Economic impact of current and alternative farm programs on farm structure in the Southern High Plains of Texas

Abstract

The Agriculture and Food Act of 1981 continues to support American agriculture through income and price supports. Disaster provisions were modified to embody a newly expanded Federal Crop Insurance program and acreage reduction provisions were implemented to reduce surplus production. How will the new Act affect the structure of Agriculture? In approaching the question this research concentrated on the Texas Southern High Plains. The study evolves based on three primary objectives: (1) Determine the economic advantages of different size cotton and grain sorghum farms on the Texas Southern High Plains. (2) Analyze the impacts of the 1981 Farm Bill and alternative farm policy options on the survival, growth and financial position of different size farms in the area. (3) Analyze the probable survival and growth of new owner-operators and tenant-operators to determine entry potential for young farmers. Eight typical farm sizes ranging from 189 to 5,570 acres were defined for the study area. Cost of production declined by 34.9 percent per pound of cotton lint as farm size progressed from small to large. The decline was a function of both technical and pecuniary economies from vertical integration. Marketing economies of approximately 4.2 percent were achieved by farms larger than 2,000 acres. No conclusive evidence could support this phenomena. Eight typical farms were simulated from 1981-1990 under alternative farm program scenarios to isolate the structural impacts of the various components in the 1981 Farm Bill. The results suggest that in the absence of farm programs, farm structure in the region would gravitate toward a bi-modal distribution composed of farms under 320 acres and farms over 3,382 acres. Mid-size commercial farms (511-2,019 acres) benefit the most from the existing farm programs. When the individual components of the 1981 Farm Bill were analyzed the conclusions remained basically the same. Prospects for the new farm entrant are not good. A beginning farmer with 29 percent equity in an established farming operation (511-1457 acres) will have a little better than a 50 percent chance of remaining solvent for 10 years. A new tenant-farmer has less than a 30 percent probability of surviving for 10 years.