Masters Theses

Date of Award


Degree Type


Degree Name

Master of Science


Agricultural Economics

Major Professor

Ben McManus

Committee Members

Luther H. Keller, Robert M. Ray, Clark D. Garland


The general objectives of the study were: (1) to determine the rates of return to equity for a representative farrow-to-finish swine farm when 100 percent equity financed, and (2) to examine the effects different combinations of income streams, interest rates, and owner equity contributions have on the debt servicing capacity of the representative swine farm,

A representative farrow-to-finish swine operation was synthesized after analyzing and comparing data from swine research units at Ames Plantation in west Tennessee along with similar research findings in the southeast.

The representative farm as described for this study had a total of 70 acres. Fifty-three acres of open land were available for pasture cultivation with the remaining 17 acres for buildings, roads and waste disposal systems. The basic farm situation remained the same throughout the study. Labor resource was scheduled to supply the equivalent of 4,576 hours annually. These hours were provided by family members of the operator along with one hired worker. On-farm capital investment contributions were generated both internally and externally. Management was assumed to have the necessary kill and dedication to efficiently operate the representative farm.

As a consequence of determining the loan repayment capacity of the farm, sub-analyses involving herd stabilization, cost and revenue estimates, hog price cycle, and interest rates were developed. The number of animals sold annually, operating expenses, and total on-farm capital investment were held constant throughout the study.

Even though total on-farm investment was the same, for all situations, the proportions of equity contributions to borrowed capital were varied. The levels of equity contributions were 20, 30, 40, and 50 percent of long term capital assets while the corresponding levels of borrowed capital were 80, 70, 60, and 50 percent, respectively.

Three hog price sequences were used instead of a constant level pricing method. This approach was taken to better represent the fluctuation in income usually experienced by swine farmers.

Three levels of interest rates were analyzed to ascertain the impact of interest rate risk on the loan repayment capacity. The types of loans and interest rates analyzed were short and intermediate loans at 9, 12, and 15 percent while the long term loans were 8, 11, and 14 percent, respectively.

Forty-five cash flows involving different combinations of equity contributions, interest rates, and income streams based on the hog farm cycle were analyzed.

From the results of this study, it would appear that current swine producers in Tennessee with relatively debt-free farms are likely to continue their operation in the short-run. Generally, farms which are fully equity financed tend to yield lower rate of returns to equity than farms in leverage situations. The beginning farmers in leverage situation are not expected to show a positive after tax net cash income for accumulation before the fifth year of operation and may extend until the tenth year depending on the income stream and level of interest rates.

Files over 3MB may be slow to open. For best results, right-click and select "save as..."