Whither Dairy Policy? Evaluating Expected Government Outlays and Distributional Impacts of Alternative 2013 Farm Bill Dairy Title Proposals
AbstractIn this analysis we compare the total expected government outlays and distribution of benefits under newly proposed dairy margin insurance programs to those under existing counter-cyclical payment programs. We combine simulation and structural modeling techniques to forecast milk price and dairy income-over-feed-cost margins. Using the price forecasts we employ Monte-Carlo experiments to evaluate the total expected government outlays for a sample of 5000 representative farms given a constant relative risk aversion utility framework. We find that expected outlays favor large farm operations and are an order of magnitude higher than those under existing programs. Under the current policy framework (MILC), farms with less than 100 cows (76% of farms) account for 42% of net payments and farms over 1000 cows (2% of farms) account for 6% of net payments. Under the new policy regime farms with fewer than 100 cows will get 17-21% of net program benefits, and farms over 1000 cows will get 36-43% of benefits.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 153750.
Date of creation: 2013
Date of revision:
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dairy; margin insurance; farm bill; supply-management; dairy security act; dairy freedom act; Gini coefficient; farm payments; Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Farm Management; Livestock Production/Industries; Risk and Uncertainty;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-08-05 (Agricultural Economics)
- NEP-ALL-2013-08-05 (All new papers)
- NEP-FOR-2013-08-05 (Forecasting)
- NEP-IAS-2013-08-05 (Insurance Economics)
- NEP-UPT-2013-08-05 (Utility Models & Prospect Theory)
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