Economic Outlook for Representative Cotton Farms Given the August 2003 FAPRI/AFPC Baseline

The farm level economic impacts of the Farm Security and Rural Investment Act of 2002 on representative cotton farms are projected in this report. The analysis was conducted over the 2001-2007 planning horizon using FLIPSIM, AFPC’s whole farm simulation model. Data to simulate farming operations in the nation’s 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 2003 Baseline. The primary objective of the analysis is to determine the farms’ economic viability by region through the life of the 2002 Farm Bill, given sector level conditions projected in the August 2003 FAPRI Baseline. The FLIPSIM policy simulation model incorporates the historical risk faced by cotton farmers for prices and production. This report presents the results of the August 2003 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 2007. This report is organized into five 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 2003 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. Two appendices constitute the final section of the report. Appendix A provides tables to summarize the physical and financial characteristics for each of the representative 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 cotton farms.