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Potential Farm-Level Effects of Eliminating Direct Payments

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Author Info

  • Ifft, Jennifer
  • Nickerson, Cynthia J.
  • Kuethe, Todd H.
  • You, Chengxia

Abstract

Since 2003, direct payments have accounted for a signifi cant portion of farm program payments. If direct payments were eliminated, many agricultural producers would be affected, both through the loss of income and potential declines in land values and rental rates. This report considers the potential contribution of direct payments to farm revenues and land values across farm commodities and regions and estimates the magnitude of the financial impact on participating farms should direct payments be eliminated. Direct payments are highest relative to crop revenues in parts of the Northern Plains, Southern Plains, Mountain, Delta, and Southeast regions, and the estimated effect of direct payments on cropland values also is relatively high in many of these regions. Overall, our analysis suggests that an abrupt end to the direct payment program could reduce the number of farms with a favorable financial status (profitable farms having relatively low debt burdens) by about 11,000 nationally, or about 2 percent of farms that received direct payments in 2009. The estimated effect varies regionally and is more pronounced in the Delta and Southeast regions, where direct payments per farm tend to be higher, on average, than elsewhere.

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Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Economic Information Bulletin with number 139809.

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Date of creation: Nov 2012
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Handle: RePEc:ags:uersib:139809

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Related research

Keywords: direct payments; farm policy; farmland values; Agricultural and Food Policy; Agricultural Finance; Land Economics/Use;

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References

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  1. Jean-Paul Chavas & Alban Thomas, 1999. "A Dynamic Analysis of Land Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 772-784.
  2. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers 11093, Iowa State University, Department of Economics.
  3. Kirwan, Barrett E., 2008. "The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates," Working Papers 42714, University of Maryland, Department of Agricultural and Resource Economics.
  4. Barry K. Goodwin & Ashok K. Mishra & Fran�ois N. Ortalo-Magné, 2003. "What's Wrong with Our Models of Agricultural Land Values?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 744-752.
  5. Alston, Julian M. & James, Jennifer S., 2002. "The incidence of agricultural policy," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 33, pages 1689-1749 Elsevier.
  6. Laure Latruffe & Chantal Le Mou�l, 2009. "Capitalization Of Government Support In Agricultural Land Prices: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 659-691, 09.
  7. Charles B. Moss & Ani L. Katchova, 2005. "Farmland valuation and asset performance," Agricultural Finance Review, Emerald Group Publishing, vol. 65(2), pages 119-130, July.
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Cited by:
  1. Kuethe, Todd & Walsh, Nicholas & Ifft, Jennifer, 2013. "Farmland versus Alternative Investments Before and After the 2008 Financial Crisis," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.

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