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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.

Suggested Citation

  • Westcott, Paul C. & Young, C. Edwin & Price, J. Michael, 2002. "The 2002 Farm Act: Provisions And Implications For Commodity Markets," Agricultural Information Bulletins 33745, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersab:33745
    DOI: 10.22004/ag.econ.33745
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    References listed on IDEAS

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    1. 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.
    2. Jean-Paul Chavas & Matthew T. Holt, 1990. "Acreage Decisions Under Risk: The Case of Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 529-538.
    3. Westcott, Paul C. & Price, J. Michael, 2001. "Analysis Of The U.S. Commodity Loan Program With Marketing Loan Provisions," Agricultural Economic Reports 34035, United States Department of Agriculture, Economic Research Service.
    4. Young, C. Edwin & Westcott, Paul C., 1996. "The 1996 Farm Act Increases Market Orientation," Agricultural Information Bulletins 262100, United States Department of Agriculture, Economic Research Service.
    5. 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.
    6. 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.
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