Financial viability and profitability of cotton farms in the Texas High Plains region after the FAIR Act of 1996

K. Durham, P. Johnson

Research output: Contribution to conferencePaperpeer-review

Abstract

Recent policy changes in United States agriculture have brought added importance to risk management for farms. The 1995 Federal Agricultural Improvement and Reform (FAIR) Act has set forth legislation which gradually reduces government payments to farms through 2002, exposing farmers to increasing levels of risk. This study analyzed the financial and production results for two cotton farms in the Texas High Plains, then projected the future viability of each farm as its level of risk increased. The simulation results indicated that Farm 1 could remain profitable despite rising levels of debt and uncertainty, as shown by a profitability of survival of 100%. Farm 2's probability of survival was only 60%, with the difference between producers primarily due to a difference in the cash cost to receipts ratio, which is a measure of operating efficiency.

Original languageEnglish
Pages248-254
Number of pages7
StatePublished - 1999
EventProceedings of the 1999 Beltwide Cotton Conference - Orlando, United States
Duration: Jan 3 1999Jan 7 1999

Conference

ConferenceProceedings of the 1999 Beltwide Cotton Conference
CountryUnited States
CityOrlando
Period01/3/9901/7/99

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