FARM Assistance:
Texas Strategic Planning Services
National Farm Management Conference
June 2007 Rochester, MN
Steven L. Klose
Financial And Risk Management Assistance
Department of Agricultural Economics
Texas Cooperative Extension
The Texas A&M University System
What is FARM Assistance?

Analysis service provided by Texas
Cooperative Extension

A strategic planning tool for the farm or
ranch manager, consisting of:
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10-year pro-forma financial analysis
Stochastic simulation risk analysis
Producer specific
Professional analyst
How do producers use
FARM Assistance?
Long-Range Planning Tool
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Production planning
Financial planning (feasibility and profitability)
Accounting for Risk
Strategic Decision Support Tool
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What’s my best alternative
Is a particular plan worth the trouble?
Communication Tool
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Family management
Bank
FARM Assistance &
Long-Range Planning
FARM Assistance &
Strategic Decision Support
FARM Assistance &
Communication
Methodology Challenges
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Program Flexibility
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Simulation Methods
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Enterprises (any crop, livestock, non-traditional production)
Multiple production locations
Business Structure (types of and multiple entities)
Management Decisions
Spatial Correlation
Stochastic Futures Prices
Illustrating Results Effectively
Figure 7. Projected Variability in Ending Cash Reserves Before Borrowing for the
Base Scenario and Alternative 1.
Base Scenario
$1,000
600
500
500
400
400
300
300
200
200
100
100
0
0
-100
-100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
5%
25%
Mean
Alternative 1
$1,000
600
75%
95%
2000
2001
2002
5%
2003
2004
25%
2005
Mean
2006
2007
75%
2008
95%
2009
Figure 3. Ending Cash Reserves and Probability
of Having to Refinance Operating Note for the
Base and Alternative 1.
$1,000
Percent
250
100
200
80
150
60
42
40
100
36
40
34
20
50
13
1
1
1
3
1
20
9
1
1
1
3
8
3
5
4
0
0
2000
2001
2002
2003
2004
Base
2005
2006
Alternative 1
2007
2008
2009
Broader Program Scope
Creating an Asset for Texas Agriculture
 What can we learn/teach?

 Benchmarking
 Characteristics
of Success
 Characteristics of Failure
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Policy Analysis
 Farm
Bill
 School Finance/Tax Reform
 Water Conservation
Benchmarking a Forecast
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Budget or Planning Data
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ProScore Index of Financial Outlook
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10 year average ROA
10 year average equity growth rate
Penalty for liquidity risk
FARM Assistance Database
65 Cotton Producers
Results & Program Output
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Over 1,000 Individual Analyses
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150/year
Program Partnerships
Annual Database Report
FARM Assistance Focus Series
Newsletters
Communicating Impacts
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Subjective
 Evaluations/comments
 Client
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repeat rate can imply value
Objective
 People
contacted
 Equity difference in alternatives studied
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$250,000 in real net worth over 10 years
$ 25,000/year equity impact
Values decisions… Not Analysis
Suggestions ?????
Discussion/Questions
Steven L. Klose
Financial And Risk Management Assistance
Department of Agricultural Economics
Texas Cooperative Extension
The Texas A&M University System