INCOME AND DEBT COMPONENTS OF FARM FINANCIAL STRESS: A NATAL EXAMPLE.

This study allocates farm financial stress into an income problem and a debt problem (leverage and interest rate) for a selected sample of Natal farms. This is done by comparing leverage and interest rates for farms experiencing financial stress (negative rate of return to equity) with a target leverage ratio and interest rate for those farms which are financially successful (positive rate of return to equity). The results show that some 65.4% of financial stress, for sample farms, is due to an income problem, 25.6% to leverage and 9.0% to an interest rate problem. Policies which alleviate the income problem will therefore be the most effective for these farms