The name is absent



farms, national data suggest that the debt-to-
asset ratio is even higher.

Of perhaps greater importance to the economic
viability of southern farms over short to inter-
mediate periods is their cash flow position. The
ratio of cash expenses to receipts in 1979 was a
little more than 70 percent. This compares rather
closely with national data that also suggest that
“primary” farms have somewhat greater cash
needs than the average.

The export experience of farmers in the past
two decades can perhaps best be characterized
as one of both promise and problems. Export
demand has measurably increased the market
possibilities for agricultural commodities. How-
ever, it has introduced a significant source of
variability in farm prices and income. This has
been reflected in the prices that farmers have re-
ceived, in their receipts, and in the income posi-
tion of their farm businesses.

While crystal balls are always dangerous,
those who would venture some projections on
exports in the 1980s believe that foreign demand
for U.S. agricultural products will continue to
grow. With this growth, however, will be the
very real possibility of even greater variability in
quantities demanded and prices received. Year-
to-year variation of as much as 20 to 30 percent in
expected cash receipts seems quite possible.

Such variation becomes especially critical to
those “primary” farms of the southern region
that work on as little as 15 to 20 percent cash
margins. These, and other farms in the South that
expanded their acreage, invested in irrigation,
and took actions during the decade of the 1970s
that increased their debt and raised their cash
commitment, are potentially vulnerable to the
swings in cash receipts that exports portend.

The policy impheations of the situation are
several. To begin, it is imperative that farmers be
able to withstand major variability in cash re-
ceipts that exports might bring. This does not
necessarily mean that a high level of price sup-
port is needed, because that could tend to work
against a competitive position in world markets.
Rather, it suggests that for farmers who are good
managers but occasionally find themselves in a
difficult cash flow situation, some accommoda-
tion be provided. This might be handled entirely
within the private sector, or it could involve pub-
lic support of one form or another. Current
commodity programs may not meet the needs of
farmers in an era of expanding exports on at least
two grounds. Existing programs are directed at
supporting income levels, not necessarily, vari-
ability in income. Also, with current commodity
programs, participating farms usually are larger
than nonparticipants in terms of acres farmed
and sales. Participating farmers tend to own a
substantial portion of their acreage base, while
also being active renters. Thus, current programs
may not reach or meet the needs of many “pri-
mary” farms and perhaps most “small” farms.

36

A second policy concern relates to livestock
production and exports. Although broilers and
other livestock products received only limited at-
tention in this paper, the producers of these
commodities are directly affected by events af-
fecting crop agriculture. Poultry and other live-
stock products can be subject to the same kinds
of international forces that create instability in
grain markets. Moreover, variability in the sup-
plies and prices of feedstuffs can critically alter
the economic viability of livestock production.
As the major producing region for broilers, for
example, there should be a fundamental concern
among those in the South about the implications
of 20- to 30-percent swings in corn prices. Feed
costs make up more than two-thirds of the total
cost of production for broilers. Hog producers,
too, are vulnerable to significant increases in
feed prices. Feeder pigs and farrow-to-finish op-
erations have feed costs of up to 50 percent or
more of total variable costs.

A third policy issue emerging from the pros-
pect of continued expanding exports involves the
natural resource base of agriculture. Soil erosion
has been shown to be a critical problem in sev-
eral areas of the southern region. The expansion
of soybean acreage in western Tennessee and
other row crop production in the Delta states has
caused erosion of serious magnitude. Greater
corn production in the eastern Piedmont has
given rise to a loss of shallow soils. Wind erosion
continues to cause problems in the Texas High
Plains. The drawdown of the Ogallala Aquifer
and other water-related problems also give rise to
concern. The issues involved are essentially two-
fold. Where will production be expanded to meet
the increased export demand and at what cost?
There are limits on the potential land base—in its
quality, if not its quantity—that suggest some
substitution or supplementation through other
inputs. This can occur only through a further
squeezing of the already tight cash flow position
of the South’s “primary” farmers. With the vari-
ability that could well be associated with expand-
ing exports, moreover, there is real concern
about the willingness or ability of farmers to
adopt soil or water conserving practices, even if
it is in their best long-term interests.

APPENDIX TABLE Al. Distribution of Wheat

Production, Southern Region, 1978

Appalachian Delta        Southeast Southern        Iotal

Income-----=--■ PPniE--π.......

_       Pro- _       Pro- _       Pro- _       Pro- “       Pro-

Farms .    . Farms .        Farms ,        Farms .    . Farms

duction duction duction duction ductιon

Less than
$2,500           8.8    1.3    2.8     0.3    8.5     1.0    5.0     0.5    6.0    1.0

$2,500-19,999    38.4   13.5   22.3     4.7   29.5     9.6   38.7    14.3   37.0   14.0

$20,000-39,999   19.8   13.2   14.7     6.3   14.7     9.6   20.4    17.3   20.0   16.0

$40,000-99,999   22.7   26.2   23.1    16.9   21.7    22.7   22.2    31.4   22.0   30.0

$100,000 and

over             10.3   45.8   37.1    71.8   25.6    57.1   13.7    36.5   15.0   39.0

Source: Calculated from 1978 Census of Agriculture,
Bureau of the Census.



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