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Potential Farm-Level Effects of Eliminating Direct Payments

Author

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  • 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.

Suggested Citation

  • Ifft, Jennifer & Nickerson, Cynthia J. & Kuethe, Todd H. & You, Chengxia, 2012. "Potential Farm-Level Effects of Eliminating Direct Payments," Economic Information Bulletin 139809, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersib:139809
    DOI: 10.22004/ag.econ.139809
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    References listed on IDEAS

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    Cited by:

    1. Liang, Lu, 2014. "Federal Crop Insurance and Credit Constraints: Theory and Evidence," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169825, Agricultural and Applied Economics Association.
    2. Kuethe, Todd H. & 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, vol. 2013, pages 1-12, June.
    3. Robbins, Michael W. & White, T. Kirk, 2014. "Direct Payments, Cash Rents, Land Values, and the Effects of Imputation in U.S. Farm-level Data," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(3), pages 1-20, December.
    4. Hungerford, Ashley, 2014. "Systemic Risk in Wheat Yields," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169376, Agricultural and Applied Economics Association.
    5. Artiom Volkov & Tomas Balezentis & Mangirdas Morkunas & Dalia Streimikiene, 2019. "Who Benefits from CAP? The Way the Direct Payments System Impacts Socioeconomic Sustainability of Small Farms," Sustainability, MDPI, vol. 11(7), pages 1-17, April.
    6. Burns, Christopher & Key, Nigel & Tulman, Sarah & Borchers, Allison & Weber, Jeremy, 2018. "Farmland Values, Land Ownership, and Returns to Farmland, 2000-2016," Economic Research Report 276249, United States Department of Agriculture, Economic Research Service.

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    Keywords

    Agricultural and Food Policy; Agricultural Finance; Land Economics/Use;
    All these keywords.

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