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

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative crop and livestock operations are projected in this report. The analysis was conducted over the 2004-2010 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s major production regions came from two sources: • Producer panel cooperation to develop economic information to describe and simulate representative crop, livestock, and dairy farms, and • Projected prices, policy variables, and input inflation rates from the Food and Agricultural Policy Research Institute (FAPRI) January 2006 Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by farmers for prices and production. This report presents the results of the January 2006 Baseline in a risk context using selected simulated probabilities and ranges for annual net cash farm income values. The probability of a farm experiencing negative ending cash reserves 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 2010.