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The 2002 Farm Act: Provisions And Implications For Commodity Markets

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  • Westcott, Paul C.
  • Young, C. Edwin
  • Price, J. Michael

Abstract

The Farm Security and Rural Investment Act of 2002 (2002 Farm Act), which governs agricultural programs through 2007, was signed into law in May 2002. This report presents an initial evaluation of the new legislation's effects on agricultural commodity markets, based on sectorwide model simulations under alternative policy assumptions. The analysis shows that loan rate changes under the marketing assistance loan program of the 2002 Farm Act initially result in an increase in total planted acreage of eight major program crops. This increase in plantings, however, is relatively small (less than 1 percent), partly due to the inelasticity of acreage response in the sector. In the longer run, the simulations indicate that overall plantings of the eight program crops studied are lower under the 2002 Farm Act than under a continuation of the 1996 Farm Act. This result mostly reflects larger enrollment in the Conservation Reserve Program and increased plantings of dry peas and lentils, although planted acreage for the eight program crops is reduced by less than 0.6 percent. The effects of the 2002 Farm Act on the livestock sector and retail food prices are relatively small. Farm income is increased, mostly due to higher government payments to the sector under the new law.

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Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Agricultural Information Bulletins with number 33745.

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Date of creation: 2002
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Handle: RePEc:ags:uersab:33745

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Keywords: Farm legislation; 2002 Farm Act; agricultural programs; commodity programs; marketing loans; counter-cyclical payments; direct payments; planting flexibility; base acres; payment yields; farm income; risk management; FAPSIM; Agricultural and Food Policy;

References

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  1. C. Edwin Young & Paul C. Westcott, 2000. "How Decoupled Is U.S. Agricultural Support for Major Crops?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 762-767.
  2. Torre Ugarte, Daniel de la & Sanford, Scott & Skinner, Robert A. & Westcott, Paul C. & Lin, William W., 2000. "Supply Response Under The 1996 Farm Act And Implications For The U.S. Field Crops Sector," Technical Bulletins 33568, United States Department of Agriculture, Economic Research Service.
  3. Westcott, Paul C. & Price, J. Michael, 2001. "Analysis Of The U.S. Commodity Loan Program With Marketing Loan Provisions," Agricultural Economics Reports 34035, United States Department of Agriculture, Economic Research Service.
  4. Orden, David & Paarlberg, Robert & Roe, Terry, 1999. "Policy Reform in American Agriculture," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226632643, April.
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Cited by:
  1. Antimiani, Alessandro & Conforti, Piero & Salvatici, Luca, 2005. "Alternative Market Access Scenarios in the Agriculture Trade Negotiations of the Doha Round," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 6(2).
  2. Johnson, D. Demcey & Krissoff, Barry & Young, C. Edwin & Hoffman, Linwood A. & Lucier, Gary & Breneman, Vincent E., 2006. "Eliminating Fruit and Vegetable Planting Restrictions: How Would Markets Be Affected?," Economic Research Report 7249, United States Department of Agriculture, Economic Research Service.
  3. Robert N. Stavins & Ruben N. Lubowski & Andrew J. Plantinga, 2008. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," Working Papers 2008.83, Fondazione Eni Enrico Mattei.
  4. Yang Zou & Qingbin Wang, 2012. "Impacts of direct government payments on US agriculture: evidence from 1960-2010 data," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(2), pages 188-199, May.
  5. Hoffman, Linwood A. & Young, C. Edwin & Westcott, Paul C. & Childs, Nathan W., 2003. "Domestic Support for the U.S. Rice Sector and the WTO: Implications of the 2002 Farm Act," 2003 Annual meeting, July 27-30, Montreal, Canada 21929, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Ahearn, Mary Clare & Collender, Robert N. & Diao, Xinshen & Harrington, David H. & Hoppe, Robert A. & Korb, Penelope J. & Makki, Shiva S. & Morehart, Mitchell J. & Roberts, Michael J. & Roe, Terry L. , 2004. "Decoupled Payments In A Changing Policy Setting," Agricultural Economics Reports 33981, United States Department of Agriculture, Economic Research Service.
  7. Beckman, Jayson F. & Wailes, Eric J., 2005. "The supply response of U.S. rice: how decoupled are income payments?," 2005 Annual meeting, July 24-27, Providence, RI 19247, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Xia, Doris Yan, 2005. "Impacts of Multi-Fiber Arrangement Removal on Global Textile and Cotton Trade," 2005 Annual meeting, July 24-27, Providence, RI 19453, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Taheripour, Farzad & Khanna, Madhu & Nelson, Charles, 2005. "Welfare Impacts of Alternative Public Policies for Environmental Protection in Agriculture in an Open Economy: A General Equilibrium Framework," 2005 Annual meeting, July 24-27, Providence, RI 19317, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Johansson, Robert C. & Livingston, Michael J. & Westra, John V. & Guidry, Kurt M., 2006. "Simulating the U.S. Impacts of Alternative Asian Soybean Rust Treatment Regimes," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
  11. Capps, Oral, Jr. & Williams, Gary W., 2006. "The Economic Effectiveness of the Cotton Checkoff Program," Reports 90753, Texas A&M University, Agribusiness, Food, and Consumer Economics Research Center.
  12. Orden, David, 2005. "Can U.S. Farm Subsidies Be Bought Out?," 2005 Annual meeting, July 24-27, Providence, RI 19233, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Shogren, Jason F. & Dohlman, Erik & Chambers, William, 2003. "Behavioral Implications Of Counter-Cyclical Payments And Base Acreage Updating Under The 2002 Farm Act," 2003 Annual meeting, July 27-30, Montreal, Canada 21937, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  14. Johansson, Robert C. & Cooper, Joseph C. & Vasavada, Utpal, 2005. "Greener Acres or Greener Waters? Potential U.S. Impacts of Agricultural Trade Liberalization," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 34(1), April.
  15. Alston, Julian M. & Sumner, Daniel A. & Vosti, Stephen A., 2005. "The Effects of Agricultural Research and Farm Subsidy Policies on Human Nutrition and Obesity," 2005 Annual meeting, July 24-27, Providence, RI 19196, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  16. Whitaker, James B. & Effland, Anne, 2009. "Income Stabilization Through Government Payments: How Is Farm Household Consumption Affected?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(1), April.
  17. Robert C. Johansson & Lisa Mancino & Joseph Cooper, 2006. "The big picture: Obesity, consumption, and food production," Agribusiness, John Wiley & Sons, Ltd., vol. 22(4), pages 491-503.
  18. Elanor Starmer, Aimee Witteman and Timothy A. Wise, . "06-03 "Feeding the Factory Farm: Implicit Subsidies to the Broiler Chicken Industry"," GDAE Working Papers 06-03, GDAE, Tufts University.
  19. Allan Drazen & Nuno Limão, 2004. "Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution," NBER Working Papers 10375, National Bureau of Economic Research, Inc.
  20. Cabanilla, Liborio S., 2006. "Agricultural Trade Between the Philippines and the US: Status, Issues and Prospects," Discussion Papers DP 2006-05, Philippine Institute for Development Studies.
  21. Drazen, Allan & Limão, Nuno, 2003. "Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution Policies," CEPR Discussion Papers 4007, C.E.P.R. Discussion Papers.

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