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U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenue

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  • Lence, Sergio H.
  • Hayes, Dermot J.

Abstract

A dynamic three-commodity rational-expectations storage model is used to compare the impact of the Federal Agricultural Improvement and Reform (FAIR) Act of 1996 with a free-market policy, and with pre-FAIR policies. Results suggest that FAIR did not lead to significant increases in long-run price volatility or revenue volatility. The main impact of pre-FAIR, relative to the free-market regime, was to substitute government storage for private storage in a way that did little to support prices or to stabilize farm incomes. Results also indicate that U.S. grain market volatility in 1995-2000 was due to fundamental market forces and not to FAIR.

Suggested Citation

  • Lence, Sergio H. & Hayes, Dermot J., 2002. "U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenue," Staff General Research Papers Archive 1779, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:1779
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