Commodity Programs

Why do bills get so bloated?

Everything is now common pool decision making leading to everyone chipping in on part of the bill.

How do subsidies work in developed vs developing countries?

1. Agriculture appears to be heavily subsidized

in developed countries where it represents a

small fraction of the population

2. Agriculture appears to be heavily taxed in

developing countries where it represents a

large fraction of the population

WHat is the idea of the “cost of organization” (Logic of Collective Action)

The less consolidated a group is, the harder it is for them to work together to a common goal (Sugar beets vs beef)

What is rent seeking?

actions taken by individuals and

groups to alter public policy for personal

advantage at the expense of other citizen

What is the key to a Monopoly?

limitation on entry. Which is

another way of stopping a buyer from purchasing

elsewhere.

What do even monopolies have to follow?

The demand curve

What is under title 1 of farm bill?

ARC and PLC (Agricultural Risk Coverage
and Price Loss Coverage)

What is under title XI of the farm bill?

Federal Crop Insurance Program

What title is the majority of subsidy coming through now?

Title 9:Crop Insurance

What are some of the basic commodities?

Hogs, Corn, Cotton, Wheat, Milk

What was the first form of indirect production control?

Acreage restriction from AAA act. 

What was the idea of Wickard v. Filburn

The farmer was growing wheat for personal use to feed animals despite being on acreage restricted land. It was ruled you cant do that. 

WHat was the direct control of AAA?

Marketing quotas

What were quotas based on?

At first acreage restrictions, but they moved to lbs allotted.

What did the quota system result in?

A lot of small farms that were not producing efficiently.

What did quotas/base acreage do to land values?

It causes them to rise as they have more access to government programs. 

How do ARC and PLC work?

ARC pays out when farm

revenue is low, while PLC pays out when prices are low. Similar to crop

insurance RP and YP

How is ARC and PLC designated for use?

Farmers can participate in the program if they have base acres

What are base acres?

A farm’s crop-specific historical planted acreage of wheat, feed grains, rice, oilseeds, pulse crops, or peanuts eligible used for FSA program purposes. Base acres do not necessarily align with current plantings (You still get money for other crops on historical base acres). 

What did the old government policy focus on? what was it phased out for?

We use to use price supports via quotas/AR. Now we moved to insurance to appease WTO. 

Why is crop insurance worth it?

Roughly 65% is subsidized by the government and it is provided through private companies. 

Why does the WTO prefer insurance over price supports?

Price supports manipulate the market in a way that is deemed unfair.

How does a forward contract work?

You have a set price you will get no matter yeild or future markets.

How does Insurance on price work?

You have a price floor that you will not fall below no matter market.

How does insurance on yield work?

You have a set floor for yield where you still get paid if you fall too low.

How does insurance on Revenue work?

If the market is too low or your yield is too low, you get money. (top right is blank)

What type of insurance is most common in row?

RP and YP

Why are ARC/PLC different from insurance?

You pay nothing to do either ARC or PLC.

Why an SCO and how is it differnt?

1. You must purchase a base insurance policy to get supplemental coverage options

2. they allow you to go over 80% subsidized

3. they are all county based

WHy use ECO over SCO?

ECO can be purchased with ARC

Why STAX? How did it happen?

You can purchase alone or with yield protection for cotton.

Brazil sued with WTO and made ARC/PLC unviable for cotton. 

PRF?

Amount of rainfall in a given area

LRP?

Protects against livestock prices being too low.