Proceedings

PR – Potential Cost Of Being Less Trade Distorting On U.S. Crop Farms

The objective of this research is to evaluate impacts of moving to a less trade distorting commodity program. An optimal control stochastic simulation model is teamed with primary representative farm data and a whole farm simulation model to evaluate the impacts of shifting government payments from countercyclical payments (CCPs) to direct payments (DPs) on U.S. crop producers. The actual difference in total government expenditures can be sizable when switching from an uncertain payment dependent on prices that fluctuate to a fixed payment that is paid regardless of prevailing market conditions. Results indicate producers historically experiencing prices high enough to exclude them from receiving substantial CCPs require very little or no increase in DPs to make them as financially viable as before removal of the CCPs. Cotton and rice farms, historically receiving significant levels of CCPs, will require a larger cash outlay in the form of DPs to maintain financial viability.

Keywords: WTO, decoupled payments, trade, simulation model.

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Author(s): Outlaw, J.L., Raulston, J.M., Richardson J.W.

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Organizations(s): Agricultural & Food Policy Center, Texas