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Abstract

Suggested methods to reduce farm financial stress have included interest rate buy-downs and debt forgiveness. This study develops a method to estimate the proportion of individual farm financial stress attributable to an income problem, a leverage problem, and an interest rate problem. Of the financially stressed farms, 33.5% suffered most from an interest rate problem, and 23.4% suffered most from a leverage problem. A reduction of leverage or interest rate to the level attained by the average nonstressed farms would make 31% and 32% of the stressed farms profitable, respectively. Therefore, in the shortrun, an interest rate buy-down or a debt reduction would be equally effective.

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