The Financial Status of Alabama Agriculture, 1984 Ao 41P Department of Agricultural Economics and Rural Sociology Departmental Series No. 37 Alabama Agricultural Experiment Station Auburn University March 1985 Gale A. Buchanan, Director Auburn University, Alabama THE FINANCIAL STATUS OF ALABAMA AGRICULTURE, 1984 William E. Hardy, Jr., J. Stanton Smith, and Laura R. Cox Protessor, Undergraduate Research Assistant, and Research Associate Uepartment ot Agricultural Economics and Rural Sociology Departmiental Series No. 37 Alabama Agricultural Experiment Station Auburn University Auburn University, Alabama Gale A. Buchanan, Director ACKNOWLEDGMENTS The survey and analysis presented in this report were completed at the request of the Honorable Albert McDonald, Commissioner of Agriculture and Industries for the State of Alabama. We appreciate the support and encour- agement given by the Commissioner and his staff. Final preparation of the questionnaires, drawing of the sample, and mailing were all handled by the Alabama Crop and Livestock Reporting Service. Special appreciation is extended to Marshall Dantzler, Statistician in Charge, and Hugh Bynum for their support and assistance. Information contained herein is available to all without regard to race, color, sex, or national origin. CONTENTS INTRODUCTION . . . . . . . . . . . PROCEDURE . . . . . . . . . . . . . RESEARCH RESULTS . . . . . . . . . . General Characteristics . . . . Production Alternatives . . . . Loan Delinquency . . . . . . . Loan Refusals . . . . . . . . . Cause of Financial Difficulties Expect to Leave Farming . . .. SUMMARY . . . . . . . . . . . . . . APPENDIX A QUESTIONNAIRE USED FOR DATA COLLECTION INTRODUCTION Financial characteristics of our nation's agricultural sector have undergone significant changes in recent years. Tne early 1970's witnessed a period in which prices for farm products were relatively high and many farmers saw the opportunity to invest in and expand their operations. In spite of a slight downturn in 1976 and 1977, the desire for growth continued throughout the decade. Market and financial conditions that have persisted since the close of the 1970's have created financial stress which is placing many farmers in very uncomfortable positions. Farm product prices are relatively lower and many purchased input prices have continued to rise. Interest costs, in particular, have taken progressively larger portions of the farmers' dollars. The cost-price squeeze facing the agricultural industry and the relatively heavy debt burdens of many farmers are making it difficult for some to remain in business. Media attention given to the financial condition of farmers has made most of the puolic aware of the serious situation that exists. These reports have often pointed to instances where long-standing family farms are in financial jeopardy. National data are available which indicate the total asset, debt, net worth, profit, and cash flow positions for agriculture. Publications are also available which give these aggregate measures for states, and in some cases, for areas as small as a county. The research results given in this report are from a project designed to determine the financial condition of Alabama farmers. PROCEDURE Data were collected using a mail survey instruiien which was sent to a stratified random sample of 1500 Alabama farmers, Appendix A. The questionnaire was designed to determine the basic financial condition of farmers through a series of questions related to gross sales, cash expenses, acres operated, value of assets, and levels of debt. Specific questions were asked to determine the portion of farmers who are not current in their payments for existing debt and who were denied loans during the past year. Respondents were also asked to indicate their beliefs relative to primary causes of the financial problems farmers are experiencing today. second questionnaire was sent to a selected sample of lenders so that data night be obtained which would represent the supply side of the agricultural finance market. Questionnaires were sent to all Production Credit and Federal Land Bank Associations in Alabama. Copies were also sent to all bankers who registered for the most recent commercial credit conference sponsored by the Alabama Bankers Association. The state office of the Farmers Home Administration was asked to respond to the current situation as faced oy their organization. Data from this survey were used to validate tne farmer survey. Results are not presented in this report because confidential data for individual lenders could be disclosed. Survey questionnaires were mailed during the first week of November, 1984. Responses, were received almost immediately and continued until mid- January, 1985. The number responding from the farmer survey (553) was reduced to 251 for analysis after all those who were retired or who did not have income from farming during recent years were deleted from the sample. Information given on the 251 usable surveys returned by farmers provided 3 the basis for the following discussion. Data are presented in summary form so that no individual respondent might be identified. Summaries are given by agricultural production area, 1984 gross sales, acres operated, age of the respondent, and whether or not the respondent purchased land within the past 10 years. The summaries by acres operated have only 247 observations since 4 of the respondents rented all their land out. Table 1 and Figure 1 present the counties included in the agricultural production areas used in the summaries. Data given in Table 2 compare the sumi ary characteristics of the respondents with data given in the 1982 Census of Agriculture which describe the total agricultural population of the State. For agricultural production areas, the portion of respondents is less than the State total for the Limestone Valley and Sand Mountain areas. The number of farmers who responded from the Wiregrass is significantly higher than the State average. For all other areas, the portion of respondents is very close to the percentage reported by the Census. When classified by gross sales, respondents are weighted somewhat more heavily at the higner income levels. Similar conditions exist when classifiea by acres operated. The age of operator classifications indicate the respondent group is clustered more heavily in the older age categories. Even though tne respondents do not exactly mirror the State agricul- tural population, enough similarities exist to be comfortable with an analysis of the data. Any inferences drawn from the analyses could cer- tainly be related directly to the total population. Table 1. Counties Included in Each Alabama Agricultural Production Area Limestone Valley Upper Coastal Plain Calhoun Cherokee Colbert Etowah Jackson Lauderdale Lawrence Li ies tone Madi son Morgan St. Clair Shelby Talladeya Sand Mountain Blount Cullman DeKalb Marshall 1 Gulf Coast Mobile Baldwi n Jefferson Autauga Bibb Chilton Elmore Fayette Franklin L amar Macon Marion Pickens Russell Tuscaloosa Walker Winston Black Belt iontgomery Bullock Dallas Greene Hale Lowndes Marengo Perry Sumter Chambers Clay Cleburne Coosa Lee Randolph Tallapoosa Lower Coastal Plain Butler Choctaw Clarke Conecuh Escambia Monroe Washington Wiregrass Barbour Coffee Covington Crenshaw Dale Geneva Henry Houston Pike Piedmont 3.L~ 4 *- - ;, Liet1eVle iers Ii f Sad"n Wi Culf[as f _ rlPiedmont " H' " Loefosa Pl 'I Ujper CctI/ Pai iure 1. Alabama fff %/ i Agiulua Prdc i Areas.i( i i / Table 2. Comparisons of the Characteristics of Farmer Respondents to Total Farmer Population in Alabama as Reported in 1982 Census of Agriculture. Agricultural Production Area Number of Percentage of Number of Farms Percentage of Area Respondents Total Reported in Census Total Limestone Valley 52 20.7 12,371 25.5 Sand Mountain 26 10.4 7,533 15.5 Upper Coastal Plain 40 15.9 8,371 17.3 Rlack Relt 24 9.6 4,488 9.3 Piedmont 15 6.0 3,847 6.3 Lower Coastal Plain 20 8.0 3,856 8.0 "iregrass 61 24.3 6,780 14.0 Gulf Coast 13 5.6 2,002 4.1 1984 Gross Sales 1 to 2,499 2,50 to 4,999 5,000 to 9,999 10,000 to 19,999 20,0100 to 39,999 40,000 to 99,999 100,00 + Gross Sales Number of Percentage of Respondents Total 54 21.5 37 14,7 32 12.7 24 9.6 33 13.1 37 14,7 34 13.5 Number of Firms Percentage of Reported in Census Total 19,246 39.7 7,916 16.3 6,100 12.6 4,154 8.6 2,934 6.1 3,542 7.3 4,526 9.3 Tahle 2. (Continued) AcrePs fperated Acres Numher of Percentage of Number of Farms Per-centage of Oper-ated Respondents Total Reported in Census Total 1 to 49 30 12.0 17,175 35.4 50 to 99 53 21.5 10,158 20.9 100 to 139 27 10.3 4,907 10.1 140 to 259 46 18.7 7,081 14.6 260 to 499 35 14.3 4,60? 9.5 500 to 999 36 14.7 2,726 5.7 1,000 + 20 8.0 1,827 3.2 Age of Operator Number of Percentage of Number of Farms Percentage of Respondents Total Reported in Census TotalAge 20 to 40 47 18.7 15,525 32.1 41 to 50 49 19.5 11,408 23.6; 51 to 60 58 23.1 11,826 24.6 60 + 97 38.6 9,609 19.9 8 RESEARCH RESULTS General Characteristics Tables 3 through 7 contain data which describe the general financial, size, age and location characteristics of the respondents. Table 3 classifies the data by agricultural production area. The Wiregrass Area in southeast Alabama had the most respondents, 61, while the smallest number, 13, came from the two-county Gulf Coast Area. Average 1984 gross sales for the State, as reported by the respondents, was $47,047. The lowest average value was reported by the 15 farmers in the Piedmont Area, $13,622, while the 24 Black Belt producers indicated average annual sales of $73,402. The same two groups reported the extreme values for cash operating expenses in 1984. Average total debt for those farmers who responded to the survey was $74,246. Again, Piedmont farmers indicated the lowest value, $26,667, while the $213,844 average debt load carried by those in the Black Belt was the greatest burden indicated. Average value of assets exceeded a quarter of a million dollars, $260,486. Piedmont farmers possessed the lowest valued assets, $157,500. Mobile and Baldwin County (Gulf Coast) farmers had slightly higher asset values, $538,153, than their counterparts in the Black Belt, $5U4,837. The debt to asset ratio reflects the portion of a farm's value that is necessary to cover existing debt. The 28.5 percent State average is significantly higher than the value of 21.7 percent for all U. S. farmers that was reported in the December, 1984 Federal Reserve System Agricultural Finance Databook. This value is also higher than the 19.1 percent ratio given in 1983 by the USDA for Alabama. Table 3. Selected Cnaracteristics of Survey Respondents Classified by Agricultural Production Area, 1984 Selected Characteristics Production Number Average Gross Averaje Cash Average Total Average Value Debt to Average Acres Area Responding Sales 1984 Oper. Expense Debt of Assets Asset Ratio Operated D.........Dollars ............................. Percent Acres Limestone Valley Sand Mountain Upper Coastal Plain Black Belt Piedmont Lower Coastal Plain Wiregrass Gulf Coast State 52 26 40 24 15 20 l1 13 251 52,852 27,311 33,239 73,402 13,622 47,889 57,942 43,271 47,0U47 45,468 11,338 24,237 67,466 9,777 40,042 50,994 40,28U 39,161 58,630 240,812 24.3 369 44,120 225,590 19.6 176 53,047 180,950 29.3 314 213,844 504,837 42.4 744 26,667 157,500 16.9 192 54,384 209,433 26.0 280 62,602 231,035 27.1 346 144,578 538,153 26.9 231 74,246 260,486 28.5 346 --- ------------------ -1------- --- The final category of information presented in Table 3 relates to farm size. For the 251 farmers who responded, the average farm size was 346 acres. The smallest farms were in the Sand Mountain Area and the largest were in the Black Belt. Data presented in Table 4 illustrate changes in selected characteristics as gross sales increase. As would be expected, cash operating expenses, total debt, total assets, and acres operated all increased with sales. The debt to asset ratio reveals some variability among classifications, but generally moved upward with sales. The extraordinarily high values for those farmers in the $100,OOU+ sales category emphasizes the severity of the farm financial problem since these larger farmers produce a majority of the prod- ucts available for sale. Similar relationships are presented in Table 5 where the data are categorized by acres operated. The data generally move upward as farm size increases. The only variation comes from a decline in the total debt and total asset values and the debt to asset ratio for the 140 to 259-acre category. Data given in Table 6 are grouped according to the age of the respondent. A majority of those who responded tended to be in the older age groups. According to 1982 Census of Agriculture statistics, respondents were slightly older than the average farm population in Alabama. Census data indicated that the average age of Alabama farmers in 1982 was 51.8 years. The average for those who responded to the survey was 55+ years. The 20 to 40-year age group reported the highest average gross sales, operating expenses, and total debt, while the 41 to 50-age group exhibited the maximum value for assets. Farm size declined with increases in age, as did the debt to asset ratio. The relatively high debt to asset ratios of Table 4. Selectea Characteristics ot Survey Respondents Classified by 1964 Uross Sales Sel ected Characteri stics -~- -- - -______ 1984 Gross Number Average Gross Average Cash Average Total Average Value Debt to Average Acres Sales, Dollars Responding Sales 1984 Oper. Expense dJebt of Assets Asset Ratio Operated .............................................. Percent Acres 1 to 2,499 54 1,172 3,067 10,671 99,987 10.7 114 2,500 to 4,999 37 3,433 2,458 7,056 108,338 6.5 128 5,000 to 9,999 32 7,168 4,773 51,024 230,091 22.2~ 211 10,000 to 19,999 24 13,972 12,354 30,396 212,008 14.3 325 20,000 to 39,999 33 28,399 23,846 43,396 278,583 17.4 349 4U,000 to 99,999 37 62,797 5U,886 104,186 378,389 27.5 423 0Uu,000 + 34 229,206 189,795 293,655 592,921 49.1 1,005 State 251 47,047 39,162 74,246 260,486 28.5 346 Table 5. Selected Characteristics of Survey Respondents Classified by Acres Operated, 1984 Selected Characteristics Acres Number Average Gross Average Cash Average Total Average Value Debt to Average Acres Operated Responding Sales 1984 Oper. Expenses Debt of Assets Asset Ratio Operated -... ........................ Dollars ......................... Percent Acres 1 to 49 30 5,911 3,983 10,774 78,649 13.7 29 50 to 99 53 8,940 6,782 17,777 118,835 15.0 74 100 to 139 27 12,807 8,888 46,990 207,563 22.6 113 140 to 259 46 25,339 18,240 36,313 184,603 19.7 199 260 to 499 35 55,683 49,047 70,476 300,354 23.1 374 500 to 999 36 92,132 72,959 146,086 415,300 35.2 696 1000 + 20 218,400 195,870 335,277 844,802 39.7 1,585 State 247 47,047 39,162 74,246 260,486 28.5 346 Table b. Selected Characteristics ot Survey Respondents Classified by Age of Respondent Selected Characteristics Age Plumber Average Gross Average Cash Average Total Average Value Debt to Average Acres Years Responding Sales 1984 Oper. Expenses Debt of Assets Asset Ratio Operated .. .............................Dollars.........................Percent Ares 20 to 40 47 75,489 61,215 120,009 274,414 43.7 480 41 to 50 49 37,126 32,439 94,923 317,651 29.9 405 51 to 60 58 46,910 35,903 67,129 303,518 22.1 336 60 + 97 38,358 33,821 45,883 199,129 23.0 457 State 251 47,047 39,161 74,246 260,486 28.5 346 14 the youngest age category emphasize the finanacial burden and pressure faced by our younger farmers. Table 7 presents general characteristics of respondents classified by whether or not they purchased land in recent years. The first section of the table shows that 36 respondents purchased additional farm land during the last 3 years. Those who purchased land had significantly higher values for all variables presented in the table. A major difference exists between the two debt to asset ratios with those who purchased land having a ratio almost 1U points higher. The second section of the table refers to land purchases during the period of 4 to 6 years ago. A total of 34 respondents purchased land during this period. Again, all values for those who made the purchases are higher. An even wider differential exists for the 2 debt to asset ratios. Data for those respondents who purchased land 7 to 10 years ago reveal a somewhat different situation. Sales, expense, and total debt values for both purchasers and non purchasers are nearly the same. The higher asset values for the 50 respondents who purchased land 7 to 10 years ago give that group as lower debt to asset ratio. These individuals bought land before land prices escalated to the high levels of recent years. Tne last section of Table 7 displays summary characteristics of respon- dents who purchased land at any time during the last 10 years. Those 97 individuals who purchased land during the period again showed higher values for all variables. Production Alternatives Information presented in tables 8 to 12 illustrates the types of production activities found on the respondents' farms. It is obvious, from the data, that there is much diversification; however, as anyone who is Table 7. Selected Characteristic of Survey Respondents Classified Dy Wnether They Purchased Additional Farm Land During Specified Periods Selected Characteristics Response to Number Average Gross Average Cash Average Total Average Value Deot to Average Acres Land Purchase Responaing Sales 1984 Uper. Expenses Debt of Assets Asset Ratio Operated ..........................Dollars....... ................ Percent Acres Land Purchased During Last 3 Years Yes 36 108,176 85,879 135,675 375,387 36.1 585 No 215 36,811 31,339 63,960 241,246 26.4 306 Land Purchased 4 to 6 Years Ago Yes 34 95,341 82,067 166,792 390,044 42.8 477 No 217 39,480 32,439 59,746 240,186 24.9 325 Land Purchased 7 to 10 Years Ago Yes 50 48,274 42,215 69,758 312,888 21.7 354 No 210 46,741 38,402 75,363 247,450 30.5 344 Land Purchased During Last 10 Years Yes 97 73,384 60,901 116,389 347,373 33.5 452 No 154 30,457 25,469 47,702 205,758 23.2 279 State 251 47,047 39,162 74,246 260,486 28.5 346 16 familar with Alabama agriculture knows, some areas of the State are normally associated with certain crops. The data presented in Table 8 tend to verify this contention. The Limestone Valley concentrates on soybeans, cotton, and beef. Soybeans are also dominant on Sand Mountain, the Lower Coastal Plain, and the Gulf Coast. Beef operations dominate the Black Belt and are also prevalent in the Piedmont Region. The Wiregrass Area is know for peanuts and beef. Other crops, such as corn and potatoes, are found in the Gulf Coast Area. Data given in Table 9 present the production alternatives by the level of gross sales on the farm. The lower income producers tend to be diversified, but place greatest emphasis on beef. Higher income producers tend to place greater emphasis on soybeans and cotton. All dairy producers who responded fell in the higher income classifications. In Table 10, the production alternatives data are categorized by acres operated. The smallest producers, like the lowest income producers in the previous table, have diversified production interests with emphasis on beef cattle. Soybeans appear to be the dominant crop for all size groupings, receiving most favor from the larger size classes of farmers. As in the income classification, dairy operations are present only on the larger farms. Wnen the production alternatives data are classified by age of respon- dent, several interesting observations may be made, Table 11. First, younger operators show a greater preference for soybeans, while older producers show more interest in cotton. These attitudes are not too surprising since soy- beans are a relatively new cash crop when compared to cotton. Also, it is relatively more expensive to get into cotton production. Information presented in Table 12 is categorized by whether land was Table 8. Portion of Survey Respondents Indicating Income From Selected Production Alternatives Classified by Production Area and for the State, 1984 Production Alternatives Production Area Number Responding Soybeans Cotton Peanuts Other Crops Beef Pork Dairy Poultry Other .........................Percentages..................... ..... Limestone Valley Sand Mountain Upper Coastal Plain Black Belt Piedmont Lower Coastal Plain Wiregrass Gulf Coast State 52 26 40 24 15 20 b1 13 251 67.3 57.7 20.0 25.0 6.7 55.0 31.1 61.5 41.0 25.0 7.7 7.5 8.3 0.0 5.0 1.6 0.0 8.8 1.9 0.0 0.0 8.3 0.0 20.0 68.9 0.0 19.5 15.4 19.2 25.0 41.7 6.7 30.0 26.2 69.2 25.9 44.2 30.8 27.5 75.0 73.3 60.0 59.0 46.1 56.2 9.6 0.0 17.5 12.5 6.7 10.0 21.3 0.0 12.4 3.8 0.0 2.5 12.5 0.0 5.U 3.3 0.0 3.6 1.9 15.4 2.5 0.0 13.3 5.U 1.6 0.0 4.0 21.2 30.8 37.5 25.0 26.7 40.0 31.1 38.5 30.3 -II ----~L ---- Table 9. Portion of Survey Respondents Indicating Income From Selected Production Alternatives Classified by 1984 Gross Sales 1984 Gross Sales, Dollars Production Alternatives Number Other Responding Soybeans Cotton Peanuts Crops Beef Pork Dairy Poultry Other 1 to 2,499 2,500 to 4,999 5,000 to 9,999 10,000 to 19,999 20,000 to 39,999 40,000 to 99,999 100,000 + State 18.5 29.7 40.6 62.5 48.5 51.4 55.9 41.0 1.9 2.2 3.1 4.2 9.1 16.2 25.5 8.8 11.1 5.4 25.0 12.5 36.4 24.3 25.5 19.5 .Percentages... ............................ 9.3 51.8 11.1 0.0 1.9 25.9 37.0 75.7 5.4 0.0 0.0 24.3 6.2 65.6 15.6 0.0 0.0 31.3 33.3 50.0 12.5 0.0 0.0 32.5 48.5 60.6 15.2 0.0 9.1 33.3 32.4 40.5 13.5 2.7 10.8 43.2 35.3 50.0 14.7 23.5 5.9 20.6 25.9 56.2 12.4 3.6 4.0 30.3 _ ---- _-11_~1_-1111_11I-- __-_1----------------~------------ Table 10. Portion of Survey Respondents Indicating Income From Selected Production Alternatives Classified by Acres Operated, 1984 Acres uinuDer Operated Responding Soybeans I to 49 3U 33.3 50 to 99 53 30.2 100 to 139 27 25.9 140 to 259 46 39.1 260 to 499 35 37.1 500 to 999 36 63.9 1000+ 20 75.0 State 247 41.0 Cotton Peanuts 6.7 16.7 1.9 17.0 3.7 14.8 8.7 21.8 5.7 31.4 13.9 11.1 35.0 30.0 8.8 19.5 Production Alternatives Other Crops Beef Pork ........ Percentages....... 6.7 33.3 1U.U 3U.2 56.4 13.2 7.4 63.0 3.7 30.4 43.5 15.2 37.1 65.7 14.3 27.8 75.0 13.9 40.0 55.0 10.0 25.9 56.2 12.4 Dai ry 0.0 U.0 0.0 2.2 8.6 8.3 10.0 3.6 Poultry Other 6.7 30.0 3.8 24.6 7.4 33.3 2.2 34.8 5.7 31.4 2.8 33.3 0.0 30.0 4.0 30.3 I ------------------- - -1----I------- ---- Table 11. Portion of Survey Respondents Indicating Income From Selecteo Production Alternatives Classified by Age of Respondent, 1984 Production Alternatives Age Number Other Years Responding Soybeans Cotton Peanuts Crops Beef Pork Dairy Poultry Other ........................... Percentages....................... 20 to 40 47 51.1 8.5 27.6 42.6 57.4 14.9 6.4 6.4 42.6 41 to 50 49 40.8 2.0 24.5 24.5 57.1 10.2 2.0 2.0 22.4 51 to 60 58 44.8 10.4 15.5 29.3 53.4 10.3 1.7 8.6 36.2 60 + 97 34.0 11.3 15.5 16.5 56.7 13.4 4.1 1.0 24.7 State 251 41.0 8.8 19.5 25.9 56.2 12.4 3.6 4.0 30.3 21 purchased during specitied periods of time. For ladnd purchasers during tne last 3 years, those who reported income from soybeans, other crops, beef, and pork appeared to have somewhat more interest in expanding the size of their operations through land purchase. For the 4 to 6-year period respondents receiving income from soybean, other crops, pork, and dairy tended to domi- nate. Seven to 10 years ago, peanut, other crop, and pork farmers were most likely to have purchased additional land. For the total of a 10-year period, soybean, peanut, other crop, pork, and dairy farmers all enlarged by tne purcnase of more land. Loan Delinquency Tables 13 to 17 display data which represent the portion of respondents who are not current in either principal or interest payments on real estate Iortgage, equipment, or operating loans. The responses in Table 13 are classified oy agricultural production area. Respondents from all areas reported some level of delinquency and when the group was viewed in total, 23.1 percent were delinquent in at least one loan category. Piedmont Area producers appeared to have the greatest problem with regard to real estate debt. They were followed by farmers in the Black Belt and Sand Mountain areas. Sand Mountain farmers appeared to be having the greatest problem with intermediate termi (machinery, equipment, and breeding stock) debt, with 20.9 percent delinquent in both principal and interest. Black Belt, Gulf Coast, Sand Mountain, and Piedmont farmers apparently are having the greatest proolems handling operating debt. On an overall basis, Liiimestone Valley farmers appear to be in the best financial condition. Data presented in Table 14 classify loan delinquency values by 1984 gross sales. The general trend in all debt categories is that the rate of delinquency increases with sales. This trend is somewhat surprising since Table 12. Portion of Survey Respondents Indicating Income From Selected Production Alternatives Classified by Wether They Purchased Additional Farm Land During Specified Periods Production Alternatives Response to Number Other Land Purchase Responding Soybeans Cotton Peanuts Crops Beef Pork Dairy Poultry Other ..................... ....... Percentages......................... Land Purchased During 8.4 19.4 39.1 61.1 8.8 19.5 23.7 55.4 Land Purchased 4 to Last 3 Years 16.7 5.6 11.7 3.3 6 Years Ago 5.6 3.7 5.9 20.6 29.4 52.9 26.5 20.6 0.0 32.4 9.2 19.4 25.3 Land Purchased 10.0 28.0 26.0 8.5 17.4 15.9 Land Purchased 9.3 22.7 32.0 8.4 17.5 22.1 8.8 19.5 25.9 56.7 10.1 7 to 10 Years 50.0 16.0 57.7 11.4 During 55.7 56.5 56.2 Last 18.6 8.4 12.4 0.9 4.6 30.0 Ago 4.0 4.0 3.5 4.0 10 Years 8.2 4.1 0.6 3.9 3.6 4.0 Yes No 36.1 29.3 52.8 39.1 55.9 38.7 40.U0 41.3 46.4 37.7 41.0 Yes No State 32.0 29.9 33.0 28.6 30.3 I-------------- -'- -~ ---- Tabl e 13. Portion of Survey Respondents Wno Indi cated They WJere Not Current in Pri nci pal or Interest Payments for Specified Types ot Loans Classified by Agriculturdl Production Area, 1984 - - --- ---- - ---- Type of Loan -- - -- -Real ! iachinery, Equipment, Estate breeding Livestock Operating Production II umTer____ Area Responding Principal Interest Principal Interest Principal Interest -.................................. Percentages.... ........... Limestone Valley 52 11.5 1.9 13.5 3.8 7.6 1.9 Sand Mountain 26 26.9 23.1 26.9 26.9 26.9 23.1 Upper Coastal Plain 40 12.5 15.0 15.0 10.0 17.5 10.0 Black Belt 24 29.2 29.2 20.8 20.8 33.3 29.2 Piedmont 15 40.0 33.3 6.7 6.7 26.7 26.7 Lower Coastal Plain 20 10.0 5.0 15.0 10.0 15.0 10.0 Wiregrass 61 18.0 11.5 16.4 ii .5 18.0 14.8 G~ulf Coast 13 15.4 15.4 23.1 15.4 30.8 30.8 State 251 15.9 11.9 16.7 12.;1 17.5 13.1 Table 14. Portion of Survey Respondents Who Indicated They Were Not Current in Principal or Interest Payments for Specified Types of Loans Classified by 1984 Gross Sales 1984 Gross Sales, Dollars Number Responding 1 to 2,499 2,5UU to 4,999 5,000 to 9,999 10,000 to 19,999 20,000 to 39,999 40,000 to 99,999 100,000 + State Type of Loan Real Machinery, Equipment, Estate Breeding Stock Principal Interest Principal Interest .............................. Percentages...... 11.1 9.3 11.1 9.3 1U.o 10.8 16.2 16.2 6.3 16.7 24.2 21.6 23.5 15.9 6.3 16.7 15.2 13.5 14.7 11.9 9.4 20.8 9.1 32.4 20.6 16.7 6.3 16.7 6.1 21.6 8.8 12.0 Operating Principal Interest 11.1 7.4 16.2 13.5 9.4 6.3 16.7 16.7 15.2 12.1 35.1 24.3 20.6 14.7 17.5 13.1 ---------- ~- ~------ I------------------- -II----- - I------------ 25 larger operations are usually thought of as being the most efficient and, therefore, the most likely to be profitable. Perhaps these data reveal that some of the larger farm operations are over capitalized and cannot handle the large debt load created by their investments. Similar conclusions may be drawn from the data given in Table 15. As the number of acres increases, so does the portion of respondents who indi- cate they are not current with their debt obligations. The age classifications given in Table 16 show very little variation. The younger age groups, however, show somewhat higher delinquency levels. Tne data given in Table 17 are somewhat surprising in that they do not show the respondents who purchased land during recent years to be consis- tently more delinquent in principal and interest payments. A smaller portion of those who purchased land during the last 3 years are not current in their real estate debt obligation. The individuals who purchased land during this period, however, were having greater problems in staying current with their intermediate and short term obligations. For all other periods of land purchase, there was not a great difference in deliquency rates between pur- chasers and nonpurchasers. Loan Refusals Data given in tables 18 to 22 reveal the portions of respondents who indicated that they had been turned down for a loan during the past year. For the total of all respondents, 11.2 percent were turned down by at least one lender. The production area classifications in Table 18 reveal that Black Belt respondents had the highest rate of refusals. In the previous set of tables, Piedmont Area producers had the highest rate of delinquency for real estate loans. The fact that those producers are only reporting turn-downs from the Farmers Home Administration could be indicative of their Table 15. Portion of Survey Respondents Who Indicated They Were Not Current in Principal or Interest Payments For Specified Types of Loans Classified by Acres Operated, 1984 Acres Operated Numoer Responding 1 to 49 50 to 99 100 to 139 140 to 259 260 to 499 50u to 999 1000+ State Type of Loans Real Machinery, Equipment, Operating Estate Breeding Stock Principal Interest -- Principal Interest Principal Interest ................................ Percentages................ ................ 10.0 13.3 13.3 13.3 16.7 13.3 15.1 11.3 13.2 9.4 11.3 7.5 3.7 3.7 11.1 7.4 7.4 3.7 13.0 8.7 15.2 10.9 15.2 13.0 17.1 8.6 14.3 8.6 20.0 14.3 25.0 16.7 22.2 13.9 25.0 16.7 35.0 30.0 40.0 30.0 40.0 35.0 15.9 11.9 16.7 12.0 17.5 13.1 _ _I_~_ ~~ _11________1_______ _ _~II~ I_ __ __I__ ~_ Table 16. Portion of Survey Respondents Who Indicated They Were Not Current in Principal or Interest Payments for Specified Types of Loans Classified by Age of Respondent, 1984 i umnoer Respondi Type ot Loan Real Machinery, Equipment, Operating Estate Breeding Stock ing Principal Interest Principal Interest Principal Interest .................................Percentages.............................. 14.9 14.9 21.3 19.0 21.3 17.0 16.3 10.2 24.5 10.2 18.4 8.2 17.2 12.1 15.5 13.8 17.2 13.8 15.5 11.3 11.3 23.7 15.5 13.4 15.9 11.9 16.7 12.0 17.5 13.1 Age Years 20 to 4U 41 to 50 51 to 60 60+ State --- ----------- Portion of Survey Respondents Who Indicated They Were Not Current In Principal or Interest Payments for Specified Types of Loans Classified by Whether They Purchased Additional Land During Specified Periods Type of Loan Response to Land Purchase Number Responding Real Estate Machinery, Equipment Breeding Stock Principal Interest Principal Interest ............................ Percentages......................... Land Purchased During Last 3 Years Yes 36 11.1 2.8 22.2 13.9 27.8 215 Yes State 251 16.7 17.6 15.7 14.0 16.4 16.5 15.6 13.5 15.8 11.6 16.7 12.615.8 Land Purchased 4 to 6 Years Ago 11.8 5.9 2.9 12.0 18.4 13.4 Land Purchased 7 to 10 Years Ago 12.0 14.0 10.0 11.9 17.4 12.4 Land Purchased During Last 10 Years 10.3 16.5 10.3 13.0 16.9 15.9 11.9 16.7 13.0 12.0 18.9 16.0 17.9 19.6 16.2 17.5 13.8 10.0 13.9 12.4 13.6 13.1 Table 17. Operating Principal Interest ---- ----- --------------- ---- Portion of Survey Respondents Who Were Turned Down For a Loan During the Past Twelve Months Dy Specified Lenders Classified by Agricultural Production Area, 1984 Type of Lender Proouction Area Number Production Federal Land Insurance Farmers Home Responding Bank Credit Assoc. Bank Company Administration Otner ............................. Percentages.......................... ... Limestone Valley 52 5.6 3.8 U.0 0.0 5.8 1.9 Sand Mountain 26 0.0 0.U 0.0 0.0 0.0 O.U Upper Coastal Plain 40 7.5 0.0 5.0 0.0 5.0 0.0 Black Belt Piedmont Lower Coastal Plain 24 12.5 0.0 0.0 Wiregrass Gulf Coast 6.4 4.8 2.4 1.2 Taole 18. 16.7 0.0 0.0 6.6 15.4 12.5 0.0 0.0 1.6 0.0 16.7 13.3 0.0 6.6 15.4 1_1_____1 - ----- I----- State 251 6.8 0.8 30 level of financial proolem. Possibly, they were not turned down by other lenders because they did not approach these other sources of credit. The rate of loan refusal appears to be somewhat nigher for larger operators, Table 19 and Table 20. When viewed in terms of both gross sales and acres operated, greater portions of respondents were turned down as size increased. Also, the category of operators operating the smallest units appeared to have met slight resistance in receiving loans. When classified by age, those individuals in the oldest category were turned down most consistently by all lenders, Table 21. Commercial banks, Production Credit Associations, and the Farmers Home Administration turned down individuals in all age groups. Data given in Table 22 indicate that, in general, those who purchased land during the past 10 years were turned down more often for additional loans. This fact is likely related to the higher debt to asset ratios reported in Table 7. Cause of Financial Difficulties Respondents were asked to identify and rank the top three causes of the financial difficulties that they and other farmers are facing. Table 23 lists 7 major factors that were mentioned by respondents. The order is based on the number of times each factor was mentioned. A count is also given of the number of times each factor was cited as the primary problem. Low product prices were given most often as a cause of farmers' finan- cial difficulties. It was listed by 199 (79.3 percent) of the respondents and ranked as the primary factor by 85 (33.9 percent). High interest rates and the high cost of inputs were also listed by over half of those who responded as the major problems that have contributed to the farmers' finan- cial difficulties. Table 19. Portion of Survey Respondents Who Were Turned Down for a Loan During the Past Twelve Months by Specified Lenders Classified by 1984 Gross Sales Type of Lenders 1984 Gross Number Production Federal Land Insurance Farmers Home Sales, Dollars Responding Bank Credit Assoc. Bank Company Administration Other 1 to 2,499 2,500 to 4,999 5,000 to 9,999 10,000 to 19,999 20,0U0 to 39,999 40,000 to 99,999 100UU,000 + State 1.9 2.7 U.0 0.0 9.1 10.8 20.6 6.4 ........................... Percentages.... 1.9 1.9 0.U 2.7 0.0 2.7 0.0 0. i) 0. 0 0.0 0.0 0.0 3.0 3.0 0.0 10.8 2.7 0.0 14.7 8.8 5.9 4.8 2.4 1.2 ........................... 1.9 0.0 5.4 2.7 0.0 0.0 4.2 0.0 12.1 0.0 13.5 2.7 11.7 0.0 6.8 0.8 0 ......... --- - -------- I ------- Table 20. Portion of Survey Respondents Who Were Turned Down For a Loan During the Past Twelve Months by Specified Lenoers Classified by Acres Operated, 1984 Type of Lender Acres Operated Number Responding 1 to 49 50 to 99 100 to 139 140 to 259 260 to 499 500 to 999 1000+ State Bank 0.0 7.5 3.7 4.3 8.6 8.3 15.0 6.4 Production Federal Land Insurance Farmers Home Credit Assoc. Bank Company Administration Other .........................Percentages............................ 0.0 0.0 0.0 0.0 0.0 7.5 1.9 1.9 7.5 3.8 0.0 3.7 0.0 11.1 0.0 2.2 0.0 0.0 2.2 0.0 5.7 0.0 0.0 8.6 0.0 8.3 5.6 2.8 8.3 0.0 10.0 10.0 5.0 15.0 0.0 4.8 2.4 1.2 6.8 0.8 _ ~_1~1_1 Table 21. Portion of Survey Respondents Who Were Turned Down for a Loan During the Past Twelve Months by Specified Lenders Classified by Age of Respondent, 1984 Type of Lenders Age Number Production Federal Land Insurance Farmers Home Years Responding Bank Credi t Assoc. Bank Company Admi ni strati on Other .. ............................. Percentages............................ 20 to 40 47 6.4 8.5 2.1 2.1 4.2 0.0 41 to 50 49 1U.2 4.1 2.0 0.0 6.1 2.0 51 to 60 58 5.2 1.7 0.0 1.7 6.9 1.7 60+ 97 5.2 5.2 4.1 1.0 8.2 0.0 State 251 6.4 4.8 2.4 1.2 6.8 0.8 Table 22. Portion of Survey Respondents Who Were Turned Down For a Loan During The Past Twelve Months by Specified Lenders Classified by Whether They Purchased Additional Lana During Specified Periods Type of Lenders Response to Number Production Federal Land Insurance Farmers Home Land Purchase Responding Bank Credit Assoc. Bank Company Administration Other ............................Percentages.. ............................. Land Purchased During Last 3 Years Yes 36 5.6 8.3 2.8 0.0 2.8 0.0 No 215 6.5 4.2 2.3 1.4 7.5 0.9 Land Purchased 4 to 6 Years Ago Yes 34 11.8 5.9 5.9 2.9 8.8 0.0 No 217 5.5 4.6 1.8 0.9 6.5 0.9 Land Purchased 7 to 10 Years Ago Yes 50 6.0 2.0 0.0 2.0 8.0 2.0 No 201 6.5 5.5 3.0 1.0 6.5 0.5 Land Purchased During Last 10 Years Yes 97 9.3 6.2 3.1 2.1 8.2 1.0 No 154 4.5 3.9 1.9 0.6 5.8 0.6 State 251 6.4 4.8 2.4 1.2 6.8 0.8 Table 23. Primary Causes of Financial Difficulties Facing Farmers Number of lumber of Causal Factor Times Reported Times Reported As Important Factor As ~ 1 Factor Product Prices 199 85 Interest Rates 142 19 Cost of Inputs 138 23 Weather 114 22 ch Over Leveraged 82 10 Management 69 10 Land Prices 27 1 Expect to Leave Farming Respondents were asked to indicate if they expected to leave farming during the next 5 years. Data given in tables 24 through 28 reflect an alarmingly large number of farmers who expect to exit farming in the near future. The highest portion was in the Limestone Valley, Table 24. This is somewhat surprising since earlier data indicated that these farmers had the lowest rates of delinquency. Lower Coastal Plain respondents gave the lowest expected exit rate at 30.0 percent. Those producers in the gross sales ranges between $5,000 and $40,000 appear to have the strongest desire to leave farming, Table 25. Also, those in the nighest sales category, $100,00U+, exhibit a strong tendency toward giving up. When categorized by acres operated, those who farm between 140 and 499 acres display the greatest probability of leaving farming during the next 5 years, Table 26. There is very little difference among the other size groups. Hopefully, the majority of those who are planning to leave agriculture during the next 5 years would come from the oldest age group. Data in Table 27 indicate that slightly over half of the 60+ age group do plan to leave, but this still leaves a significant number of those planning to leave to come from the younger producers. The seriousness of the problem is emphasized when it is noted that 27.7 percent of the youngest group indicated they planned to leave farming. When categorized by purchase of land in recent years, results were not surprising, Table 28. In all cases, those who had purchased indicated a greater willingness to remain in agriculture. Retirement and financial problems were the major reasons given for the Table 24. Portion of Survey Respondents Who Indicated They Would Leave Farming in the Next Five Years Classified by Agricultural Production Area, 1984 Percentage Who Production Area Number Responding Expect to Leave Limestone Valley 52 44.2 Sand Mountain 26 38.5 upper Coastal Plain 40 32.5 Black Belt 24 41.7 Piedmont 15 33.3 Lower Coastal Plain 20 30.0 Wiregrass 61 39.3 Gulf Coast 13 38.5 State 251 38.3 TaDle 25. Portion of Survey Respondents Who Indicated They Would Leave Farming in the Next Five Years Classified by 1984 Gross Sales 1984 Percentage Who Gross Sales, Number Reporting Expect to Leave Dollars 1 to 2,499 54 37.0 2,500 to 4,999 37 29.7 5,000 to 9,999 32 46.9 10,000 to 19,999 24 37.5 20,000 to 39,999 33 48.5 40,000 to 99,999 37 35.1 100,000 + 34 35.3 State 251 38.3 Portion of Survey Respondents Who Indicated They Would Leave Farming in tile Next Five Years Classified by Acres Operated Acres Operated Number Reporting Percentage Who Expect to Leave 1 to 49 50 to 99 100 to 139 140 to 259 26u to 499 500 to 999 1000 + State Table 26. 36.7 37.7 37.0 41.3 45.7 36.1 35.0 38.3 I -- Table 27. Portion of Survey Respondents Who Indicated They Would Leave Farming in the Next Five Years Classified by Age of Respondent Number Responding Percentage Who Expect to Leave 27.7 32.7 29.3 51.5 38.3 Age, Years 2U to 40 41 to 50 51 to 60 60 + State I --- - -- ~- --- -------- -I ------- Table 28. Portion of Survey Respondents Who Indicated They Would Leave Farming in the Next Five Years Classified by Whether They Purchased Additional Land During Specified Periods Response to Percentage Who Land Purchase Number Responding Expect to Leave Land Purchased During Last 3 Years Yes 36 36.1 No 215 38.6 Land Purchased 4 to 6 Years Ago Yes 34 35.3 No 217 38.7 Land Purchased 7 to 10 Years Ago Yes 50 34.0 No 201 39.3 Land Purchased During Last 10 Years Yes 97 36.1 No 154 39.6 State 251 38.3 42 desired exit from farming, Table 29. An examination of the "other" factors given by 25 of the respondents revealed that most were related to financial and profit-oriented problems. SUMMARY The financial situation faced by Alabama farmers, in general, is indeed serious. Of course, as with any industry, examples can be found where large profits are being made. The data presented in this report illustrate clearly, however, that the Alabama agricultural economy is not strong. The debt to asset ratio has grown significantly from its typical 15 to 17 percent level to 28.5 percent. A large number, 38.3 percent, of the farmers who responded to the survey reported that they would likely leave farming in the next 5 years. They indicated that low product prices, coupled with high interest rates and high input costs, were the major factors causing their financial problems. Declining asset values in agriculture are serving to further erode the solvency of agricultural producers. This loss of wealth has caused lenders to look more closely at agricultural loans and show increased concern for profitability and repayment ability. The price and cost structure in agriculture of recent years has made the probability of profits very low for many farmers, thus affecting the farmers' ability to retire existing debt or secure additional fundings for necessary operations. Table 29. Primary Reasons for Leaving Farming Number of Times Percentage of Reason for Reported as Total Who Leaving Important Factor Will Leave Retirement 44 45.8 Financial Problems 42 43.8 Health 21 21.9 Other 25 26.0 G APPENDIX A QUESTIONNAIRE USED FOR DATA COLLECTION 1984 AI.ABAW Fes! FflWA1E SURVEY 1,In what county is most of your farming operation located?_ ____________________ 2 . Your crrnt age? (Chek n) 1 I I I I 1 _ 1 1 1 1 1 1 1 24-25 26-30 31-35 3&-4O 45-50 51-60 Over 60 3. Is farming a primary source of income? A. Yes B. No , If no~, go to question 5. 4. Bow Tmmiv years has fa==ing been your primaryry source of income? I I 1 I__ I I .'eas (Chek cue) Lbder 5 5-10 Over 10 5. What percent of your 1983 gross farm sales from each of these sources? Soyb'eans........................ Cotton..................... Pea=Its ..................... Other Crops.................. Beef ................... Pork....................... X Dairy...................... Poultry.................... zX Other .. (Specify) TC7TAI.100J 6. What was the value of gosh sales fran your faning operation in 1982 andI 1983 (incluiding goverzrnt payments but ecluding sales of capital items) ........... 1982..........$____ 1983..........$ Estimated 1984..........$_____ 7, Bow Mich did you spend for cash operating expenses in.............................1982...........$_____ (exclude purchases of capital items~) 1983..........$_____ Estimated 1984..........._____ 8. 1983 IVIrAL NCN-FAF rCM .................................................. Wife ........... $ Psksba ......... $_ ___ 9. Bow many acres do you: A. Own..................................... acres B. Rent From Others..........................acres C. :fit to Others........................... acres Total ILand You Operate (Item A + B - C) ....................... acres 10. How many acres of land did you purchase: During the last three years?..... _________acres 4 - 6 years ago? ................... _acres 7 - 10 years ago? .......................... acres 11. What is the current market value cf assets that you ca? Real estste (land~ and buildings)..........................$_ ___ ,achinery........................... ........... $_ ___ Livestock ............................................... ___ Stored cr=-s, feed, seed, and sT ppijes ..................... S____ in---cial assets (i.e. checkxing accz mts, stocks, bondxs) .... S ___ Other ..... .... ... _ 46 12. Ho muxch ouitstanding debt do ycu currently have in each category? Ancunt F=r real estate debt ........ Farm machiney, equps==, and breeding stock.. .$____ F operat.g loans .................... Cther .............. $__ An~.al Rate of IntE-est I. 13. Are your debt payments cu rret? ................................ Yes I A. Real Estate Debt ................... vincipal B. Machinery, equipment, and breeding stock ..... principal- :nterest C. Opeating loans ................... principal ___ interest 14. Woat do you feel are the primar causes of the financial difficulties farmrs find theseves in? (Rank the top 3 in order by using 1, 2, 3) we___ .ather -prices for farm products ____interest rates -cost of inputs ___land prizes over leveraged (too much debt) other_____.___ (specify) 15. Have you beet turned down for a loan during the past 12 months by any of the folloing lenders? DI O APFT? Local Bank .___.__... Production Credit Assoc.____ Federal Land Bank....... Insu.rance Ccxpany.______ Farmers Home Adni... Otr__ (specify) 16. Are you curety a FB borrower? ....................... YSN If yes, type of loans: eaergeIoy operating ____farm ownership 1 7 .Doyubelieve you will leavefamn;gin thenxt 5years?.................... If Yes, what do you anticipate will be the reason you will leave farming? (check one) Retirement.............. H3ealth................. F -Icial ?Roblems.._ ___ (specify) Cc nts: * t