-x9S6
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The.
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SerTe
1986
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THE FINANCIAL CONDITION OF ALABAMA FARMERS, JANUARY 
1986
J. Lavaughn Johnson
William E. Hardy, Jr.
J. H. Yeager
Hugh Bynum
John Gamble
Department of Agricultural Economics and Rural Sociology
Departmental Series No. 39
Alabama Agricultural Experiment Station
David Teem, Acting Director
AUBURN UNIVERSITY, ALABAMA
AUTHORS
J. Lavaughn Johnson, Extension Economist, Alabama
Cooperative Extension Service, Auburn University
William Hardy, Professor, Department of Agricultural
Economics and Rural Sociology, Alabam Agricultural Experiment
Station, Auburn University
J. H. Yeager, Department Head and Professor, Department of
Agricultural Economics and Rural Sociology, Alabama a
Agricultural Experiment Station, Auburn University
Hugh Bynum, Statistician, Alabama Agricultural Statistics
Service, Montgomery
John Gamble, Agricultural Economics Administrator, State
Department of Agriculture and Industries, Montgomery
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
Alabamna. Appreciation is expressed to the Commissioner for his
encouragement and financial support in connection with this
survey.
Final preparation of the questionnaires, drawing of the
sample, and mailing were all handled by the Alabama Agricultural
Statistics Service, Special appreciation is extended to Marshall
Dantzler, State Statistician, for his support and assistance.
Information contained herein is available to all without regard
to race, color, sex, or national origin.
CONTENTS
Paye
Introduction .. .. .......................
Procedure. ................ 
......... 2
Survey Results .. .. ........ 
...........
Selected Characteristics 
............ 
....... 8
Agricultural Production 
Areas. ...............
8
Gross Sales .. ...... 
........... 
...... 10
Acres Operated. ... 
.......... .........
12
Land Purchases .. ............ 
......... 12
Profit or Loss .. ............ 
.......... 5
Major Enterprises ..... 
..................
17
Plans to Continue......................19
Delinquency Levels. ...... 
...............
19
Number of Lenders Owed. .. 
... ............
22
Lender Share of Debt...................32
Summary. ...... ............. 
........ 36
Appendix A - Questionnaire 
.. ..........................
40
44
Appendix 3 - Farm Finanace Survey .
INTRODUCTION
The deteriorating financial condition of farmers across
the nation has received much public attention in recent years.
There has been considerable media exposure of this topic through
newspapers, magazines, radio, TV, and even the movie screen.
Financial characteristics of the farming sector continue to
undergo significant changes. Depressed market and financial
conditions that have persisted since the late 1970's have placed
many farmers under tremendous financial and family stress. Inte-
rest costs, in particular, have taken progressively larger por-
tions of the farmers' income. The cost-price squeeze and de-
clining land values have increased the total debt burden and
forced some farmers out of business. Other farmers are being
forced to address the ramifications of potential economic failure
unless they gain major financial concessions or make significant
changes in their farming operations.
At the same time, there are farmers who continue to maintain
profitable farming operations. However, many do not seem to
have the enthusiasm that existed during the early and mid-1970's
when markets were booming and the agricultural economy looked
quite promising.
Confusion seems to exist as to the true financial condition
of Alabama farmers. This survey was conducted to provide readers
a more objective evaluation of the financial condition of farmers
in the State.
PROCEDURE
Data were collected during December 1985 and January 1986
using a mail survey. The survey involved a random systematic
sampling of 1,500 farmers across the State. The purpose of the
survey was to determine the overall financial condition of
Alabama farmers. Several items were explored and analyzed,
including asset values, levels of debt, loan payment
delinquencies, interest expense, and other selected key financial
indicators. The questionnaire used is presented in Appendix A.
The 54 percent response to the initial mail and follow-up
phone surveys was excellent, providing 810 usable questionnaires.
The sample of farmers represented approximately 25,000 farms in
Alabama having gross agricultural receipts of $5,000 or greater,
and/or exceeding 30 acres in size. The sample was not designed
to represent the following types of farming operations: those
specializing in timber, greenhouses, nurseries, or turf farms;
operators of small tracts who contract with poultry integrators
and produce no (or very little) other agricultural commodities;
and those farms that were already out of business by the end of
1985.
It is pointed out that survey responses reflected the
financial condition of farmers at a fairly specific time (Decem-
ber 1985 - January 1986). Some respondents indicated they had
recently paid off or refinanced their operating loans; hence the
3
total debt picture might be different from that for other times
of the year.
Data are presented in summary form so that no one individual
respondent might be identified, Summaries are reported by
agricultural production area, Figure 1., 1985 gross sales, acres
operated, net cash income or loss, major enterprises, land
purchases within the past 10 years, and plans to continue
farming.
SURVEY RESULTS
Significance of Aricultural Debt. There is a common percep-
tion today that those who farm have a large debt burden. Based
on the survey responses, however, 45.1 percent of the farmers
reported having no debt. It is quite likely that some of these
farmers may have, in fact, incurred debt during the past year(s),
but their farms were debt-free at the time of the survey, figure 2.
The remaining 54.9 percent
degrees of farm indebtedness.
a commonly used measure to
indebtedness or the general
farmers. This ratio reflects 
assets) that is necessary to
asset ratio of 40 percent or
be experiencing financial
threshold, however, should
of the farmers reported varying
The debt-to asset ratio (D/A) is
gauge the extent of the firm's
overall financial condition of
the portion of a farmer's value (or
cover existing debt. A debt-to-
greater suggests that a farmer may
difficulties. This particular
not be used exclusively of other
L AWERDALE // L STO"eE MADISON., 
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cop
III - Black Belt
IV - Lower Coastal Plain-Gulf 
Coast
V -Wire grass
Fig. 1. Alabama 
Agricultural Production 
Regions
Fig. 2. Portion of Survey Respondents With 
and Without Debt,
Alabama, January, 1986.
financial ratios and profitability analyses in gauging the
farmer's financial condition.
The average D/A ratio for Alabama farmers who responded to
the survey was 24.4 percent, slightly lower than the 29.4 percent
1
reported for nine Midwest states. However, of those farmers
having debt, about half (47.8 percent) had D/A ratios of 40
percent or greater, figure 3. This represents 26.3 percent of all
survey respondents, and approximately 6,500 Alabama farmers.
Many of these farmers are experiencing cash flow difficulties. A
debt-to-asset ratio in excess of 70 percent usually indicates
that a farmer may soon be facing insolvency: 13.1 percent of the
indebted farms in this survey fell in the 70+ percent category.
The general conclusion, based solely on the D/A ratios from
this survey, was that about half of the farmers have debts, and
approximately half of those who are in debt are potentially
facing financial difficulties.
'The nine states included Illinois, Iowa, Kansas, Michigan
Missouri, Nebraska, North Dakota, Ohio, and Wisconsin. The D/A
ratio ranged from 21.2% for Ohio to 36.9% for Iowa.
7
Less than 
25% D/A
26% to 
40% D,/A
Over 70% 
D/A
41%a to 
70% 0/A
Fig. 3. Debt 
to Asset Ratios 
(D/A) for 
Alabama Farmers 
With
Debt, January, 
1986.
Selected Characteristics
Agricultural Production Areas
Tables 1 through 7 contain data which describe the general
size, enterprise, and location characteristics of the respon-
dent's farms. The portion of farmers with debt ranged from 49.8
percent in the Piedmont - Upper Coastal Plains area to 59.5
percent in the Limestone Valley - Sand Mountain area, table 1.
Among those farmers who reported debt, the average debt load
per farm was $138,037, with Black Belt farmers reporting the
largest average total debt, $169,689. Wiregrass farmers
reported the lowest average total debt, $123,206.
Average value of assets exceeded $300,000 for the total
sample of farmers and approached an average of $400,000 for
farmers who reported debt. Of the farmers having debt, those in
the Lower Coastal Plains - Gulf Coast area reported the highest
asset value, $558,114. Black Belt farmers had the next highest
value, with $494,432. Asset values were lowest in the Wiregrass
Area, $318,397, and the Piedmont - Upper Coastal Plains area,
$310,406.
The differences in asset values among the areas can be
attributed primarily to differences in size of farms. Average
farm size among indebted farmers was 859 acres in the Black Belt
and 550 acres in the Lower Coastal Plains - Gulf Coast area. The
average size was only 258 acres in the Piedmont - Upper Coastal
Plains area and 342 acres in the Wiregrass.
Table 1. Selected Characteristics of Respondents to Agricultural Finance 
Survey Classified by Alabama
Agricultural Production Areas, January, 1986
Portion Average Average Debt- Average Off-farm Average
Production with total value of to-asset 
acres income ag. interes
area debt debt assets ratio 
operated av. amt. paid
Percent - - -- Dollars - - - Percent Acres 
- - - Dollars - - -
---------- --- All Respondents --------
Limestone Valley-
Sand Mountain 59.5 82,602 330,284 25.0 297 
12,204 8,763
Piedmont-Upper Coastal 49.8 66,443 261,577 25.4 
291 9,930 5,622
Black Belt 54.5 92,558 373,924 24.8 
612 11,429 9,736
Lower Coastal-Gulf
Coast 55.0 70,259 382,014 18.4 
416 13,288 6,909
Wiregrass 53.6 66,061 269,979 24.5 339 10,125 
7,008
State 54.9 75,772 310,135 24.4 
352 11,189 7,610
----- - ------- ---- Respondents with Debt
Limestone Valley-
Sand Mountain 100.0 138,762 425,880 32.6 
373 14,090 14,569
Piedmont-Upper Coastal 100.0 133,482 310,406 43.0 
258 16,585 11,168
Black Belt 100.0 169,689 494,432 34.3 
859 17,223 16,702
Lower Coastal-Gulf
Coast 100.0 127,848 558,114 
22.9 550 14,843 12,567
Wiregrass 100.0 123,206 318,397 38.7 
342 14,668 12,713
State 100.0 138,037 396,556 34.8 
415 15,256 13,561
t
10
A comparison of average total debt and average value of
assets gives the average D/A ratio for each production area. As
mentioned earlier, the average D/A ratio for all farmers was 24.4
percent, but for farmers who reported debt it was 34.8 percent.
Debt-to-asset ratios were highest in the Piedmont - Upper Coastal
Plains, 43.0 percent, and Wiregrass, 38.7 percent. These high
values were due in large part to lower values of assets.
Off-farm income was considerably higher among those farmers
who had debt than for the entire group. The average interest
rate paid by all borrowers, determined by dividing average
interest paid by average total debt, was approximately 10
percent.
Gross Sales.
Both debts and assets tended to increase with the level of
gross sales, table 2. Likewise the D/A ratio generally tended to
increase with the level of sales with the exception of the
$100,001-250,000 sales category. This general trend suggests that
farmers with larger sales volume have the larger debt problems.
The data also indicate that the farmers in these higher sales
categories were relying less on off-farm income; the exception is
the $250,001-500,000 sales category.
Gross sales and size of farm tended to increase together.
Farms reporting sales of $10,000 or less averaged 190 acres in
size, while those farms reporting sales of over $500,000 averaged
2,289 acres in size, table 2.
Table 2. Selected Characteristics of Alabama Respondents to Agricultural Finance Survey Classified by 1985
Gross Sales
Selected chara-cteristics
1985 Portion Average Average Debt- Average Off-farm Average
grosswith total value of to-asset acres income ag. interest
sales debt debt assets ratio operated av. amt. paid
Dollars Percent - - - Dollars -
- - Percent Acres - - - Dollars - - -
- - - - - - - - - - All Respondents . . . . .- - - - - -.
10,000 or less
10,001-40,000
40,001-100,000
100,001-250,000
250,001-500,000
Over 500,000
10,000 or less
10,001-40,000
40,001-100,000
100,001-250,000
250,001-500,000
Over 500,000
34.5
40.2
81.4
94.2
82.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11,995
27,601
121,402
237,764
277,854
555,044
34,807
68,607
149,207
252,375
336,793
555,044
167,273
226,794
361,755
743,937
680,156
1,207,822
173,406
240,303
376,075
753,729
706,016
1,207,822
7.2
12.2
33.6
32.0
40.9
46.0
Responden
20.1
28.6
39.7
33.5
47.7
46.0
208
293
355
677
1,238
2,289
its with Debt -
190
303
363
653
1,147
2,289
1,450
3,195
10,174
26,375
26,930
55,438
- - - - -
F-
12,540
10,386
12,512
5,095
15,837
8,778
20,283
20,408
14,655
4,905
18,894
8,778
4,024
7,798
12,033
27,857
31,357
55,438
12
Acres Operated.
The D/A ratio was relatively low for those farms under 100
acres, table 3. The ratios increased for the 100-179 acre and
180-259 acre categories, declined for the 260-499 acre category,
and increased again for those farms over 500 acres in size.
Land Purchases.
Only 13.6 percent of the farmers had purchased land during
the past 3 years and 40.9 percent had purchased land during the
past 10 years, Table 4. Those who had purchased land had signi-
ficantly higher values for all variables, except off-farm income.
For farmers with debt, there was very little difference in
the D/A ratios of those who had purchased land and those who had
not purchased land during the last 3 years. However, those who
had purchased land 4 to 10 years ago had D/A ratios averaging 8
to 21 percentage points higher. This reflects the relatively
higher priced land bought during the late 1970's and the decline
in land values since the early 198U's. Average land value in
Alabama in 1981 was 2.14 times the 1976 value but decreased over
15 percent between 1982 and 1985.
Table 3. -Selected Characteristics of Alabama Respondents to Agricultural Finance 
Survey Classified by
Acres Operated, January, 1986
Table ~ ~ ~ ~ ~ ~ ~ ~~ elce characteristicsic o laam esonetstoAriu
Portion Average Average Debt- Average Off-fa
Acres with total value of to-asset acres income a. ners
harvested debt debt assets ratio operated av. amtpi
Pret--- olr --- Pecices- -ulas- --
1 to 49
50 to 99
100 to 179
180 to 259
260 to 499
500 to 999
1,000 plus
1 to 49
50 to 99
100 to 179
180 to 259
260 to 499
500 to 999
1,000 plus
All Respondents - -
37.7 4,983 95,624 5.2 35
36.9 6,580 171,218 3.8 77
43.2 28,396 159,595 17.8 131
65.4 118,455 268,058 44.2 213
54.6 44,613 349,957 12.7 361
77.5 153,167 565,961 27.1 651
67.7 203,354 829,432 24.5 1,627
_ _ _Respondents 
with Debt -
100.0 13,216 144,465 9.1 36
100.0 17,843 200,441 8.9 82
100.0 65,779 167,017 39.4 127
100.0 181,074 327,758 55.2 216
100.0 81,676 436,635 18.7 353
100.0 197,724 602,395 32.8 649
100.0 300,302 941,211 31.9 1,678
9,967
8,172
11,071
11,189
11,601
12,586
12,524
16,957
9,101
18,858
12,194
16,185
14,347
17,017
492
1,146
3,059
10,760
4,271
16,394
20,796
1,305
3,050
6,411
16,272
7,747
21,138
29,994
I
14
Table 4. Selected Characteristics of Alabama Agricultural Finance Survey Respondents Classified by Whether ThE
Purchased Additional Farmland During Specified Periods, January, 1986
Selected character ist ics
Portion Portion Average Average Debt- Average Off-farm Average
Response to who pur- with total value of to-asset acres income ag. interes
lInd purchase chased debt debt assets ratio operated av. amt. paid
Percent Percent - - - Dollars - - - Percent Acres - - - Dollars - - -
------------------------AllI Respondents-----------
Land Purchased During Last 3 Years
13.6
No
78.9
86.4
145,516 447,723 32.5
51.1 64,846 288,580
457
22.5
7,933
336
14,543
11 p6991
Yes
6,524
Land Purchased 4 to 6 Years Ago
19.0
81 .0
69.9
51 .4
128,802
63, 306
340,120
303,086
37.9
20.9
364
349
10,433
11 ,369
12,189
6, 534
Land Purchased 7 to 10 Years Ago
14.9
85.*1
68.4
52.5
155,382
61 ,815
442,988
286, 843
35.1
21 .6
578
313
21 ,809
9,327
14,504
6,401
Land Purchased During Last 10 Years
406, 739
243,360
37.0
10.0
445
288,
12,637
10,180
14, 248
3, 022
-- -- Respondents with Debt- - -- ---- -
Land Purchased During Last 3 Years
510, 805
368,958
3601
34.*4
482
399
8,819
16,81 1
18,356
12,403
Land Purchased 4 to 6 Years Ago
184,250
123,251
227,166
117,688
415,346 44.4 422 10,776
390,545 31.6 412 16,689
Land Purchased 7-10 Years Ago
557,312
359,855
40.8
32.7
6 82
354
Land Purchased During Last 10 Years
Yes 100.0
No 
100.0
196,468
60,719
472,292
296, 341
41.6
20.5
481
327
Yes
No
Yes
No
Yes
No
40.9
59.1
76.5
40.*0
150,291
24, 263
Yes
No
19.5
80.*5
100.0
100.0
184,537
126,804
Yes
No
24.2
75.8
Yes
No
100.0
100.0
100.0
10000
18.6
81 .4
57.*0
43.0
17,131
12,419
20,904
11,885
25,843
12,839
13,873
17,086
18,449
7,094
Yes
No
15
Profit or Loss
The data indicate that 
25.7 percent of all farmers 
in the
State reported net losses, table 
5. The percentage of farmers
with debt who reported losses 
was not much higher, 29.3 percent.
The portion of farmers showing 
losses of $5,000 or greater was
10.9 and 17.6 percent, respectively, 
for all farmers and farmers
with debt. There was a strong 
relationship between net losses
and the average amount of interest 
paid. Those farmers showing
relatively large net losses also 
had relatively large interest
payments. Debt-to-asset ratios 
for those showing large losses
were generally above the 40 percent 
level.
Over half (52.7 percent) of 
the farmers reporting net
profits for 1985 showed profits 
of $10,000 or less. A smaller
portion of those farmers with debt 
(44.6 percent) showed profits
of $10,000 or less.
Generally, farmers who reported 
net profits had lower D/A
ratios. However, there were 
some exceptions. Among farmers 
with
debt who showed net profits between 
$5,001 and $40,000, the D/A
ratios were high, over 40 percent.
2
Net profit (or loss) is defined 
as total gross receipts minus
cash operating expenses (not 
including depreciation).
Table 5. Selected Characteristics of Alabama Respondents to Agricultural Finance Survey Classified by Net Cash
Income or Loss During 1985
Selected characteristics
Portion Portion Average Average Debt- Average Off-farm Average
Profit or at each with total value of to-asset acres income ag. interest
loss level debt debt assets ratio operated av. amt. paid
Dollars Percent Percent - - - Dollars - - - Percent Acres - - - Dollars - - -
Al IRespondents --------- 
------
Net Profit
5,000 or less 35.4 45.6 33,285 215,298 15.5 272 10,561 3,709
5,001-10,000 17.3 48.3 95,728 325,097 29.4 305 11,216 8,444
10,001-40,000 17.5 59.5 98,963 328,459 30.1 393 6,199 9,981
40,001-100,000 4.0 92.6 135,275 613,126 22.1 763 11,169 13,259
Over 100,000 0.1 100.0 121,000 535,000 22.6 2,905 0 12,600
Net Loss
5,000 or less 14.8 43.5 21,054 217,399 9.7 244 16,124 1,973
5,001-10,000 4.7 83.5 84,746 264,266 32.1 333 18,250 8,513
10,001-40,000 4.7 92.4 261,440 795,772 32.9 701 13,525 26,953
40,001-100,000 1.3 95.2 332,793 846,899 39.3 1,098 7,429 37,963
Over 100,000 0.2 100.0 477,800 1,093,000 43.7 850 500 53,345
------------ - ---------------- Respondents with Debt------------------
Net Profit
5,000 or less 29.4 100.0 72,980 238,666 30.6 270 15,891 8,011
5,001-10,000 15.2 100.0 198,294 462,064 42.9 324 18,815 17,331
10,001-40,000 19.1 100.0 166,258 382,671 43.4 459 9,409 15,684
40,001-100,000 6.8 100.0 146,011 625,199 23.4 762 11,802 13,889
Over 100,000 0.2 100.0 121,000 535,000 22.6 2,905 0 12,600
Net Loss
5,000 or less 11.7 100.0 48,345 285,830 16.9 312 22,811 4,483
5,001-10,000 7.2 100.0 101,438 257,420 39.4 314 18,261 10,190
10,001-40,000 7.9 100.0 282,928 825,463 34.3 700 12,255 29,152
40,001-100,000 2.2 100.0 349,432 844,044 41.4 1,059 7,800 39,861
Over 100,000 0.3 100.0 477,800 1,093,000 43.7 850 500 53,345
17
Major Enterprises
The heaviest incidence of debt was among poultry producers
and field crops producers, 66.1 percent and 
60.6 percent,
respectively, table 6. Only 43.2 percent 
of the livestock
producers reported debt, Livestock producers 
also had the
highest average amount of off-farm income, suggesting 
that much
of their operating and capital outlays are being provided 
by
off-farm earnings rather than borrowed money. 
The 0/A ratio for
this group of farmers was also relatively 
low at 14.9 percent.
Approximately two-thirds of the poultry producers reported
having debt. Producers with debt had an average 
debt load of
$185,179, a D/A ratio of 44.9 percent, and an average interest
payment of $17,287. This is due in large part to the 
relatively
high level of recent capital investments in 
poultry houses and
equipment.
The other group showing large average total debts 
and a high
D/A ratio was the vegetable, fruit, and nut producers. 
These
enterprises are characterized by a high level of 
production,
marketing and financially related risks. Almost 
half, 45.1 per-
cent, of these producers were in debt, and those 
with debt had
the highest average total debt, $188,139. They 
also had a D/A
ratio of 38.7 percent, and average annual interest 
payments of
$19,493.
Table 6. Selected Characteristics of Alabama Respondents 
to Agricultural Finance Survey Classified by 
Major
Enterprise, January, 1986
Portion Average Average 
Debt- Average Off-farm Average
Major with 
total value of to-asset 
acres income ag. interest
enterprise debt 
debt assets ratio 
operated av. amt. paid
Percent - -
- Dollars -- -- 
Percent Acres 
- - - Dollars -
- -
- - All RE
espondents -
Livestock
Poul try
Field Crops
Vegetables, Fruits,
Nuts
Other
Livestock
Poultry
Field Crops
Vegetables, Fruits,
Nuts
Other
43.2
66.1
60.6
45.1
51.7
100.0
100.0
100.0
100.0
100.0
40,148
122,345
80,146
84,847
27,916
93,031
185,179
132,207
188,139
54,046
268,839
327,814
356,889
14.9
37.3
22.5
304,293 27.9
320,282 8.7
- - - - - - Respondents
358,455 26.0
412,643 44.9
419,478 31.5
485,552
359,421
38.7
15.0
351
232
622
318
458
with Debt
463
265
785
540
419
0o
15,418
8,163
10,510
8,529
11,324
21,691
12,302
12,475
13,174
16,508
4,525
11,749
8,377
8,791
2,721
10,367
17,287
13,389
19,493
5,267
V ~I IC I J I O I L I ) J L V V L~ V ) L VL- V I I
19
Plans to Continue.
Only 2.3 percent of the respondents 
indicated that they did
not plan to continue in farming 
during 1986, table 7. Those
farmers who did not plan to continue 
had higher average D/A
ratios, 38.5 percent, than those 
who planned to continue farming,
a 24.3 percent D/A ratio.
Delinquency Levels
About 11.4 percent of all borrowers were delinquent 
on real
estate principal payments, while 
9 percent were delinquent on
real estate interest payments. 
The lowest delinquency rate was
for the payment of interest on non-real 
estate loans, figure 4.
Only 3.9 percent of the respondents 
with debt indicated that
they were not current on principal 
for both real estate and non-
real estate loans. An even smaller 
portion, 2.5 percent,
reported that they were delinquent 
on interest payments for both
types of loans.
Table 7. Selected Characteristics of Alabama Respondents to Agricultural Finance Survey Classified by Whether They
Expect to Continue Farming in 1986
Selected characteristics
Portion Portion Average Average Debt- Average Off-farm Average
Expect to with each with total value of to-asset acres income ag. Interest
continue response debt 
debt assets ratio operated 
av. amt. pai
Percent Percent - - - Dollars - - - Percent Acres - - - Dollars - - -
-------------------- -------- Al I Respondents----------------
Yes 97.7 54.5 76,121 313,744 24.3 353 11,188 7,612
No 2.3 71.8 61,105 158,651 38.5 321 11,248 7,514
------------------------------------ Respondents with Debt-- -------------
Yes 97.0 100.0 139,698 403,888 34.6 417 15,243 13,658
No 3.0 100.0 85,111 163,000 52.2 326 15,666 10,467
0
LEGEND
Principal
Interest
11.4
7, 9.0
N
4.5
309
J 7
V.2.5
7,,
Real Estate
Both Loan Types
Non-Real Estate
Type of
Loan
Fig. 4. Portion of Respondents 
Who Are Delinquent on Either 
Principal or Interest on
Their Loans, Alabama, January, 1986.
184-
16-
14--
c
a3
-4-
Ci
84
6'
4-j
2
0
9.3
,7>
:rte
" --- -I
22
Number of Lenders Owed
Many farmers borrow money 
from several different 
sources.
They often borrow short-term 
and long-term money from 
different
sources, since various 
lending agencies are organized 
to handle
different types of 
loan requests. The data 
showed that most
borrowers, 76.8 percent, 
owed only one or two lenders, 
while 23.2
percent owed three or more 
lenders, figure 5.
Most production areas of the 
State followed the pattern 
for
the State as a whole. 
The percentages of borrowers 
owing three
or more lenders were as 
follows: Limestone Valley 
- Sand
Mountain, 12.7 percent; Black 
Belt, 14.9 percent; Wiregrass, 
14.7
percent; Lower Coastal 
Plains - Gulf Coast, 22.9 
percent, and
the Piedmont - Upper Coastal 
Plains, 46.8 percent, table 
8.
As sales volume increased, 
farmers generally tended 
to owe
more lenders, table 
9. This could be expected 
since larger
sales often require larger 
outlays and several lending 
sources
may be necessary to fund 
these larger outlays. For 
those farms
producing $10,000 or less 
gross sales in 1985, about 
95 percent
owed only one or two lenders, 
whereas on those farms producing
over $250,000 sales, approximately 
67 percent owed three or more
lenders.
There appeared to be no particular 
relationship between the
number of acres farmed and the number of lenders owed, Table 10.
The majority of farmers (65 
to 100 percent) across all 
acreage
groups tended to use only one 
or two lenders.
23
Owes 1 Lender
Owes 2 Lenders
Owes 3 Or More Lenders
Fig. 5. Number of Lenders Owed by Alabama Farmers Who Reported Debt, 1986.
Table 8. Portion of Borrowers Who Owe Money to Specified Numbers of Lenders
Alabama- Agricultural Production Area, January, 1986
Classified by
Production Portion withi oes Oes Oes Jor
area debt 1 lender 2 lenders more lenders
Percent--- -- -- -- -- ---
Limestone Valley-
Sand Mountain
Piedmont-Upper Coastal
Black Belt
Wi regrass
Lower Coastal-
Gulf Coast
59.5
49.8
54.5
55.0
53.6
44.1
34.4
38.0
49.2
44.1
43.2
18.8
47.1
36.1
33.0
12.7
-46.8
14.9
14.7
22.9
35.4 23.254.9 41.4State
Table 9. Portion of Borrowers Who Owe Money to Specified Numbers of Lenders Classified by
1985 Gross Sales, Alabama
1985 gross Portion Owes Owes Owes 3 or
sales with debt 1 lender 2 lenders more lenders
Dol ars
... .. . . - - - -- - Percent - - -
10,000 or less 34.5 76.1 18.7 5.2
10,001-40,000 40.2 46.7 42.0 11.3
40,001-100,000 81.4 30.5 30.3 39.2
100,001-250,000 94.2 12.8 63.3 23.9
Over 250,000 82.5 21.2 18.2 66.6
N)
0
Table 10. Portion of Borrowers Who Owe Money to Specified Numbers of Lenders Classified by
Acres Operated, Alabama
Acres Portion Owes Owes Owes 3 or
operated with debt 1 lender 2 lenders more lenders
Acres ------ Percent - ------------
1-49 37.7 74.0 26.0 0.0
50-99 36.9 35.9 58.5 5.6
100-179 43.2 45.2 27.8 26.9
180-259 65.4 34.7 46.2 19.1
260-499 54.6 66.5 11.5 22.0
500-999 77.5 32.0 46.0 35.0
1,000 plus 67.7 25.3 54.0 20.7
27
Farmers who had purchased land during the last 10 years
generally owed money to more lenders than those who had not
purchased, table 11. For example, the percentage point spread
between purchasers and non-purchasers during the last 3 years for
those who owe 3 or more lenders was 16.1 points (36.3 vs. 20.2).
This same spread for land purchased 4 to 6 years ago was only
1.6, and for land purchased 7 to 10 years ago, the percentage
point difference was 24 (42.8 vs 18.8).
The relationship between number of lenders owed and the
level of profits and losses was different than expected. Most
farmers owed only one or two lenders whether they had profits or
losses, table 12. An exception occurred among those farmers
having net profits of $5,000 or greater. About 37 to 44 percent
of these farmers owed three or more lenders. Since there is
probably a relationship between net profits and gross sales, more
lenders may have been necessary to finance this larger volume of
sales.
Table 11. Portion of Borrowers Who Owe Money to Specified Numbers of Lenders Classified by
1985 Gross Sales, Alabama
Response to Portion with Owes Owes Owes 3 or
land purchase debt 1 lender 2 lenders more lenders
78.9
51.1
69.9
51.4
68.4
52.5
76.5
40.0
---- -- Percent --------
Land Purchased During Last 3 Years
34.1 29.6
43.0 36.8
Land Purchased 4 to 6 Years Ago
23.1 52.6
47.8 29.4
Land Purchased 7 to 10 Years Ago
23.7 33.5
45.3 35.9
Land Purchased During Last 10 Years
24.8 40.6
64.2 28.4
36.3
20.2
24.4
22.8
42.8
18.8
34.6
7.4
Yes
No
Yes
No
Yes
No
Yes
No
Table 12. Portion of Borrowers Who Owe Money to Specified Numbers 
of Lenders Classified by
1985 Gross Sales, Alabama
1985 gross Portion with Owes Owes Owes 3 
or
sales debt 1 lender 2 lenders more lenders
Dollars ----.-------- Percent ------ - ---
Net Profit
5,000 or less 45.6 59.2 
29.6 11.2
5,001-10,000 48.3 23.3 
36.6 40.1
10,001-40,000 59.5 16.5 46.6 
36.9
Over 40,000 92.6 44.5 
11.1 44.4
Net Loss
5,000 or less 43.5 67.9 
23.9 8.2
5,001-10,000 83.5 42.4 
48.5 9.1
10,001-40,000 92.4 15.0 
61.7 23.3
Over 40,000 95.2 60.0 24.9 
15.1
N
30
The relationship between enterprises and number of lenders
owed is presented in table 13. Vegetable, fruit, and nut
producers owed the greatest number of lenders. None of these
producers indicated owing only one lender. This group of farmers
also had a high D/A ratio. Poultry producers had debts spread
among several lenders with the larger portion of these producers
owing two lenders. About 85 to 90 percent of the livestock and
field crops producers owed only one or two lenders. The majority
of livestock producers owed only one lender and the largest
portion of field crops producers was in the one-lender category.
Table 13. Portion of Borrowers Who Owe Money to Specified Numbers of Lenders Classified by
1985 Gross Sales, Alabama
Major Portion with Owes Owes Owes 3 or
enterprise debt 1 lender 2 lenders more lenders
.... .... ... Percent ---- -----------
Livestock 43.2 60.5 28.2 11.3
Poultry 66.1 26.6 47.3 26.1
Field Crops 60.6 45.0 38.1 16.9
Vegetables, Fruits, Nuts 45.1 0.0 52.1 47.9
Other 51.7 72.1 1.6 26.3
.
32
Lender Share of Debt
Respondents to the survey indicated that they depended upon
five basic sources for their borrowed capital. Those sources
were: the Federal Land Bank, the Farmers Home Administration,
Production Credit Association, commercial banks, and insurance
companies. A sixth category is generally referred to as "other."
It includes merchants and dealers who extend credit to promote
sales, and individuals who are willing to finance the sale of
their property.
The Federal Land Bank held 34 percent of the total debt
reported by those who responded to the survey, figure 6. When
combined with the 8 percent held by Production Credit Associa-
tions, the significance of Farm Credit System agencies is readily
apparent. Commercial banks held 21 percent of the outstanding
loan volume, Farmers Home Administration held 16 percent of the
total, and insurance companies held 6 percent. Individuals and
others held 15 percent of the total debt.
It was reported earlier that most respondents had debt with
more than one lender. Additional information presented in figure
6 shows the portion of borrowers who reported loans with each
lender. Over half of the respondents, 52 percent, had loans with
commercial banks. A total of 39 percent of the producers
reported debt with individuals and others, while 36 percent had
mortgages with the Federal Land Bank. Twenty percent of the
borrowers had loans with the Farmers Home Administration, while
FmHA Banks PCA
LEGEIND
- - Percent of Borrowers
Percent of Total .Debt
eO-
50-
40 -
30i
20-i
101n
52
71
7
71
-z
7
71
7
7
7z
7
A--
'-4
-A
Fig. 6. Percent of Borrowers by Source of Credit and
Alabama, January, 1986.
Percent of Total Debt by Source
W~
0
0
1 G
21
20
{-
39
7
-A-,
16
7
~<'
-A--
77
7-
7
4,
7
A-
-A
7
F LB Ins.
Credit Source
--1
Other
I
34
Production Credit Association loans were reported by 16 percent
of the respondents. Only 6 percent had loans with insurance
companies.
Federal Land Bank loans were the largest with an average
size of $103,000, while commercial banks and the "other" category
were indicated to have the smallest loans at $45,000 and $44,000,
respectively, figure 7. Insurance company loans (mostly for real
estate) were relatively large, averaging $99,000. Loans from the
Farmers Home Administration averaged $85,000, while Production
Credit Association loans averaged $57,000.
(ii
45
Bank
57
IN'7
l'
1-0
PCA
44
7
*1~ - 7
/
/1
-7
7
7-171
71 - -
Other
Credit Source
Fig. 7. Average Size Debt by Source of Credit for Alabama Farmers Who Reported Debt, Jaary 196
200-
180
160-
140+
4
CJ -
120o+
100
80?-
103
FLE3
60-H
40-
20-
Ins. Fm HA
36
SUMMARY
The survey provided 
an overall view 
of the financial
condition of 
the 25,000 largest 
commercial farm 
operations in
Alabama. Typically, 
this group of farms 
accounts for more 
than
85 percent of 
Alabama's livestock, 
poultry, and field 
crop
receipts. These 
operations usually 
have over $5,000 
in annual
farm receipts or 
a farm size of 30 
acres or greater.
Given the current 
negative attitudes 
regarding the general
financial condition 
of the agricultural 
sector, it was 
somewhat
surprising that 
only slightly more 
than half of the 
farmers (54.9
percent) reported 
debt as of the end 
of 1985. The 
timing of the
survey, however, 
could partly explain 
the results. At 
the end of
the year, most 
of the profitable 
operators have already 
repaid
loans made during 
the year.
However, some of 
the operators with 
debt were in relatively
unsatisfactory 
financial positions. 
The data indicated 
that
perhaps as many 
as 6,500 commercial 
farms in the State 
may be
experiencing financial 
difficulties associated 
with D/A ratios
above 40 percent. 
A total of 13.1 percent 
of the respondents
with debt, representing 
approximately 1,800 
farms statewide,
reported D/A ratios 
of over 70 percent. 
While the existence 
of
such relatively 
high debt levels 
does not necessarily 
mean
failure of the 
business, it does 
indicate a high level 
of
financial stress and 
a high potential for 
economic failure. 
On
an individual farm 
basis, profitable 
and efficient operations
37
with an adequate cash flow could effectively handle 
D/A ratios of
70 percent or higher, but the task would be difficult.
When the data were analyzed by geographic area, respondents
from the Black Belt area reported the 
largest average debt,
$169,689, while those in the Wiregrass had the lowest, 
$123,206.
When these debts were examined relative to asset 
values, it
appeared that the Piedmont - Upper Coastal Plains area 
farmers
were feeling the greatest financial pressure with 
an average D/A
ratio of 43.0 percent. The lowest ratio, 22.9 
percent, was in the
Lower Coastal Plains - Gulf Coast area.
The general trend was for the D/A ratio to increase 
as sales
increased. When classified by acres operated, 
those respondents
in the 180 to 259 acre range reported the 
highest average D/A
ratio.
As would be expected, those individuals who had purchased
land during the last 10 years were feeling 
a great deal more
financial pressure than those who had stayed out 
of the real
estate market. The most profitable respondents 
were experiencing
the least financial pressure through their 
generally lower D/A
ratios. When the data were classified by major 
enterprises, it
appeared that the high capital investments required 
for poultry
operators have placed them in a position of 
having the highest
0/A ratios.
Anoth~er measure of financial stress examined from 
the survey
data was the number of lenders owed by each respondent. 
A total
38
of 23.2 percent of the respondents with debt indicated that they
had loans with three or more lenders. Approximately 41.4 percent
had debts with only one lender and 35.4 percent owed two lenders.
Sources of funds for those respondents who have debt were
from the traditional agricultural lenders - Federal Land Bank,
Production Credit Association, Farmers Home Administration,
commercial banks, insurance companies, merchants and dealers, and
individuals.
Only 2.3 percent of the operators indicated that they would
not continue farming in 1986. Those with high absolute debt
levels and those with high D/A ratios are certainly feeling
financial stress and must direct their efforts toward improved
management decisions and attaining higher profitability.
39
APPENDIX A
,ALABAMA COP 4
and LIVESTOOK REPORTING SERVIOE
7.~~~~o DEA.IIN FAGRICU1LTURE ALABAMA DEP AR 
TMENT OF AGRICULTIU RE
::ti D LSTR1ES. ST ATiSTI CS DIVISION
MARSHALL'. Z.. DAY'ZLER
oamoer 25. 1985
AL3E T McDONALD
Dear ALoame Farmer:
As Comissioner Pt0onaLd stated in his enclosed Letter,
ALaoam ee amea, au well as manty farears cross 
this
nation, are faomd with some serious financial probLems.
We were asked by him to conduct this survey to provide
current information about the tarm, financial situation
here in ALabama. Simi Lar surveys are also being
conducted eLseenere including most of our neighboring
states.
'lease tae the time to comolete :his quetionnire 
and return it in the enclosed stamped envelops. ALL
inldividual reports aeasoat strictly conf identiaL, 
will not be snared with any other aencies and use 
only when
coso inee with other resorts for ares and state 
toteals. If you need assistance in' compLeti ng 
this questionnaire
pieame feel free to call as collact at (2051 832-7253.
j a85 _ 1 TLYANE SURVE
SECTION 1 - ACRES OPERATED AND INCOME
.o 0 al acres in this operation during 
1985 (include all cropland, pasture, and idle
; ound )
a. Ownled...............................acres
0. Rented from others........ee..._____acres
e. Rented to othersse..............acres
d" Total land operated
(a *b ? c)..............-......acres
b2. How many acres of land did you purchase:
a. During the past three years?.._______
b. 6 years ago? ............... .......
a. 7- 10 years ago? ...... e.... . ........
2.What was the total gross receipts for 
agricultural products sold during 1985 (include
CCC forfeitures, and government payments)? 
Check one.
A. Total Cross Receipts:
$10,000 or less ......... , _
$10,001 - 40,000..s
S40,001 -$100,000...
310,01$500000 250,001 
0{ $500 
,000.....
O ver $ 500, 00 0"... ..... ,_
~.Approxtimately what percent of your 1985 
gross farm receipts came from each of 
the
following 
sources: 
pg 
~
Livestock & Dairy.. .... ... .__________eO .
Poult ry................ . . .......... o " 
+
Field Crops ...........................
Vegetables, :ruits, & Pecans....."e...____
Other _____
(specify) TOTAL 
100%
64. What was the NET CASH INCOME 0O. LOSS during 
1985 (Question 3A minus cash operating
expenses , but do not include depreciation)y
" Only check a cell in ONE of these two 
columns.
If a NET PROFIT use this column:
$5,000 or less....... .
$5,001 - $10,000..
$10,001 - $40,000...
$40,001 0V- o.._..
Over $100,000.........
If a NET L.OSS use this column:
$5,000 or less.........
S5,001 S 510 ,000.-
$10,001 S0,00. .
S40,001 $0000..
Over S100,000.........
5. How many adults actively participate in the 
day-to-day management & operation of this
farm ( x U ~) e" e" 
o " " " ~ " "" " " " ~ ~ ~ ~ "" " 
" e " e ",.,
3. Total Off-yarn income earned by these adults & their 
spouses in 1985?$
Sincerety,
Mrshatl .. Dntztsr
:Ltta.'St t, scicistn
IN, 9- - -MP- -- wam" !gem-mm-- 
I
'41
SZC10% l- vC:Rz & '.TNA .ALSITUA A.
?"ease report elow the current asset value, outstanding dent, and roan status or real
estate and non-real estate property included in this operati.on.
A SSE TS OWNED AND
ASSETS r iNANC D .Ase
Value
Out- deot is outstancing, are!
standing, you ur-Tt ~l
Deb t 1!
Real ?s Late S
a. Farmland*.......................
b . Improvements (if not in a.) ..
c. Personal residence (if not in
a. o r ab.) ....................... ___..
3. Non-real Estate
a. :.ives Lock ........................
b. Crops 3tored on or off farm
(include crops under CCC loan) ...
?arm mac lines & equipment...
~.Personal assets, auto, savings,
etc... .......................... ~-~_
Other debt, unsecured family,
ec. (include past due land
rent) ............................
2. :NANcING BY
E'? OF LE) ER
a.
e.
Out-
standing
Deb t
S
Federal Land Rank ...............
insurance Comanies............
Farmers Home Administration..
Commercial Banks ................
?roduc Lion Credit Association...___
Other Sources ( Dealers, '?rivate
?arries, herchiants, Others) ..
!Yes.. No . '.Yes ._
!Yes,.. No___ Ye s..a...
i 
e 
20 
es~.Yes,,,,.No___ 
Y 
es..
"'es___
-des~
N.No__
No. Yes__No___
No Yes___ No___...
I. 1es....No.. Yes _,,No___
IU fdebt is outstanding, are l
Total I you current on:
Payments I
[Yes. No___
,.[Yes...No___
lYes.._. No__
Yes___No__
'1o___
No......
No___
NO.___
No____
No___
. What was the total interest paid on all agricultural loans during 1985?_______
4. Do you expect to continue operati.ng this farm during 1986? Yes_____ yo_____
5. Are you currently in foreclosure or bankruptcy proceedings? Yes_____ No_____
5.. Have any repossession actions been taken against this operation
since July 1, 1985?......................................... Yes_____ No_ ___
Thank you for your cooperation. The results of this survey are scheduled for release in
mid-February by Comissioner McDonald and a copy will be mailed to you at that time.
Reported by:
Date: ________________
Phone:
r
1
f
42
43
APPENDIX B
ALBERT ' MOONALO
COMMISSIONER
44
STATE OF ALABAMA
DEPARTMENT 0F AGRICULTURE
AND INDUSTRIES
BEARD BUILDING
P . B OX 3 336
MONTGOMERY, ALABAMA 36193
CZCOL DAVIS
ASSISTANT COMMISSIONER
JrANUARY, 1986
MAJOR FINDINGS
Forty-five percent of Alabama 
farmers have ro debt.
Only one out of twelve Alabama 
farmers was de-
linquent on a debt 
payment.
Seven percent of Alabama 
farmers reported a debt-to-
asset ratio exceeding 70 percent... an 
indication that
these farmers may have 
a serious problem meeting
principal and interest payments.
Only 2 percent of the farmers 
said they would not
continue operations 
in 1986.
FmHA borrowers had the highest average 
debt-to-
asset ratio and delinquency 
rate. Commercial bank
borrowers had the lowest delinquency 
rate.
Major farm lenders, according to 
total debt held, were
ranked as follows: Federal Land 
Bank; commercial
banks; FmHA; merchants, dealers, 
and other private
sources; ?roduction Credit Associations: 
and insurance
companies.
Seventy-four percent of all farmers 
reported a net
profit for 1985 ... twenty-six. 
percent reported a net
loss.
Farmers with no debt had average 
off-farm income of
$6.240 in 1985. Those farmers with 
debt had average
off-farm income of $15,256.
Farmers with debt paid an 
average of $13.561 in
interest payments in 1985 with 
an average computed
rate of 10 percent.
Debt Status and Debt~to.Asset
Ratio, Alabama Farmers
January, 1986
No Debt
25% and Lower
0/A =22.3%
Over 70%
D/A 73
41% to 70% ?/A
26%to4O%.0/A=6.3%
Average Debt-to,-Asset Ratio and
Delinquency Rate for Alabama
Borrowers by Major Enterprise,
January, 1986
70
eoi
N0
:D
II
~~;e tj j.
eivestock Poultry Crops leg.. etc. Other
Major Enterprise
r A
I 9/
Nurmber of Lenders 
Owed by
Percent of Alabama Farmers 
who
Reported Debt, January, 
1986
One Lender 41.4%
Four or More
SLenders 7.4%
Three Lenders 15.8%
'wo LendersN
35.4%
Average Size Debt 
by Source of
Credit for Farmers 
who Reported
Debt, Alabama, January, 
1986
K5
57
I5..
FLB Ins. PmIA Bank 
PCA Other'
Credit Source
60
C~O
MYc
a
45 Percentage Distribution 
of Farmers by
Major Enterprise and Debt-to-Asset 
Ratio,
Alabama, January, 1986
D ebt-teo-
Debt-to- 
or 
asset Live -Field
ratio stock Poultry croes S ecialt /
Percent
No debt 56.8 33.9 39.4 54.9
0-40 35.0 15.8 37.8 
22.6
41-70 5.9 38.9 
13.9 11.8
71-95 1.3 11.4 3.1 0.0
over 95 1.0 0.0 5.8 10.7
Debt-to-asset
ratio
all farmers 14.9 37.3 22.5 
27.9
Delinquency
Rate for
Borrowers 10.1 11.6 22.2 
73.9
1; Vegetable, fruit, and-nut crop farmers.
More than half the livestock farmers had no 
debt and
reported the lowest average debt-to-asset 
ratio (14.9%) of
all groups. Poultry operators reported 
the highest average
debt-to-asset ratio but also reported a low loan 
payment
delinquency rate. This latter 
combination likely reflects
the recent favorable economic conditions in the 
poultry
sector and the associated new capital investment 
for
facilities and equipment.
Although specialty crop farmers 
who reported debt had
an extremely high loan delinquency 
rate, it should be
equally noted that over half of all specialty 
crop producers
reported no debt. Also, although 
the plight of field crop
producers has received much 
recent attention, it's im-
portant to note that over three-fourths 
of the farmers in
this group reported a debt-to-asset 
ratio of 40 percent or
less .. , a very positive finding.
Percent of Borrowers 
by Source of Credit
and Percent of Total 
Debt by Source,
LEGEND
10
0
FLB Ins. FmHA 
Banks PCA Other
Credit Source
t inancial (Liaracteristics tor r armers
with Debt by Regions, Alabama,
January, 1986
Average Average Debt-to- Percent
Region debt assets asset ratio delinquent
Thousand Dollars Percent
I 138.8 425.9 32.6 23.5
II 133.5 310.4 43.0 
7.2
III 169.7 494.4 34.3 
18.3
IV 127.8 558.1 22.9 9.8
V 123.2 318.4 
38.7 15.3
State 138.0 396.6 34.8 16.5
For those farmers who reported a debt position, highest
average debt per farm was in the Black Belt followed by
farmers in the Tennessee Valley-Sand Mountain region.
Farmers who had debt in Region IV, reported the highest
average asset value and a low loan delinquency 
rate. Loan
delinquency rates in Regions I and III were above the State
average of 16.5 percent. The average debt-to-asset ratio 
for
farmers who reported debt was 34.8 percent. The average
debt-to-asset ratio for all farmers in the State was 24.4
percent.
Management (Not Land Ownership) Important
'" 23% of the farmers who owned no land reported they
lost money in 1985... average farm size was 257 acres
S. . of the farmers who owned no land, two-thirds of
their gross receipts come from field crops - average
gross receipts were $42,000.
" 25% of the farmers who owned all the land they farmed
lost money in 1985... average farm size was 261 acres
... of the farmers who owned all the land they farmed,
over half of their gross receipts came from poultry
-average gross receipts were $35,000.
" 27% of the farmers who both owned and rented land in
1985 lost money... average farm size was 488 acres...
295 acres owned; 193 rented or a 60/40 relationship...
of the farmers who operated both owned and rented
land, gross receipts were evenly divided between
livestock, poultry, and field crops - average gross
receipts were $87,000.
Percentage Distribution of Net Income
for Alabama Farmers, 1985
Negative
,000 or Less 25.7%
35.3%
Over $40,000
4.2%
$10,001 -$40,000
$5,001-$10,000 
17.5%
17.3%
A Definition: Debt-to-Asset Ratio
Debt-to-asset ratio (percentage) is often used to gauge 
financial condition of farms or firms. The ratio is obtained 
by
dividing total debt by total assets (D/A). The U.S. 
Department of Agriculture uses four groups of 
ratios:
0-40%
41-70%
71-100%
over 100%
Generallyfew financial problems.
May present problem in meeting principal payment. Highly leveraged.
Problems in meeting principal and interest payments. Declining net worth. Very highly 
leveraged.
Severe problems and likely negative net worth. Technically insolvent.
46
Selected C t ~47.
Seleted har~c~,risics by Total
Land Operated, Alabama, January, 1986
Alveragle Aeveage verae vrae Avrge Aerg
gLand farm Farms total total debtto- off-farm inte
operated size debt assets asset ratio income p
acres acres percent - thousand dollars - percent - dollars -
1-49 35 4 5.0 95.6 5.2 9,967
50-99 77 8 6.6 17.2 3.8 8,172 11
100-179 131 33 28.4 159.6 17.8 11,071 3,
180-259 213 21 118.5 268.1 44.2 11,189 10,
260-499 361 14 44.6 350.0 12.7 11,601 4,
500-999 651 13 153.2 566.0 27.1 12,586 16,
1000+ 1,627 7 203.4 829.4 24.5 12,524 20
CIHARACTERISTICS OF THE SAMPLE AND SURVEY
A sample of 1500 farms was drawn from a list that represented the 25,000 largest commercial farm opera
liabama. Typically, this group of farms accounts for more than 85 percent of Alabama's livestock, poultry and fE
eceipts. These operations typically exceed $5,000 in farm receipts and/or exceed a farm size of 30 acres. O 9
uestionnaires were collected and 810 were used for tabulating. One-third of these were returned by mail and were
rithout further contact, one-third were mail returns which needed telephone contacts to clarify some questio
emainder were collected with telephone interviews. Collection ard analysis of the survey data was a cooperativ
f the Alabama Department of Agriculture and Industries, Auburn University, and the Crop and Livestock Rept
ervice.
'he sample and survey did not cover the following:
... Land owners who were not actually involved in operating a farm.
... The debt, assets and income of landlords on any questionnaire that showed acres being rented.
*..Farms that specialized in timber, greenhouses, nurseries and turf farming.
. .. Operators of small tracts of land whose sole farming activity was principally limited to poultry production
... Operations that were already out of business by December 1985.
The 810 questionnaires tabulated showed the following characteristics:
... Average data collection date was January 18, 1986.
Gross receipts exceeded $56,000 per farm.
Average farm size was 352 acres.
... Seventy-five percent of the land farmed was owner operated.
.. Twenty-nine percent of the land operated was rented.
..Four percent of the land owned was rented out.
PERCT OF FARMERS AND PERCENT
TOTAL FARM RECEIPTS BY MAJOR
RIRMSE, AhA? JANUARY, 1986
Total
Enterprise Farms Receipts
- percent
Livestock 31 27
Poultry 37 38
Field Crops 1223
Specialty Crops* 6 6
Other*" 14 6
*vegetab ies, nuts and fruits


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