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Farm survival and performance under alternative financial conditions and credit policies

Author

Listed:
  • David J. Leatham

    (Assistant Professor in the Department of Agricultural Economics, Texas A&M University)

  • Gregory M. Perry

    (Research Associate in the Department of Agricultural Economics, Texas A&M University)

  • M. Edward Rister

    (Assistant Professor in the Department of Agricultural Economics, Texas A&M University)

  • James W. Richardson

    (Associate Professor in the Department of Agricultural Economics, Texas A&M University)

Abstract

The impact of beginning equity, credit limits imposed by lenders, and changes in land values on farm survival, changes in equity position and farm success (measured by the probability of a positive net present value of returns) are evaluated. Whole-farm, Monte Carlo simulations for Texas part-owner and tenant rice-soybean operations were completed over the period 1984 through 1988. Results indicate that extending additional credit to part-owner and tenant operators in a high debt position (over 50%) will allow continued operation, but continued operation significantly increases the likelihood of a loss of farm equity and loan losses to agricultural lenders. Deterioration in land values increases the need for a higher equity base.

Suggested Citation

  • David J. Leatham & Gregory M. Perry & M. Edward Rister & James W. Richardson, 1986. "Farm survival and performance under alternative financial conditions and credit policies," Agribusiness, John Wiley & Sons, Ltd., vol. 2(3), pages 321-337.
    • Handle: RePEc:wly:agribz:v:2:y:1986:i:3:p:321-337
    DOI: 10.1002/1520-6297(198623)2:3<321::AID-AGR2720020305>3.0.CO;2-9
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    References listed on IDEAS

    as
    1. Patrick, George F., 1979. "Effects Of Debt Levels And Loan Arrangements On Farm Firm Survival And Growth," Risk Management in Agriculture: Behavioral, Managerial, and Policy Issues, January 25-26, 1979, San Francisco, California 271464, Regional Research Projects > W-149: An Economic Evaluation of Managing Market Risks in Agriculture.
    2. Helmers, Glenn A. & Held, Larry J., 1980. "Simulating Firm Survivorship - Suggestions For Financial Simulation Research," Risk Analysis in Agriculture: Research and Educational Developments, January 16-18, 1980, Tucson, Arizona 271569, Regional Research Projects > W-149: An Economic Evaluation of Managing Market Risks in Agriculture.
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    Cited by:

    1. Richardson, James W. & Smith, Edward G. & Knutson, Ronald D., 1988. "Who Benefits From Farm Programs: Size And Structure Issues?," 1988 Conference, January 16-19, San Antonio, Texas 260102, Regional Research Committe NC-181: Determinants of Farm Size and Structure.
    2. Richardson, James W. & Smith, Edward G. & Knutson, Ronald D., 1988. "Who Benefits from Farm Programs: Size and Structure Issues?," Staff Reports 257911, Texas A&M University, Agricultural and Food Policy Center.
    3. Knutson, Ronald D. & Smith, Edward G. & Richardson, James W., 1990. "The Incidence of Farm Program Benefits: Implications for Payment Limit Policies," Working Papers 258045, Texas A&M University, Agricultural and Food Policy Center.

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