Production Decoupling under US Farm Programs

Charles B. Moss, Andrew Schmitz, Troy G. Schmitz

Food and Resource Economics, IFAS, University of Florida, Gainesville, USA.
Morrison School of Agribusiness and Resource Management, Arizona State University, Mesa, USA.

DOI: 10.4236/nr.2014.51003                

Abstract

The loan rate and target price are key ingredients in US farm policy. Empirical models of the effect of US agricultural policy are based on different degrees of decoupling between price supports and production. Theoretically, rational producers will make decisions based on the loan rate rather than the target price. Therefore, models which are estimated based on a target price specification could significantly overestimate the distortionary impact of policy on resource use and production.

Keywords

Decoupling; Loan Rate; Price Suppression; Target Price

Conflicts of Interest

The authors declare no conflicts of interest.

References

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