TITLE:
Production Decoupling under US Farm Programs
AUTHORS:
Charles B. Moss, Andrew Schmitz, Troy G. Schmitz
KEYWORDS:
Decoupling; Loan Rate; Price Suppression; Target Price
JOURNAL NAME:
Natural Resources,
Vol.5 No.1,
January
26,
2014
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.