U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenues

Posted: 1 Jun 2002

See all articles by Sergio H. Lence

Sergio H. Lence

Iowa State University - Department of Economics

Dermot J. Hayes

Iowa State University - Center for Agriculture and Rural Development (CARD)

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Abstract

A dynamic three-commodity rational-expectations storage model is used to compare the impact of the Federal Agricultural Improvement and Reform (FAIR) Act of 1996 with a free-market policy, and with pre-FAIR policies. Results suggest that FAIR did not lead to significant increases in long-run price volatility or revenue volatility. The main impact of pre-FAIR, relative to the free-market regime, was to substitute government storage for private storage in a way that did little to support prices or to stabilize farm incomes. Results also indicate that U.S. grain market volatility in 1995-2000 was due to fundamental market forces and not to FAIR.

Suggested Citation

Lence, Sergio H. and Hayes, Dermot James, U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenues. Available at SSRN: https://ssrn.com/abstract=312041

Sergio H. Lence (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States

Dermot James Hayes

Iowa State University - Center for Agriculture and Rural Development (CARD) ( email )

Ames, IA 50011
United States
515-294-6185 (Phone)

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