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Impact of Government Programs on Risk-Returns of Cotton Production

Lucas D. Parsch, Ge Cao


This study assesses the benefits which tenant and landlord producers of cotton have enjoyed under provisions of the 1990 Farm Bill. Based on the results of a survey of cotton producers, simulation is used to quantify the risk and returns of irrigated cotton production for a typical 75/25 crop share rental arrangement with and without government program participation. Partici-pation in the government cotton program under 1990 Farm Bill provisions results in a $66/acre increase in expected net returns for tenants and a $13/ acre increase for landlords in comparison to non-participation. The cotton program also reduces risk to 84% of its market level. Without participation in the government cotton program, the probability that tenants will earn negative returns increases more than threefold from 0.20 to 0.68 under the representative rental arrangement. Although landlords fare better with government programs, in comparison to tenants, they bear a relatively smaller portion of the burden of the reduced benefits under non-participation.

Reprinted from Proceedings of the 1996 Beltwide Cotton Conferences pp. 508 - 510
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998