Representative Farm Analysis of the S. 1731 Farm Bill Proposal

Farm Level Analytical Overview?? 46 of 48 representative crop farms analyzed would choose to update their base acreage and yields as allowed under the proposal.The only 2 that would not choose to update were the Texas Rolling Plains 2500 acre (TXRP2500) and Alabama 3000 acre (ALC3000) cotton farms.??Under Senate Bill S. 1731 all 48 farms increased net cash farm income relative to the current farm bill.These increases ranged from $13,900 on the South Central Kansas wheat farm (KSCW1385) to $380,150 on the Arkansas cotton farm (ARC5000).?? Average annual government payments also increase on all of the representative farms.The increase ranged from 17.6 percent on the 2500 acre Texas Rolling Plains cotton farm (TXRP2500) to 154.4 percent on the moderate size Texas Southern Plains cotton farm (TXSP1682).?? 43 of 48 representative farms saw the probability of a cash flow deficit decline in the final year of the analysis.The change in the probability of a cash flow deficit ranged from an increase of 0.8 percentage points on the Northern Louisiana rice farm (LANR2500) to a decline of 48 percentage points on the 2,640 acre Louisiana cotton farm (LAC2640).?? All but 3 of the farms improve their ability to retain net worth under S. 1731.The change in the probability of losing real net worth ranges from 0.8 percentage points on the 3000 acre Colorado wheat farm (COW3000) to -81.8 percentage points on the Texas Blackland cotton farm (TXBC1400). Analysis Assumptions?? Forty-eight representative crop farms were simulated from 2002-2006 with prices and input inflation rates (including land) projected by FAPRI.?? The sector and farm level analysis includes estimated prices and yields based on historical farm experiences.?? Farms are assumed to have a 20 percent term debt-to-asset ratio on January 1, 2000.Operating expenses are fully financed with borrowed capital.?? Farms choose base structure to maximize government benefits.The choice being either to keep original 1996 FAIR Act base acreages or update to the average 1998-2001 planted acreages.?? MPCI coverage maintained at 50/100 across all farms.?? Baseline assumes all farms operate under the provisions of the 1996 FAIR Act with AMTA payments extended at 2002 levels through 2006.Includes market loss assistance payments and disaster package for 2000, but does not include market loss assistance for 2001 crops.?? The S. 1731 analysis includes the crop provisions as interpreted by FAPRI/AFPC.?? Payment limits are assumed to be nonrestrictive in the analysis. Definition of Terms?? Net Cash Farm Income = Total Receipts including Government Payments minus all Cash Expenses.?? Probability of a Cash Flow Deficit = Chance that net cash farm income is less than cash required for family living, taxes, principal payments and capital replacement.?? Probability of Losing Real Net Worth = Chance that real net worth Dec. 31, 2006 is less than beginning net worth Jan. 1, 2000.?? Cumulative Distribution Function (cdf) is a distribution of net cash farm income over 500 iterations using historical yield and price variability.It represents the probability that income will fall below a specified level, as shown on the horizontal axis of the graph.Difference -0.06 -0.07 -0.06 -0.05 -0.04 -0.03 -0.02 -0.01 -0.01 -0.04 Corn Baseline Policy 2.08 2.11 2.15 2.22 2.29 2.36 2.42 2.49 2.56 2.30 S. 1731 2.03 2.04 2.07 2.15 2.24 2.32 2.39 2.46 2.54 2.25 Difference -0.05 -0.07 -0.07 -0.07 -0.05 -0.04 -0.03 -0.03 -0.02 -0.05 Sorghum Baseline Policy 1.85 1.89 1.93 2.01 2.08 2.13 2.19 2.25 2.32 2.07 S. 1731 1.79 1.80 1.84 1.93 2.01 2.08 2.15 2.22 2.30 2.01 Difference -0.06 -0.08 -0.08 -0.08 -0.06 -0.05 -0.04 -0.03 -0.02 -0.06 Barley Baseline Policy 2.25 2.27 2.29 2.33 2.39 2.44 2.48 2.54 2.60 2.40 S. 1731 2.20 2.21 2.22 2.27 2.33 2.39 2.44 2.50 2.57 2.35 Difference -0.05 -0.06 -0.07 -0.06 -0.06 -0.05 -0.04 -0.04 -0.03 -0.05 Oats Baseline Policy 1.20 1.24 1.26 1.29 1.33 1.36 1.39 1.42 1.46 1.33 S. 1731 1.15 1.17 1.18 1.21 1.25 1.29 1.32 1.35 1.39 1.26 Difference -0.05 -0.07 -0.08 -0.09 -0.08 -0.08 -0.07 -0.07 -0.07 -0.07