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Analysis Of The U.S. Commodity Loan Program With Marketing Loan Provisions

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

Abstract

Over the next several years, crop prices are projected to be below to slightly above commodity loan rates. As a result, marketing loan benefits to farmers, in the form of loan deficiency payments and marketing loan gains from the commodity loan program, are likely to continue to be sizeable. The level of realized per-unit revenues facilitated by marketing loans exceeds commodity loan rates, thereby raising expected net returns to farmers. Model simulations show that the loan program can raise total acreage planted to major field crops, generally increasing levels of domestic use and exports while lowering crop prices. Cross-commodity effects of supply response to relative returns (including marketing loan benefits), however, result in acreage shifts among competing crops, which can lead to reductions in plantings of some crops in some years. Most impacts occur in the years when there are marketing loan benefits, with little effect in subsequent years when prices rise high enough to eliminate marketing loan benefits. The livestock sector benefits from these outcomes because of generally lower feed costs.

Suggested Citation

  • 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.
  • Handle: RePEc:ags:uerser:34035
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    File URL: http://purl.umn.edu/34035
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    References listed on IDEAS

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    1. Westcott, Paul C. & Hoffman, Linwood A., 1999. "Price Determination for Corn and Wheat: The Role of Market Factors and Government Programs," Technical Bulletins 33581, United States Department of Agriculture, Economic Research Service.
    2. Salathe, Larry E. & Price, J. Michael & Gadson, Kenneth E., 1982. "The Food and Agricultural Policy Simulator," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 2.
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    Cited by:

    1. Nadolnyak, Denis A. & Fletcher, Stanley M. & Revoredo-Giha, Cesar, 2005. "Can Rank-Order Tournaments Improve Efficiency of Quality Differentiated Crop Markets Under Marketing Loan Program Operation? The Case of U.S. Peanuts," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24703, European Association of Agricultural Economists.
    2. 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.
    3. Brandão, Antônio Salazar P. & Lima, Elcyon Caiado Rocha, 2006. "Impacts of the U.S. subsidy to soybeans on World prices, production and exports," Brazilian Journal of Rural Economy and Sociology (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 44(4), December.
    4. Ruben N. Lubowski & Andrew J. Plantinga & Robert N. Stavins, 2008. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," Land Economics, University of Wisconsin Press, vol. 84(4), pages 529-550.
    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. Barry Goodwin & Randy Schnepf & Erik Dohlman, 2005. "Modelling soybean prices in a changing policy environment," Applied Economics, Taylor & Francis Journals, vol. 37(3), pages 253-263.
    7. Gardner, Bruce L., 2002. "North American Agricultural Policies And Effects On Western Hemisphere Markets Since 1995, With A Focus On Grains And Oilseeds," Working Papers 28602, University of Maryland, Department of Agricultural and Resource Economics.
    8. Gardner, Bruce L., 2002. "U.S./Canadian Agricultural Policies And Effects On Western Hemisphere Markets Since 1995, With A Focus On Grains And Oilseeds," Working Papers 28577, University of Maryland, Department of Agricultural and Resource Economics.
    9. 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.
    10. Timothy E. Josling & Stefan Tangermann, 2015. "Transatlantic Food and Agricultural Trade Policy," Books, Edward Elgar Publishing, number 15889.
    11. Luther Tweeten & Carl Zulauf, 2008. "Farm price and income policy: lessons from history," Agribusiness, John Wiley & Sons, Ltd., vol. 24(2), pages 145-160.
    12. Westcott, Paul C. & Meyer, Leslie A., 2003. "U.S. Cotton Supply Response Under The 2002 Farm Act," Agricultural Outlook Forum 2003 33171, United States Department of Agriculture, Agricultural Outlook Forum.
    13. Nadolnyak, Denis A. & Fletcher, Stanley M., 2006. "Quality Premiums and the Post-Harvest Spot Market Thinness: The Case of U.S. Peanuts," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25274, International Association of Agricultural Economists.
    14. Cai, Ruohong & Bergstrom, John C. & Mullen, Jeffrey D. & Wetzstein, Michael E., 2011. "Assessing the Effects of Climate Change on Farm Production and Profitability: Dynamic Simulation Approach," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103420, Agricultural and Applied Economics Association.
    15. Revoredo-Giha, Cesar & Fletcher, Stanley M., 2003. "Does The Existence Of Market Power Affect Marketing Loan Programs?," 2003 Annual meeting, July 27-30, Montreal, Canada 22241, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Gardner, Bruce L., 2008. "Distortions to Agricultural Incentives in the United States and Canada," Agricultural Distortions Working Paper 48573, World Bank.
    17. MacDonald, Stephen & Meyer, Leslie A. & Somwaru, Agapi, 2003. "Perspectives On Cotton Global Trade Reforms," 2003 Annual meeting, July 27-30, Montreal, Canada 21902, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Young, C. Edwin & Skully, David W. & Westcott, Paul C. & Hoffman, Linwood A., 2005. "Economic Analysis of Base Acre and Payment Yield Designations Under the 2002 U.S. Farm Act," Economic Research Report 33594, United States Department of Agriculture, Economic Research Service.
    19. Westcott, Paul C., 2003. "Perspectives On Impacts Of The 2002 U.S. Farm Act," Farm Policy Development and Policy Tensions under NAFTA; Proceedings of the 9th Agricultural and Food Policy Systems Information Workshop - 2003 16816, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

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