How Market-Oriented is United States’ Farm Policy?

Abstract

Farm policy in the United States has crucial implications for world agricultural markets as the us is a major producer and exporter of many agricultural commodities. This study analyses the economic effects of various farm programmes, as enacted in various Farm Acts. The analysis shows that most of the domestic farm programmes are geared towards affecting production, directly or indirectly. These include the totally coupled programmes like the non-recourse loan programme, partially coupled programmes like the production flexibility contract payments, and largely decoupled payments like the direct payments and counter-cyclical payments. The coupled programmes have the maximum market-distorting effect because they are linked to current production. Decoupled programmes like ccps reduce revenue variability and the risk faced by the farmers. The combined effect of these programmes is to insulate the us farmer from the market to a large extent and stabilise his returns from farming. In addition, there are commodity-specific programmes like the peanut programme, sugar and sweetener policy, etc, which perhaps make the us farm sector one of the most supported farm sectors in the world. This high level of domestic support has implications for production and export surpluses, and in turn, for the world markets.