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Financial Impacts of Government Support Price Programs

Author

Listed:
  • Michael Boehlje
  • Steven Griffin

Abstract

Recent proposals to index government support prices based on the cost of production will have significant differential impacts on farms with different size and financial characteristics. Simulation analyses indicate that since such proposals result in both increased income and decreased risk and thus capitalization rates, land values could increase dramatically with the larger, high-equity operator best able to pay the higher price for additional land. Furthermore, the guaranteed cash flow from such a program enables the higher equity firm to grow more rapidly in terms of net worth and land ownership as well as exhibit higher levels of family living compared to smaller, highly leveraged firms.

Suggested Citation

  • Michael Boehlje & Steven Griffin, 1979. "Financial Impacts of Government Support Price Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(2), pages 285-296.
    • Handle: RePEc:oup:ajagec:v:61:y:1979:i:2:p:285-296.
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    Citations

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    Cited by:

    1. Holt, Matthew T., 1989. "Risk, Rational Expectations, and Price Stabilization in the U.S. Corn Market," Staff Papers 200480, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    2. El-Osta, Hisham S. & Mishra, Ashok K., 2005. "Dimensions of Wealth Dispersion Among Farm Operator Households: An Assessment of the Impact of Farm Subsidies," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 187-208, April.
    3. Stam, Jerome M., 1995. "Credit as a Factor Influencing Farmland Values," Staff Reports 278779, United States Department of Agriculture, Economic Research Service.
    4. Jeon, Jong-Pyeong, 1989. "The impacts of policy alternatives and foreign demand fluctuations on the US rice market," ISU General Staff Papers 1989010108000010204, Iowa State University, Department of Economics.
    5. Ahrendsen, Bruce L. & Collender, Robert N., 1989. "Leverage Decisions In The Presence Of Bankruptcy Laws," Department of Economics and Business - Archive 259451, North Carolina State University, Department of Economics.
    6. Tabesh, Hamid, 1987. "Hedging price risk to soybean producers with futures and options: a case study," ISU General Staff Papers 1987010108000010306, Iowa State University, Department of Economics.
    7. Gary L. Helms & DeeVon Bailey & Terrence F. Glover, 1987. "Government Programs and Adoption of Conservation Tillage Practices on Nonirrigated Wheat Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 786-795.
    8. G. F. Ortmann, 1987. "Land Rents and Production Costs in the South African Sugar Industry," South African Journal of Economics, Economic Society of South Africa, vol. 55(3), pages 163-169, September.
    9. Offutt, Susan & Shoemaker, Robbin, 1989. "Distribution of Domestic Policy Benefits and the Willingness to Support Trade Liberalization," 1989 Occasional Paper Series No. 5 197669, International Association of Agricultural Economists.
    10. Setia, Parveen & Childs, Nathan & Wailes, Eric & Livezey, Janet, 1994. "The U.S. Rice Industry," Agricultural Economic Reports 305473, United States Department of Agriculture, Economic Research Service.
    11. Kramer, Randall A. & Pope, Rulon D., 1980. "The Benefits And Costs Of Participation In Farm Commodity Programs: A Stochastic Dominance Analysis," Working Papers 225685, University of California, Davis, Department of Agricultural and Resource Economics.
    12. Hughes, Dean W. & Penson Jr., John B. & Bednarz, Curtis R., 1984. "Subsidized Credit And Investment In Agriculture: The Special Case Of Farm Real Estate," 1984 Annual Meeting, August 5-8, Ithaca, New York 279062, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Langley, James A. & Price, J. Michael, 1985. "Implications of Alternative Moving Average Loan Rates," Agricultural Economic Reports 307994, United States Department of Agriculture, Economic Research Service.
    14. C. Arden Pope III & H. L. Goodwin, 1984. "Impacts of Consumptive Demand on Rural Land Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(5), pages 750-754.
    15. Richardson, James W. & Smith, Edward G. & Knutson, Ronald D., 1988. "Who Benefits From Farm Programs: Size And Structure Issues?," 1988 Conference, January 16-19, San Antonio, Texas 260102, Regional Research Committe NC-181: Determinants of Farm Size and Structure.
    16. Moore, Kevin Clare, 1985. "Predictive econometric modeling of the United States farmland market: an empirical test of the rational expectations hypothesis," ISU General Staff Papers 198501010800008872, Iowa State University, Department of Economics.
    17. Shaik, Saleem & Atwood, Joseph A. & Helmers, Glenn A., 2012. "Did 1933 new deal legislation contribute to farm real estate values: A regional analysis," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 801-816.
    18. Richardson, James W. & Smith, Edward G. & Knutson, Ronald D., 1988. "Who Benefits from Farm Programs: Size and Structure Issues?," Staff Reports 257911, Texas A&M University, Agricultural and Food Policy Center.
    19. Davis, Neal & Hanson, Gregory D. & Kinnucan, Henry, 1986. "Taxation And Agriculture: An Annotated Bibliography Of Selected Journals," Staff Reports 277841, United States Department of Agriculture, Economic Research Service.
    20. Baum, Kenneth & Harrington, David, 1983. "Research, Risk And Agricultural Policy: Some Suggestions From Within The Fire," 1983: S-180 Annual Meeting, March 28-30, 1983, San Antonio, Texas 271581, Regional Research Projects > S-180: Risk Management Strategies for Agricultural Production Firms: Perspectives and Research Issues.
    21. Shaik, Saleem, 2007. "Farm Programs And Land Values In Mountain States: Alternative Panel Estimators," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 10256, Western Agricultural Economics Association.
    22. Williams, J., 2013. "Wheat and corn price skewness and volatility: Risk management implications for farmers and end users," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 21, pages 1-20.

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