REGIONALIZED IMPLICATIONS OF FARM PROGRAMS, MO

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: COMPLETE
• Funding Source: SPECIAL GRANT
• Reporting Frequency: Annual
• Accession No.: 0218653
• Grant No.: 2009-34228-19797
• Proposal No.: 2009-03398
• Project Start Date: Aug 1, 2009
• Project End Date: Jul 31, 2011
• Grant Year: 2009
• Program Code: [EC]- Regionalized Implications of Farm Programs, MO & TX

Recipient Organization
UNIVERSITY OF MISSOURI
(N/A)
COLUMBIA,MO 65211

Performing Department
Social Sciences

Non Technical Summary
Agriculture is a unique industry. United States agricultural production occurs on farms across a wide variety of geographic and climatic regions. Each farmer has his/her own particular way to produce agricultural products. In addition, farms quite often produce a different mix of agricultural products. This combination of production techniques and product mix results in farms that are distinctly different from one another and a change in agricultural policy may be positive for a portion of U.S. farms and, at the same time, be negative for others. If the effects of the policy are to be fully understood, it is necessary to examine policy change at the farm level. This project has developed a process of canvassing U.S. farms and constructing computerized farm models that are representative of specific regions and types of operations. The project can then look at how these representative farms would fare under any change in agricultural policy. This project also has developed a process to help verify how representative the farms collected for the project are. It involves using the Agricultural Resource Management Survey (ARMS) conducted by the USDA. The characteristics of each of the panel farms are used to narrow the survey to farms with similar characteristics. The remaining survey farms are then averaged to see how well they correspond to the panel farm in many types of economic comparisons. This comparison process helps to verify the panel data collected for each farm. This project allows the aggregate commodity level policy analysis conducted by FAPRI to be taken one step further. It provides another important check on whether a particular policy option will have any undesired effects for individual producers.

Animal Health Component

100%

Research Effort Categories

Basic

(N/A)

Applied

100%

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
601	6030	3010	100%

Knowledge Area
601 - Economics of Agricultural Production and Farm Management;

Subject Of Investigation
6030 - The farm as an enterprise;

Field Of Science
3010 - Economics;

Keywords

agricultural policy analysis

regionalized implications

farm level impacts

economic impacts of farm programs

Goals / Objectives
This project is a joint effort between the Agricultural and Food Policy Center (AFPC) at Texas A&M University and the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri. This joint arrangement allows the FAPRI staff to measure the aggregate-level impacts of a proposed change in farm policy and then pass those results to the staff at AFPC so that the farm-level impacts can be evaluated. This process allows each of the units to focus on their own strengths while making the total analysis much more complete than either of the units could turn out by themselves. The FAPRI portion of this project has two primary objectives. 1) Provide aggregate commodity price forecasts for the baseline so the farm-level agricultural baseline can be established. 2) Provide aggregate commodity price forecasts for policy options so the farm-level impact can be compared to the baseline to show the policies impact on farming operations. In addition, secondary objectives would include: 1) Provide assistance to the staff at AFPC as they update existing crop, livestock and dairy farms that are the focus of this project. 2) Provide assistance to the staff at AFPC as they build new crop, livestock and dairy farms to provide broader coverage of farms across the United States.

Project Methods
FLIPSIM is a Fortran simulation model that uses accounting equations, identities, and probability distributions to simulate the annual economic activities of a representative farm over a multiple-year planning horizon. FLIPSIM simulates the annual activities of a representative farm or ranch using price projections from sector models and assumptions regarding policy options. Information to describe a representative farm is obtained from a panel of producers within a specified region. By using historical yields and livestock production information in a stochastic analysis, the model incorporates actual price and production risks faced by the farm. Thus, the model is capable of simulating representative farms under risky conditions faced by actual farms and ranches. The FLIPSIM model uses producer-derived information to describe a representative farm, ranch, or dairy in a particular region. Actual farm information is obtained from a panel of producers in a 3 to 4 hour session where the panel members provide information on: 1) size of the operation (acres, head, etc.), 2) tenure (acres owned and leased) and asset values, 3) enterprises (crops, livestock, dairy, etc.), 4) costs of production for each enterprise, 5) fixed costs for the overall operation, 6) yields and a history of yields and farm program participation, and 7) machinery complement and replacement strategy. The producers who make up the panel are identified by local personnel (usually County Extension Specialists) and are representative of a commercial operation in the area. Normally, two farms are developed in each region using separate panels of producers; one is representative of moderate-scale full-time farm operations while the second panel represents farms that are two to three times larger. Each farm panel is interviewed using a consensus building process. Producers are asked to draw on their personal operations and experience to develop a representative farm. During the interview process, the farmers' information is entered into a FLIPSIM input file. Once the interview is complete, the model is run to show the producers the projected income statement, cash flow, and balance sheet (pro forma financials) for the representative farm they developed. The producers are then asked to adjust their input values for costs, yields, etc., until the results for the first year match up with recent experiences. The panel generally makes adjustments to debt levels and current market prices until they are satisfied that the model can simulate their farm data. This interactive validation process has proven to be helpful to the representative farm process because it gives the producer panel immediate feedback that their efforts were worthwhile. The representative farms are updated every three years, or as often as the panels want to update the farm data. Most panel farms have a long history with the project. The oldest panel farm has been maintained since 1980.

Progress 08/01/09 to 07/31/11

Outputs
OUTPUTS: The ten year outlook was prepared in conjunction with this project, which included policy as set forth by the Energy Independence and Security Act (EISA) of 2007 and the Food, Conservation and Energy Act (FCEA) or 2008 farm bill. This ten year baseline outlook also contains model enhancements allowing FAPRI-MU to analyze the biofuels industry from the commodity, product, and co-product standpoint and the ACRE farm program option. The farm-level detail has allowed FAPRI-MU and AFPC to examine the detailed impacts of various policy changes relating to direct payments, dairy policies, and crop insurance options. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
Agriculture is a unique industry. United States agricultural production occurs on farms across a wide variety of geographic and climatic regions. Each farmer has his/her own particular way to produce agricultural products. In addition, farms quite often produce a different mix of agricultural products. This combination of production techniques and product mix results in farms that are distinctly different from one another and a change in agricultural policy may be positive for a portion of U.S. farms and, at the same time, be negative for others. If the effects of the policy are to be fully understood, it is necessary to examine policy change at the farm level. This project has developed a process of canvassing U.S. farms and constructing computerized farm models that are representative of specific regions and types of operations. The project can then look at how these representative farms would fare under any change in agricultural policy. This project also has developed a process to help verify how representative the farms collected for the project are. It involves using the Agricultural Resource Management Survey (ARMS) conducted by the USDA. The characteristics of each of the panel farms are used to narrow the survey to farms with similar characteristics. The remaining survey farms are then averaged to see how well they correspond to the panel farm in many types of economic comparisons. This comparison process helps to verify the panel data collected for each farm. This project allows the aggregate commodity level policy analysis conducted by FAPRI to be taken one step further. It provides another important check on whether a particular policy option will have any undesired effects for individual producers.

Publications

• FAPRI-MU Report #08-10, August 2010, FAPRI-MU August 2010 Baseline Update for US Agricultural Markets.
• FAPRI-MU Report #10-10, September 2010, Crop Insurance: Background Statistics on Participation and Results.
• AFPC WP-2010-3, August 2010, Representative Farms Economic Outlook for the August 2010 FAPRI/AFPC Baseline.
• AFPC BP-2011-1, December 2010, Representative Farms Economic Outlook for the December 2010 FAPRI/AFPC Baseline.

Progress 08/01/09 to 07/31/10

Outputs
OUTPUTS: The ten year outlook was prepared in conjunction with this project, which included policy as set forth by the Energy Independence and Security Act (EISA) of 2007 and the Food, Conservation and Energy Act (FCEA) or 2008 farm bill. This ten year baseline outlook also contains model enhancements allowing FAPRI-MU to analyze the biofuels industry from the commodity, product, and co-product standpoint and the ACRE farm program option. Dissemination of an updated Excel spreadsheet to assist producers in determining the most beneficial choice between the current DCP farm program and the ACRE program is in its second year, with modifications since it's January 2009 deput as a joint product of the regional implications of farm programs project and the food and agricultural research policy institute project. In addition to providing a free, web version of the decision support tool, FAPRI-MU has also worked to provide information at large, in commodity sponsored programs, in conjunction with extension activities, and through interaction with state and local FSA offices. FAPRI-MU has responded to numerous requests during 2009 and 2010 regarding impacts of the 2008 farm bill. Many of these requests have entailed analyzing major components of bills while others have been focused on small, specific details related to one program, industry, or commodity. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
Agriculture is a unique industry. United States agricultural production occurs on farms across a wide variety of geographic and climatic regions. Each farmer has his/her own particular way to produce agricultural products. In addition, farms quite often produce a different mix of agricultural products. This combination of production techniques and product mix results in farms that are distinctly different from one another and a change in agricultural policy may be positive for a portion of U.S. farms and, at the same time, be negative for others. If the effects of the policy are to be fully understood, it is necessary to examine policy change at the farm level. This project has developed a process of canvassing U.S. farms and constructing computerized farm models that are representative of specific regions and types of operations. The project can then look at how these representative farms would fare under any change in agricultural policy. This project also has developed a process to help verify how representative the farms collected for the project are. It involves using the Agricultural Resource Management Survey (ARMS) conducted by the USDA. The characteristics of each of the panel farms are used to narrow the survey to farms with similar characteristics. The remaining survey farms are then averaged to see how well they correspond to the panel farm in many types of economic comparisons. This comparison process helps to verify the panel data collected for each farm. This project allows the aggregate commodity level policy analysis conducted by FAPRI to be taken one step further. It provides another important check on whether a particular policy option will have any undesired effects for individual producers.

Publications

• FAPRI-MU Report #06-09, Fapri August 2009 Baseline Update for US Agricultural Markets, August 2009.
• FAPRI-MU Report #01-10, FAPRI U.S. Baseline Briefing Book, March 2010.
• FAPRI-MU Report #02-10, FAPRI U.S. Baseline Briefing Book: Missouri Insert, March 2010.
• AFPC Report BP-2010-1, Representative Farms Economic Outlook for the January 2010 FAPRI/AFPC Baseline, March 2010.
• AFPC Report BP-2009-4, Representative Farms Economic Outlook for the December 2009 FAPRI/AFPC Baseline, December 2009.
• AFPC Report BP-2009-3, Economic Outlook for Representative Cotton Farms Given the August 2009 FAPRI/AFPC Baseline, September 2009.
• AFPC Report BP-2009-2, Representatiave Farms Economic Outlook for the August 2009 FAPRI/AFPC Baseline, September 2009.