IMPLICATIONS OF THE 2002 U.S. FARM ACT FOR WORLD AGRICULTURE

Abstract

The purpose of this paper is to discuss the implications of the Farm Security and Rural Investment Act (FSRIA) of 2002 for U.S. agriculture and its subsequent impact on world agricultural prices and world trade. In order to effectively illustrate the implications of the 2002 Act it is important to consider it in the context of the changes already made in previous farm acts. As the paper develops, many of the changes in U.S. cropping patterns were already captured by the policy changes occurring under the 1996 Federal Agricultural Improvement and Reform (FAIR) Act. The estimated impact of the 2002 Act on commodity production is minimal and, therefore, estimated price changes are relatively small. In the conclusions is a discussion on how trends in U.S. farm policy tend to reflect international agricultural policy, an important observation as World Trade Organization (WTO) negotiations are anticipated. Policy changes in the 2002 Act are discussed in detail followed by a description of how the policy instruments are incorporated in the Food and Agricultural Policy Research Institute’s (FAPRI) U.S. crops model. Implications of the policy changes for the 2002 Act are discussed relative to a continuation of the FAIR Act. A brief review of the possible implications for longer-term trade, production, consumption, and prices are also included. Finally, some observations are included that trace the evolution of U.S. farm programs, especially the trend toward designs in the European Union.