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Document Type

Thesis - University Access Only

Award Date

2005

Degree Name

Master of Science (MS)

Department / School

Economics

Abstract

South Dakota's economy is very dependent on agriculture. However, the farm population and number of farms continue to decline in South Dakota. The distribution of farm size (in acres) has also changed overtime in South Dakota. Since 1969, increasing average farm size in South Dakota has been accompanied by an increased number of large farms and ranches (2000 acres or more) and substantial declines in the number of small to medium size farms (180 to 999 acres). Therefore, it is important to know if specific farms have greater profitability for survival. The purpose of this thesis was to evaluate the ability of the representative farm with various ownership levels, debt levels and with different lease agreements in the northeast and north central region of South Dakota. A "representative" farm was developed for five-county study region, from detailed farm data collected from numerous secondary sources. A total of 18 scenarios with different land ownership, different debt level and with cash/share agreements are studied in this research. The Farm Level Income and Policy Simulation Model were used to project future financial viability of the representative farm under different scenarios. The simulation results classified the overall financial position for all scenarios with 5% and 25% debt level are good, and scenarios with 45% debt level are marginal. The probability of farm firm survival is very high (99%) for all the 18 scenarios considered. However, the level of profitability varies across the scenarios. In this research a positive relationship between land ownership level and net worth is expressed and an inverse relationship is shown between the debt level and level of net farm income. The deterministic result shows, the ending financial situations are much improved for most of the scenarios in the simulation period of 2003 to 2011. In the 25% and 45% debt level scenarios, there is considerable reduction in the dollar value of total ending debt. The result also shows participation in federal commodity program stabilizes the cash receipts, and reduces the magnitude of business risk for farms. The simulation result shows, under the similar level of land owner ship and debt level the share lease agreements have more negative effect on net farm income, ending cash reserves, and net worth than in comparison with cash lease agreements. The ratios for cost to receipts and return to equity are also slightly lower for the share lease scenarios.

Library of Congress Subject Headings

Farms -- South Dakota -- Finance

Farm income

Agriculture -- Economic aspects -- South Dakota

Format

application/pdf

Number of Pages

143

Publisher

South Dakota State University

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