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Whither Dairy Policy? Evaluating Expected Government Outlays and Distributional Impacts of Alternative 2013 Farm Bill Dairy Title Proposals

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  • Newton, John
  • Thraen, Cameron S.
  • Bozic, Marin

Abstract

In 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.

Suggested Citation

  • Newton, John & Thraen, Cameron S. & Bozic, Marin, 2013. "Whither Dairy Policy? Evaluating Expected Government Outlays and Distributional Impacts of Alternative 2013 Farm Bill Dairy Title Proposals," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 153750, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:153750
    DOI: 10.22004/ag.econ.153750
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    8. Bozic, Marin & Newton, John & Thraen, Cameron S. & Gould, Brian W., 2012. "Mean-reversion in Income over Feed Cost Margins:Evidence and Implications for Managing Margin Risk by U.S. Dairy Producers," Staff Papers 132379, University of Minnesota, Department of Applied Economics.
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    Cited by:

    1. John Newton & Cameron S. Thraen & Marin Bozic, 2016. "Evaluating Policy Design Choices for the Margin Protection Program for Dairy Producers: An Expected Indemnity Approach," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 712-730.
    2. Wolf, Christopher & Bozic, Marin & Newton, John & Thraen, Cameron, 2013. "Moove Over: Will New Government-Sponsored Dairy Margin Insurance Crowd Out Private Market Risk Management Tools?," 2013 AAEA: Crop Insurance and the Farm Bill Symposium 156713, Agricultural and Applied Economics Association.
    3. Miller, Maryfrances, 2016. "Regional variation in margin response, participation, and potential federal expenditures under Dairy Margin Protection Program," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230075, Southern Agricultural Economics Association.

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    Keywords

    Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Farm Management; Livestock Production/Industries; Risk and Uncertainty;
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