Arnold Paulsen

Incidence, Intensity, and Duration of Financial Stress among Farm Firms

Over the past year, evidence on the extent of farm financial stress became available (Melichar, Jolly). However, policy makers disagree not only about the size and significance of the farm debt problems but also about the type of intervention, if any, that would be appropriate. The objective of this paper is to provide a benchmark for subsequent policy discussion. Financial stress requires definition. The absence of normal profit or returns to factors cause financial stress, yet these same forces drive the allocative mechanism of a market economy. Financial stress occurs when the capacity of an individual or firm or a specific sector of the economy to adjust to the forces causing stress is exceeded. Some stress is essential for efficiency and growth. Too much financial stress may lead to misallocation of resources, undesirable structural change, loss of economic and human capital, needed institutions, and individual well-being. Two surveys are used in this report. The USDA Farm Costs and Returns Survey (FCRS) is a probability-based sample of 23,386 farm operators contacted by enumerators between 15 February and 8 March 1985. Of these initial contacts 73% participated in the survey (Johnson, Baum, and Prescott). The FCRS collected income, cost, and balance sheet data for farm operators. The second data source was a mail survey of 4,700 Iowa farm operators conducted in March 1985. The Iowa Crop Reporting Service requested information on 1984 and 1985 financial conditions and operator characteristics. Approximately 23% of the questionnaires were returned (Jolly and Barkema).

Economic Impact of Restricting Feed Additives in Livestock and Poultry Production

Effects of feed additive restrictions on meat production have been measured in previous studies. An econometric simulation model is used in this study to evaluate the impact of policy alternatives on costs, prices, and net profits in beef, pork, broiler, and turkey production over a ten-year period. Under the model, all the restrictive policy alternatives produced wholesale price increases. Simulation estimates of price and production cost increases, however, were lower than previous findings. Health risk reductions may be obtainable at a smaller loss in economic efficiency than previously suggested.

Evaluation and Planning of Research in the Experiment Station

F research is viewed as a social investment, the criterion for selecting specific research investment is the greatest social return possible for total investment funds available. The criterion is implemented by estimating the expected rate of return for resources to be used in each alternative and selecting enough of those research investment alternatives with the most favorable benefits relative to costs to utilize the available budget. But difficulties are encountered (1) in getting acceptance of the view that research is a social investment, (2) in specifying the substance of social return, (3) in estimating the expected rate of social return, and (4) in implementing the resulting research investment plan.

Payment Limitations: The Economic and Political Feasibility

N an extreme sense, payment limitations are of course feasible. We can have them if we are willing to pay the political, administrative, and economic price. The U.S. economy and the federal budget would be affected less than one percent. The votes needed on congressional committees and on the floor of the House and Senate could, I believe, be obtained one of these years for some form and level of payment limitation if a coalition of administration and bipartisan congressional leaders are willing to give its passage sufficient priority. The U.S. Department of Agriculture could administer effectively and achieve the intent of any one of several forms of payment limitations. The question is not absolute feasibility, but relative desirability: Would the consequences of specific payment limitations be judged by our policy makers as improvements relative to what we have now?