Representative Farms Economic Outlook for the August 2006 FAPRI/AFPC Baseline

The Agricultural and Food Policy Center (AFPC) at Texas A&M University develops and maintains data to simulate 100 representative crop, dairy, and livestock operations in major production areas in 28 states. The chief purpose of this analysis is to project those farms’ economic viability by region and commodity for 2006 through 2011. The data necessary to simulate the economic activity of these operations is developed through ongoing cooperation with panels of agricultural producers in each of these states. The Food and Agricultural Policy Research Institute (FAPRI) provided projected prices, policy variables, and input inflation rates in their August 2006 Baseline. Under the August 2006 Baseline, 14 of the 65 crop farms are considered in good liquidity condition (less than a 25 percent chance of negative ending cash in 2011). Ten crop farms have between a 25 percent and a 50 percent likelihood of negative ending cash. The remaining 41 crop farms have greater than a 50 percent chance of negative ending cash. Additionally, 23 of the 65 crop farms are considered in good equity position (less than a 25 percent chance of decreasing real net worth during the study period). Six crop farms have between a 25 percent and 50 percent likelihood of losing real net worth, and 36 crop farms have greater than a 50 percent probability of decreasing real net worth. The following discussion provides an overall evaluation by commodity considering both liquidity and equity measures.