Estimated Debt Carrying Capacity of Cotton Farms in Northeast Louisiana

Lonnie Vandeveer, Kenneth Paxton, and David Lavergne


The performance of the agricultural production sector in recent years suggests a need to consider financial implications of farm management decisions. In this discussion, a Target MOTAD programming model is used to estimate an optimal cropping portfolio for a farming situation in Northeast Louisiana. A financial leverage model is then used to estimate the debt carrying capacity of the farming operation. Maximum financial leverage and risk adjusted maximum financial leverage estimates from the model provide information concerning the range of debt that may be incorporated into the farm's capital structure. In general, results from the model provide improved information for management of debt within the farm business.

Reprinted from 1990 Proceedings: Beltwide Cotton Production Research Conferences pp. 442 - 445
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998