Agricultural Policy: High Commodity and Input Prices

By Schmitz, Andrew; Furtan, Hartley et al. | Agricultural and Resource Economics Review, April 2009 | Go to article overview

Agricultural Policy: High Commodity and Input Prices


Schmitz, Andrew, Furtan, Hartley, Schmitz, Troy G., Agricultural and Resource Economics Review


Because of high commodity prices, beginning in 2006, subsidies to farmers in the United States, the European Union, and Canada have been reduced significantly. However, significant losses have been experienced by the red meat sector, along with escalating food prices. Because of rising input costs, the "farm boom" may not be as great as first thought. Ethanol made from corn and country-of-origin labeling cloud the U.S. policy scene. Higher commodity prices have caused some countries to lower tariff and non-tariff barriers, resulting in freer commodity trade worldwide. Policymakers should attempt to make these trade-barrier cuts permanent and should rethink current policy legislation to deal with the possibility of a collapse of world commodity markets. Agricultural commodity prices have dropped significantly since early 2008.

Key Words: agricultural policy, high commodity prices, input prices

For many years, farmers worldwide, including in the United States, the European Union, and Canada, received large direct and indirect farm subsidies. This picture changed dramatically beginning in 2006. Prices for oil, grains, oilseeds, and pulses more than doubled. This paper discusses escalating commodity prices in the context of U.S., European Union, and Canadian agricultural programs and policies. These programs are likely to have little effect on world agriculture unless there is a significant drop in commodity prices. These policies should be redesigned to account for the possibility that prices could once again "hit the tank." Higher commodity prices translate into higher food prices worldwide. This, in turn, has motivated importers to lower tariff and non-tariff barriers. Some argue that high food prices have brought about a freer trade environment than would be possible under trade negotiations alone.

U.S. Farm Legislation

Agricultural commodity and conservation legislation in the United States has roots in the Agricultural Adjustment Act of 1933. Between 1929 and 1932, net cash farm income fell from US$5.2 billion to US$1.4 billion. With the introduction of new stabilization policies, the magnitude of government transfers to U.S. agricultural producers increased from zero dollars in 1933 to US$28 billion in 2000. As a result, U.S. farm income increased from approximately US$1.4 billion in 1932 to approximately US$56 billion in 2000.

The first U.S. farm bill was passed by Congress in 1933. Until 1970, U.S. farm bills dealt mainly with issues such as rural poverty, soil conservation, crop insurance, and farm credit. The 1970 U.S. Farm Bill introduced direct commodity price supports for the first time. Farm bills from 1970 to 1996 introduced a number of measures such as the Conservation Reserve Program (CRP), payment- in-kind (PIK), and the Export Enhancement Program (EEP). The reform act of 1996 introduced dramatic changes such as removing restrictions on acreage set-asides and replacing the target price and deficiency mechanisms with seven annual market transition payments.

There were large farm product surpluses between 1970 and 1996. Commodities such as milk and tree fruits had different programs aimed at raising producer incomes and prices. Marketing orders allowed for price discrimination between markets by setting limits on the quantity sold to the high-value market. These orders allowed producers to receive blended prices, which were higher than the competitive price level. They also allowed producers to control quality by specifying minimum grades and sizes. In addition, checkoffs were available for research and development and for advertising.

Key elements of the 2008 U.S. farm program, like the 2003 program, are the loan rate and target price provisions for grains, upland cotton, and oilseeds. The loan rate for corn remained unchanged, as did the target price. This was also true for rice. For soybeans, the loan rates remained unchanged, but the target price was increased by U. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Agricultural Policy: High Commodity and Input Prices
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.