What is in this article?:
- Economist authors study on various farm program proposals recently introduced.
- Tables included.
Differences between plans originating in the South versus those from farther north...
“When I look at the ongoing policy discussion, I think it’s important to keep the ‘historical evolutionary time path’ in mind. Midwestern crops – corn, other feed grains, soybeans, wheat, etc. – all began to experience significant price increases around 2005. Thus, they’ve been above the traditional target prices and loan rates for longer than the crops in the South.
“So, Midwestern crop producers have had more experience – more learning, if you will – under a different price and revenue structure. That has colored the debate because they’re looking at the world through different experience. Clearly, higher and more volatile prices are part of the current picture.
“For example, if price is at the loan rate, the program is partly covering your risk of lower prices. That has to impact what type of crop insurance you buy.
“However, when price is above the target prices, the program doesn’t function in a way to help you manage risk. As a result, you’ll look at crop insurance differently.
“I think the South looks at crop insurance differently than the Midwest because they’ve had different experiences. The Midwest has had longer to deal with risk when prices are above the loan and target prices. That has to account for some of the differences – including typically lower levels of insurance coverage in the South – between the two regions.”
“I would like to reiterate that the paper is trying to help readers think about these proposals in a historical perspective. Hopefully it helps tell us about the broad directional shift of farm policy.
“It’s very easy to talk about the specifics of proposals. That’s understandable because that’s what determines the budget.
“But looking at it more broadly, these proposals, as a group, have a lot in common and are substantively different than the traditional farm safety net.”