IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Loan Deficiency Payments versus Countercyclical Payments: Do We Need Both for a Price Safety Net?

The federal government currently runs two major price support programs in agriculture, the marketing loan and countercyclical payment (CCP) programs. While these programs are both targeted at providing producer price protection, they have different political and financial costs associated with them. We outline these costs and project the effects of various loan rate changes on these programs for eight crops (barley, corn, cotton, oats, rice, sorghum, soybeans, and wheat) for 2005. Loan rate changes affect the price support programs by changing the payment rate producers receive when payments are triggered. We find that the crop's relative price strength versus its loan rate and the relationship between CCP base production and 2005 expected production have the largest influence on how loan rate changes affect outlays from the price support programs for the various crops. Of these crops, cotton is the only one that would be relatively unaffected by loan rate shifts. Corn and soybeans would see the largest declines in overall expenditures from price support programs if loan rates were decreased. Oats and soybeans would experience the largest percentage losses. However, the results also show that the federal government could maintain an agricultural price support structure at a lower cost than it is currently paying. The reduction in cost often comes in situations where the current array of price support programs overcompensates producers for price shortfalls. This shift would also likely find greater acceptance under the World Trade Organization (WTO) agriculture guidelines than would the current structure. For an administration that is looking to rein in deficit spending while at the same time negotiating new WTO guidelines, moving to lower loan rates could be an answer.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Full Text
Download Restriction: no

File URL:
File Function: Online Synopsis
Download Restriction: no

Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 05-bp44.

in new window

Date of creation: Feb 2005
Handle: RePEc:ias:cpaper:05-bp44
Contact details of provider: Postal:
578 Heady Hall, Ames, Iowa 50011-1070

Phone: (515) 294-1183
Fax: (515) 294-6336
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:05-bp44. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.