Outlook for Texas Representative Cotton Farms

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 are projected for representative Texas cotton farms. The analysis was conducted over the 2001-2008 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in Texas’ major cotton production regions came from two sources: - Producer panel cooperation to develop economic information to describe and simulate representative cotton farms. - Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) August 2004 Baseline. The primary objective of the analysis is to determine cotton farms’ economic viability by region through 2008, assuming provisions of the 2002 Farm Bill. The FLIPSIM policy simulation model incorporates the historical price and production risk faced by cotton farmers. This report presents the results of the August 2004 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing annual cash flow deficits and the probability of a farm losing real net worth are included as indicators of the cash flow and equity risks facing farms through the year 2008. This report is organized into six sections. The first section summarizes the process used to develop the representative farms and the key assumptions utilized for the farm level analysis. The second section summarizes the FAPRI August 2004 Baseline and the policy and price assumptions used for the representative farm analyses. The third section presents the results of the simulation analyses for cotton farms. The fourth section summarizes and compares cost of production information for the nine cotton farms. Two appendices constitute the final sections of the report. Appendix A provides tables to summarize the physical and financial characteristics for each of the representative cotton farms. Appendix B provides the names of producers, land grant faculty, and industry leaders who cooperated in the panel interview process to develop the representative farms.