Operating loan policy of commercial lending agencies and optimum resource allocation in an irrigated rice area of Texas

Abstract

Increasing pressure of technological developments accompanied by greater use of purchased inputs have greatly increased the role of short-term operating capital financing in Texas rice farming. This study is an attempt: (1) To describe the common operating loan policy of lending agencies as applicable to the typical rice farmers of the Texas Coast Prairie Rice Sub-area 4. (2) To determine the effect of selected operating capital level on optimum organizations and income for typical full owner rice farms with both advanced and average management subject to each of four levels of interest and rice price. Both primary and secondary data have been used in this study. Primary data with respect to common lending policies are collected from a number of selected lenders, borrowers and experienced extension and research personnel of Texas A&M University and Beaumont Rice-Pasture Research and Extension Center. The basic farm sizes, resource situations, prices, costs, and input-output coefficients under advanced management of the typical rice-beef cattle systems are obtained from research personnel of the Farm Production Economics Division, Economic Research Service, United States Department of Agriculture. Some of these estimates have been updated to reflect current conditions. To account for average management, input-output coefficients under advanced management are assumed to remain the same except 20 percent reduction in rice drying cost for the assumed 20 percent decrease in rice yields and 20 percent reduction in cattle production. ...