SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS DECEMBER, 1983 ENTRY INTO FARMING: THE EFFECTS OF LEASING AND LEVERAGE ON FIRM SURVIVAL

The 1979 Farm Finance Survey revealed that 42 of the farm operation. In this study we investigate the percent of all farmers are over 55 years of age and these effects of various combinations of initial equity posi-farmers control 48 percent of all farm assets. This im- tions and debt financing versus leasing for tenant and plies that the ownership of about one-half of all farm- part owners of a typical 640-acre cotton farm in the land will be transferred in the next three decades. This Texas High Plains. These results enable one to deter-turnover in ownership will intensify the capital re- mine the implications of alternative capital structure on quirements of agriculture. In 1970 the average capital the survival/success of farms in the study area and on requirement for a farm with $40,000-$60,000 gross the future structure of agriculture. sales was $412,507 (Hottel and Barry). As in 1970, the Various studies, both surveys and simulations con-question still remains, "How are aspiring young farm- ducted during the 1960s, pointed to the availability of ers going to gain control of enough resources to estab- credit as one of the most limiting factors to young lish a viable operation? " farmers trying to become established (Lu, Home, and As debt-free farmers retire and low equity new en- Tweeten; Epperson and Bell; Thomas and Jenson). trants replace them, the financial structure of the farm Gaining control of a viable farming operation is an old sector will be greatly altered. Machinery accounted for problem. Kaldor and Jetton, in their 1966 survey o