Economic Outlook for Representative Cotton Farms Given the August 2005 FAPRI/AFPC Baseline

The Agricultural and Food Policy Center (AFPC) at Texas A&M University develops and maintains data to simulate eighteen representative cotton operations in major production areas of seven states. The chief purpose of this analysis is to project those farms’ economic viability for 2005 through 2009. 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 2005 Baseline. Under the August 2005 Baseline, only the moderately sized Tennessee cotton farm (TNC1900) and Louisiana cotton farm (LAC2640) are considered in good liquidity condition (less than a 25 percent chance of negative ending cash during 2005-2009). Five cotton farms (TXSP3745, TXRP2500, TXMC3500, TXCB1850, and TNC4050) have between a 25 percent and a 50 percent likelihood of negative ending cash. The remaining eleven cotton farms have greater than a 50 percent chance of negative ending cash. Additionally, TNC1900 is the only farm in the set considered in good equity position (less than a 25 percent chance of decreasing real net worth during 2005-2009). Three cotton farms (TXRP2500, TXMC3500, and TXCB1850) have between a 25 percent and 50 percent likelihood of losing real net worth, and the remaining fourteen cotton farms have greater than a 50 percent probability of decreasing real net worth.