1.0 1.0 5029.1 0.0 9400.0 1035.0 1100.0 110.0 1.0 1.0 990.0 0.0 5400.0 1500.0 3500 0 350.0 1.0 1.0 2449.2 0.0 5400.0 1000.0 1020.0 102.0 1.0 1.0 430.3 0.0 2100.0 1100.0 1400.0 150.0 1.0 1.0 1143.5 0.0 2100.0 3500.0 4400.0 450.0 1.0 1.0 1451.4 0.0 11500.0 50000.0 40000.0 4000.0 1.0 0.0 52031.4 2.0 90000.0 2310. 4c455--~--------------------------~----~--------~-------------------------- 55:0 PERT-LIME CHEMICALS FUEL-LUBE 4544145 01454 444v5s1 c051 --s/4c45-- 5/11510 u411 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.45 14.35 45.45 12.54 5.11 9.14 ¢.4500 33.90 51.00 51.55 14.40 5.15 19.20 1.2300 0.0 3.34 2.50 0.0 0.0 5.15 1.2300 4v c404 5415444155 344. FEB. MAR. 44411 MAY 4045 JULY 4u5. 5541. 0:1. 40v. 0.240 0.454 0.105 0.545 1.244 0.444 0.295 0.404 0.105 0 551 0.191 0.240 0.454 0.105 0.545 1.244 0.444 0.295 0.404 0.105 0.551 0.191 0.215 0.341 1.340 0.515 1.130 1.191 1.213 0.911 0.294 0 111 0.155 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.101 0.054 0.544 0.0 400.00 400.00 400.00 400.00 150.00 900.00 900.00 400.00 500.00 400.00 400 00 250.00 300.00 350.00 350.00 350.00 350 00 350.00 350.00 300.00 300.00 250 00 1944 1945 1945 1441 1944 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.59 24.11 24 51 25.11 25.54 0.0 0.0 0.0 0.0 45.11 52.31 55.04 55.51 51.14 0.0 0.0 0.0 0.0 1.94 1.95 1.94 2.00 2.02 0.0 0.0 0.0 0.0 1444 1945 1945 1941 1944 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.33 1.45 1.92 4.01 4.34 0.0 0.0 0.0 0.0 9.24 9.14 10.14 10.55 11.02 0.0 0.0 0.0 0.0 4.52 9.10 9.43 9.42 10.25 0.0 0.0 0.0 0.0 4:455 4:455 MINIMUM MAXIMUM 1144405 404441 4144150 444v5s150 r44c1104 54451104 10 000415 544:. 4:455 v544 1 15441 0r MIX 05 MIX 0404 444v55150 0.0 0.0 0.0 0.0 0.0 0.0 1091.00 1042.40 0.0 0.0 0.0 0.95 1091.00 1045.40 0.0 0.0 0.0 0.99 1091.00 1045.30 0.0 0.0 3.00 0.99 LANDLORD 54445 05 45551415 4 c0s1s c404 5550 FERT 4 CHEMICAL FUEL 4 MACHINERY 01454 cus10u 45551415 c0515 LIME c0515 L045 4544145 50515 WORK 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1430 0.0 0.0 0.0 0.0 0.0 0.0 0.0190 0.1430 0.0 0.0 0.0 0.0 0.0 0.0 0.0190 0.1430 0.0 0.0 0.0 0.0 0.0 0.0 0.0190 455144145 44451104 MONTH MONTH 14v54104v 5000 45x1 5010 45154 5010 14 14x 1544 444v551 45x1 1544 0.0 0.0 0.0 0.0 5349.199 0.300 10.000 1.000 0.0 0.0 1.000 1.000 1405.000 1 000 10.000 1.000 000013000100000IDOOOIJOCCGDOCOIDOOOCDOOOO E . 0.105 0.105 0.222 0 400.00 250.00 OOOO OOOO 0000 OOOO n...5..1..21_._4-_11ml SEASONAL PRICE INDEX 1ST SOYEEANS 2ND SOYOEANS FIRST RICE RATOON RICE FACTOREO MATRIX CROP YIELOS 1ST SOYSEANS 2ND SOVIEANS FIRST RICE RATDON RICE CROP PRICES 1ST SOYOEANS 2ND SOVOEANS FIRST RICE RATOON RICE CROP YIELOS 1ST SOYOEANS 2NO SOYOEANS FIRST RICE RATOON RICE CROP PRICES 1ST SOYOEANS 2ND SOYOEANS FIRST RICE RATOON RICE CDVARIANCE MATRIX OF 1ST SOVIEANS 2NO SOYOEANS FIRST RICE RATOON RICE CCC LOAN RATES 1ST SOYEEANS 2ND SOYIEANS FIRST RICE RATOON RICE INTEREST RATE FOR CCC LOANS INTEREST RATE FOR FOR LOANS OFF-FARM STORAGE COSTS FOR CROPS UNDER 1ST SOYEEANS 2ND SOYIEANS FIRST RICE RATOON RICE TARGET PRICES. 1ST SOVIEANS 2ND SOYOEANS FIRST RICE RATOON RICE FLEXIILE TARGET PRICE---FRACTION OF 1ST SOYEEANS 2ND SOVOEANS FIRST RICE RATOON RICE DIRECT "FOR" 1ST SOYEEANS 2ND SOYOEANS FIRST RICE RATOON RICE IST SOYEEANS 2NO SOYEEANS FIRST RICE RATOON RICE 1ST SOVOEANS 2NO SOYEEANS FIRST RICE RATOON RICE PROGRAM (on ans!) 1ST SOYEEANS 2ND SOYOEANS FIRST RICE RATOON RICE NATIONAL ALLOCATION FACTOR 1ST SOVIEANS 2ND SOVOEANS FIRST RICE RATOON RICE ACREAGE SET ASIDE. 1ST SDYOEANS 2ND SOVOEANS AS A FRACTION OF MEAN 7 I 5 Y .000 .000 .000 .000 AUG. -0. -0. -0. -0. 0. 0. 0. 1. 01900 00100 1.000 1.000 1.000 1.000 245 245 552 540 242 242 571 000 .152 .135 .034 .055 .087 .057 .205 .205 EY YEAR AND OY CROP JAN. FEE. MAR. APRIL MAY JUNE JUL 1.000 1.000 1.000 1 000 1.000 1.000 1 1.000 1.000 1.000 1.000 1.000 1.000 1 1.000 1.000 1.000 1.000 1.000 1.000 1 1.000 1.000 1.000 1.000 1.000 1.000 1 FOR CROP YIELOS I PRICES 1 2 5 7 0.0 0.503 0.515 0.355 0.0 0.300 -0.415 0.0 0.503 0.515 0.355 0.0 0.300 -0.415 0.0 0.0 0.732 0.255 0.0 0.030 0.177 0.0 0.0 0.0 0 533 0.0 0.031 -0.101 0.0 0.0 0.0 0.0 0.0 0.551 -0.150 0.0 0.0 0.0 0.0 0.0 0.551 -0.150 0.0 0.0 0.0 0.0 0.0 0.0 0.452 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CUNMULATIVE DISTRIBUTIONS OF OEVIATES AEOUT TNE MEAN [OR TRENOI. EXPRESSED 1 2 3 5 5 -0.751 -0.530 -0.355 -0.254 -0.175 -0.055 0.032 -0.755 -0.541 -0.375 -0.255 -0.133 -0.025 0.025 -0.427 -0.215 -0.150 -0.121 -0.077 -0.042 -0.004 -0.514 -0.317 -0.155 -0.125 -0.055 -0.023 0.024 -0.274 -0.235 -0.053 -0.052 -0.031 0.035 0.045 -0.274 -0.235 -0.053 -0.052 -0.031 0.035 0.045 -0.415 -0.354 -0.222 -0.057 -0.025 0.125 0.171 -0.415 -0.354 -0.222 -0.057 -0.025 0.125 0.171 NET INCONES FOR CROPS 1 2 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SUMMARV OF POLICY OATA, 1554 1555 1555 1557 1555 0.0 0.0 0.0 0.0 0.0 5.02 5.02 5.02 5.02 5.02 5.33 5.33 5.33 5.33 5.33 5.03 5.03 5.03 5.03 5.03 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 LOAN 0.30 0.31 0.33 0.35 0.35 0.30 0.31 0.33 0.34 0.35 0.50 0.52 0.55 0.57 0.50 0.50 0.52 0.55 0.57 0.50 IF THEY ARE NOT TIED TO LOAN RATES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.23 12.23 12.23 12.23 12.23 11.53 11.53 11.53 11.53 11.53 TARGET PRICE TO LOAN RATE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ENTRY PRICE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ACTUAL YIELOS LAST 5 YEARS FOR CALCULATING FARM PROGRAM YIELOS . . 0.0 0.0 0.0 30.00 32.00 17.00 10.00 5 00 41.55 35.53 44.45 45.51 45.32 2.12 1.55 1.55 1.52 1.54 ACTUAL LAGGED PRICES FOR 4 YEARS USED FOR FLEXIBLE LOAN RATES .0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ACREAGE 0.0 0.0 0.0 0.0 0.0 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 1057.00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.00 1.00 1.00 1.00 1.00 1-9° 1.00 1.00 1.00 1.00 DIVERSION OR LIMITATION (FRACTION) 0.0 0.0 0.0 0.0 0.0 9-O 0.0 0.0 0.0 0.0 rvar- »v—— SEPT. 01000 01000 .000 .000 .000 .000 .310 .301 .121 .155 .225 .225 .211 .211 .000 .000 C . 1.000 1 1 1.000 0.570 0.500 0.355 0.752 0.255 0.255 0.415 0.415 .000 .000 .000 .000 83 .000 .000 .000 .000 RATOON RICE SLIPPAGE RATE IST SOYEEANS 2NO SOYOEANS FIRST RICE RATOON RICE PAYMENT RATE FOR ACREAGE DIYERSION IST SOYOEANS IND SOYEEANS FIRST RICE RATOON RICE TRIGGER PRICE FOR THE IST SOYIEANS 2ND SOYBEANS FIRST RICE RATOON RICE CALL PRICE FOR THE 1ST SOYEEANS 2NO SOYBEANS FIRST RICE RATOON RICE LENGTH OF FARMER OWNED RESERVE 1ST SOYIEANS 2ND SOYEEANS FIRST RICE RATOON RICE STORAGE PAYMENT RATE FOR THE 1ST SOYIEANS 2ND SOYBEANS FIRST RICE RATOON RICE PRODUCTION GUARANTEE FOR CROP IST SOYOEANS 2ND SDYOEANS FIRST RICE RATOON RICE PRICE ELECTION FOR CROP 1ST SOYOEANS 2ND SOYBEANS FIRST RICE RATOON RICE PREMIUM RATE PER ACRE 1ST SOYEEANS 2ND SOYEEANS FIRST RICE RATOON RICE LOAN RATE FOR PEANUTS IST SCYBEANS 2ND SOYBEANS FIRST RICE RATOON RICE LOAN RATE FOR PEANUTS 1ST SOYIEANS 2ND SOYBEANS FIRST RICE RATOON RICE FARM”S POUNOAGE 0UOTE IST SOYBEANS 2ND SOYIEANS FIRST RICE RATOON RICE ACREAGE ALLOTMENT FOR 1ST SOYDEANS 2ND SOYOEANS FIRST RICE RATOON RICE FRACTION TARGET 1ST SOYEEANS 2ND SOYOEANS FIRST RICE RATOON RICE FRACTION TARGET 1ST SOYBEANS 2ND SOYIEANS FIRST RICE RATOON RICE FRACTION PROVEN 1ST SOYIEANS 2ND SOYDEANS FIRST RICE RATOON RICE FRACTION PROYEN 1ST SOYOEANS 2ND SOYBEANS FIRST RICE RATOON RICE PARITY PRICE IST SOYOEANS 2ND SOYOEANS FIRST RICE RATOON RICE IST SOYOEANS 2ND SOYBEANS FIRST RICE RATOON RICE PAYMENT LIMITATION FOR INCOME SUPPORT PAYMENTS DISASTER PAYMENTS MAXIMUM NONRECOURSE CCC LOAN IST SOYBEANS 2ND SOVBEANS FIRST RICE RATOON RICE 0.25 0.35 (FRACTION) 0.0 0.0 0.0 0.0 0.20 0.20 0.20 0.20 0.0 0.0 0.0 0.0 0.0 71.1! 3 0.0 0.0 "FOR" 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 "FOR" 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 "FOR" 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 INSURANCE 0.0 0.0 0. 13.55 13.32 1A. 0.0 0.0 0. 0.0 0.0 0 INSURANCE 0.0 0.0 0. 5.50 7.73 I. 0.0 0.0 0. 0.0 0.0 0. FOR CROP INSURANCE 0.0 0.0 0. 9.13 11.08 12. 0.0 0.0 0. 0.0 0.0 0. UNDER 0UOTE 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. NOT UNDER OUOTA 0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. FOR PEANUTS 0.0 0.0 O. 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. RICE 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. PRICE FOR LOW YIELD PAYMENT 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. PRICE FOR PREVENTED PLANTING PAYMENT 0.0 0. .0 0.0 0. 0.0 0.0 0. 0.0 0.0 0. YIELD FOR LOW YIELD PAYMENT 0. 0.0 0. 0. 0.0 0. 0.0 0.0 0. 0.0 0.0 0 YIELD FOR PREYENTED PLANTING 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FRACTION OF CROP ELIGIBLE FOR MKTG CERTIFICATE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100000.00 100000.00 100000. 100000.00 100000.00 100000. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 84 PERCENT BASE PRODUCTION ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 O 0. MAXIMUM VALUE OF CROP ELIGIBLE FOR DEFICIENCY PAYMENT 0.0 0. 0000 0000 0000 0000 OM00 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 00 000 0000 0000 00N0 4 N 0000 0000 0000 0000 0000 0000 0000 00 00 0000 00N0 100000. 100000. 0000 0000 0000 0000 OOIO 00N0 D 000 0000 000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 00 0000 001-80 II 0000 0000 0000 0000 0000 0000 0000 00 00 0000 .2 00l-l0 .20 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 OM00 0 0000 00 0 000 0000 0 000 0000 00-0 .4 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 0000 I00000.00 100000.00 FLEXIBLE LOAN RATE FORMULAS NO. OF YEARS DROP LOW OROP HIGH FRACTION OF MEAN 1ST SOYBEANS 0.0 0.0 0.0 0.0 2NO SOYBEANS 0.0 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 0.0 II A 1.0 INOICATES OELETING THE LOW OR HIGH MARKETING LOAN RATES 1ST SOYBEANS 0.0 0.0 0.0 0.0 0.0 2NO SOYBEANS 0.0 0.0 0.0 0.0 0.0 FIRST RICE 0.0 0.0 0.0 0.0 0.0 RATOON RICE 0.0 0.0 0.0 0.0 0.0 MAXIMUM MKTG LOAN BASE 0 0 0.0 0 0 0.0 0.0 SCALE FARM PROGRAM BENEFITS TO FARM SIZE FARMS LARGER THAN 0. ACRES ARE NOT ELIGIBLE FOR ANY FARM PROGRAM FARMS LARGER THAN 0. ACRES ARE ONLY ELIGIBLE FOR THE CROP INSURANCE PROGRAM FARMS WITH CROP SALES GREATER TNAN S 0. FARMS WITH CROP SALES GREATER THAN S 0. HISTORY OF FCIC PARTICIPATION 5uu555 05 15555 15 755 5505555 5.00 NUMBER or 1055 15555 15 PROGRAM 2.00 70751 rcxc 155055555 PREMIUMS PAID 51 5555 24245.70 70751 5:15 150555171 55155575 55551150 55555.57 755 550 05 511 15ru7 0575 1 170751 05555: 5 7515 15555 05555: 2552 4 2552.4 5555155 1 7.00 55474.00 55755.00 5550.00 5515.51 0.0 0.0 7.00 55755.00 2552.4: 51700.00 5.00 0.0 1 270751 05555: 5 7515 15555 055555 4255.2 1570.5 5555155 2 7.00 51755.00 55555.00 5:57.00 5457.71 0.0 0.0 7.00 55555.00 1570.77 51700.00 5.00 0.0 1 570751 05555: 5 7515 15555 05555: 15217.5 14554.: 5555155 5 7.00 51700.00 51700.00 0.0 52445.00 ' 0.0 0.0 7.00 51700.00 15554.25 51700.00 5.00 0.0 1 470751 05555: 5 7515 15555 05555: 15217.5 0.0 5555155 4 7.00 7717.00 10057.00 1005.00 1005.00 0.0 0.0 7.00 10057.00 0.00 15500.00 5.00 0.0 1 570751 05r55c 5 7515 15555 05555: 20407.5 1150.0 5555155 5 7.00 54545.00 52475.00 5245.00 5457.55 0.0 0.0 7.00 52475.00 1155.55 54500.00 5.00 0.0 1 570751 05555: 5 7515 15555 05555: 55551.1 5555.4 5555155 5 7.00 50557.00 74525.00 7452.50 51:45.75 0.0 0.0 7.00 74525.00 5555.55 54500.00 5.00 0.0 1 770751 055555 5 7515 15555 0555:: 41455.7 2552.5 5555155 7 7.00 51505.00 55555.00 5555.00 10015.25 0.0 0.0 7.00 55555.00 2552.55 54000.00 5.00 0.0 1 570751 05555: 5 7515 15555 05555: 54:22.: 22525.5 5555155 5 7.00 54000.00 54000.00 0.0 75500.00 0.0 0.0 7.00 54000.00 22525.57 54000.00 5.00 0.0 1 570751 05555: 5 7515 15555 055555 54524.5 4502.5 5555155 5 7.00 55552.00 51551.00 5155.00 15105.1: 0.0 0.0 7.00 51551.00 4502.52 54000 00 5.00 0.0 1 1070751 05555: 5 7515 15555 05555: 71110.2 2155.7 5555155 10 7.00 5000.00 5000.00~ 0.0 7550.00 0.0 0.0 7.00 5000.00 2155.71 5000.00 5.00 0.0 1 1170751 0:555: 5 7515 15555 055555 71255.5 145.7 5555155 11 7.00 5425.00 4555.00 454.00 502 55 0.0 0.0 7.00 4555.00 145.55 5000.00 5.00 0.0 1 1270751 05555: 5 7515 15555 05555: 72115.5 0.0 5555155 12 7.00 2575.00 5575.00 555.00 555 00 0.0 0.0 7.00 5575.00 0.00 5000.00 5.00 0.0 1 1570751 05555: 5 7515 15555 0555:: 74155.5 2070 0 5555155 15 7.00 7500.00 11500.00 0.0 7245.00 » 0.0 0.0 7.00 11500.00 2070.00 15:00.00 5.00 0.0 1 1470751 05555: 5 7515 15555 05555: 74515.7 725.5 5555155 14 7.00 4500.00 5500.00 550.00 2551.02 0.0 0.0 7.00 5500.00 725.55 15:00.00 5.00 0.0 1 1570751 05555: 5 7515 15555 05555: 75255 7 1550.0 5555155 15 . 7.00 5000.00 11500 00 0.0 4550.00 0.0 0.0 7.00 11500.00 1550.00 15500.00 5.00 0.0 1 1570751 055555 5 7515 15555 05555: 75557.5 501.5 5555155 15 7.00 5500.00 5200.00 520.00 1221.55 0.0 0.0 7.00 5200.00 501.55 15500.00 5.00 0.0 1 1770751 0:555: 5 7515 15555 05555: 75755.7 755.0 5555155 17 7.00 2000.00 4200.00 0.0 2545.00 0.0 0.0 7.00 4200.00 755.00 5200.00 5.00 0.0 1 1570751 05555: 5 7515 15555 0:555: 75540.5 207.2 5555155 15 7.00 1500.00 5500 00 550.00 725.14 0.0 0.0 7.00 5500.00 207.15 5200 00 5.00 0.0 1 1570751 055555 5 7515 15555 05555: 75540.5 0.0 55c5155 15 7.00 4500.00 4:71.00 457.00 457.00 0.0 0.0 7.00 4:71.00 0.00 10250.00 5.00 0.0 1 2070751 055555 5 7515 15555 05555: 52052.4 1250.0 5555155 20 7.00 4500.00 7000.00 0.0 4410.00 0.0 0.0 7.00 7000.00 1250.00 10250.00 5.00 0.0 1 2170751 05555: 5 7515 15555 055555 52545.5 555.2 5555155 21 7.00 5500.00 4715.00 0.0 1551.55 0.0 0.0 7.00 4715.00 555.15 5500.00 5.00 0.0 1 2270751 05555: 5 7515 15555 055555 52545.5 0.0 5555155 7.00 2000.00 1520.00 152.00 152,00 0.0 0.0 7.00 1:20.00 0.00 5500.00 5.00 0.0 1 2570751 055555 5 7515 15555 055555 52557,, 153,4 4000.00 0.0 4000.00 0O '00 874.20 264.00 2.00 OO OO '00 '00 OO O0 OO OO OO OO '00 O0 OO OO OO O0 OO OO ARE NOT ELIGIBLE FOR ANY FARM PROGRAM BENEFITS 33474.00 1380.00 31708.00 1070.00 B1700.00 1S83.00 7717.00 1075.00 38045.00 1078.00 S0lS7.00 1381.00 51009.00 1070.00 Sl000.00 1S8J.00 $5882.00 1080.00 8000.00 1SB3.00 J425.00 IS7B.00 2375.00 1l75.00 7500.00 1SB2.00 lS00.00 1S80.00 5000.00 1Il1.00 3500.00 1S78.00 2000.00 1SB2.00 1500.00 1I7S.00 4500.00 1S7G.00 1500.00 1582.00 3500.00 1S81.00 2000.00 1S7S.00 ARE ONLY ELIGIBLE FOR THE CROP INSURANCE PROGRAM 33141 0.0 2OBA1 0.0 2423!. 0.0 S078. C7227. 0.0 S2239. 0.0 A872! 0.0 S8S28. 0.0 50375. 0.0 8050. 1188. .l2 .00 28 00 B0 .38 .71 .00 .00 .00 .Bl 00 .00 .00 .04 .00 .00 .00 00 85 Hzfflfixmw AZFVIFIIFTIT Appendix C. Plots of Probability Distribution Functions Yield distribution for ratoon rice Yield distribution for rice following 1 year of soybeans 501 50¢ I . 45- 45- 40- 40- 35- as- 30- so- P E 25- R 2s- - c E N T 2U- 2Q- 1s- IS- 1o- 10- 5- 5- 0- o- . . . . . . . . . . . . . Y . . . . . 2 4 5 a 10 12 14 20 25 an as 40 45 so ss so as 7o 75 tui /ncnz cur /acne Yield distribution for rice following 2 years of soybeans Price distribution for soybeans a C l u C ._L ‘5' 45 ........l...... 40- 4g- 35- 35.: 30- 3g- P i E . 25- R 2s- 5 : E . N 29- T 20 J I G | ..“.n (H CD I l cn <3 I... ... .l..... c: l (J |....... I 1 | I I 1 | 2O 2S 3O 3S 40 45 5D 55 EU 55 70 75 4 5 5 7 a 9 ¢"T~/"PR5 DOLLRRS/BUSHEL .._\ Price distribution for ratoon rice SO- P E R c E N r v *"""*T 5 7 B 9 10 ll 12 13 14 l5 DOLLRRS/[HT Yield distribution for soybeans following soybeans 50- .55 40- as- 30% P E R 25- c E N T < 20- l5- iol 5-. oi . . Y . . l . . 1 . o 10 IS 20 zs so as 40 45 so BUSHELS/RERE qzmnxmw HZTVIFIZIFH‘ Yield distributions for soybeans following rice SD- 45- 40- un 0| l .... w D 1.... .. N N O U! ..l..... .l.... I 0 5 10 15 20 Z5 BUSHELS/HERE 303 25— 20- Price distribution for first crop rice DOLLHR5/CHT 88 ACKNOWLEDGEMENTS Several individuals contributed significantly t0 this research effort. The assistance of Kelby Boldt, Arthur Gerlow, Willie Hubbell, Barry Jeffrey, Charles McQuhae, Tom Smith, Mike Spacek, James Stansel, Fred Turner, and David Yates in identifying the base farm production and financial situation is gratefully acknowledged. Several people reviewed an early draft of the report, offering many suggestions concerning the text itself, as well as the assumptions made in the study. Their suggestions have considerably improved the study. Sincere appreciation is extended to the following individuals for their comments: Lee Adams, David Bessler, Bill Black, Leon Blackwelder, Kelby Boldt, Ron Griffin, Iohn Hopkin, Willie Hubbell, Ronald Kay, David Leatham, Bruce McCarl, Mechel Paggi, Melvin Parker, Michael Parker, Lucas Parsch, Glen Pederson, Ierry Skees, and Ed Smith. Several typists spent many hours working on the original manuscript and adding subsequent revisions and additions. Becky Parker and Sue Ellen Galvan, in particular, were very diligent in interpreting the authors’ handwriting. Typing assistance by Sue Gorris and Iris Saito is also appreciated. In addition, Mary Lou Taylor, Sue Durden, and Kimberly Trant provided much appreciated editorial assistance. Despite the abun- dance of potential scapegoats, responsibility for any remaining errors or omissions rests with the authors. Mention of a trademark or a proprietary product does not constitute a guarantee or a warranty of the product by The Texas Agricultural Experiment Station and does not imply its approval to the exclusion of other products that also may be suitable. All programs and information of The Texas Agricultural Experiment Station are available to everyone without regard to race, color, religion, sex, age, handicap, or national origin. 2M—7-86 B-1530 July 1986