History Flashcards
How does Ag policy develop over time?
Evolutionary
What factors influence policy’s gradual change?
Changes in values, beliefs, and goals
As its impacts become apparent
How long do policies last?
Usually they last a while with only small revisions.
Have farmers been effective in resisting program changes?
Yes.
Why do farmers resist changes?
1) Changes can be expensive to farm operations
2) Affect farmer wealth (capitalization)
3) Fear of uncertainty
What is the three-legged stool?
Morrill Act
Hatch Act
Smith-Lever Act
What was the Morrill Act of 1862?
Donated lands for agriculture and mechanic universities
What was the Hatch Act of 1887?
Set agricultural research stations in place
What was the Smith-Lever Act of 1914?
Established the Extension system to streamline communication between farmers and USDA
What was the Capper-Volstead Act of 1922?
Gives anti-trust exemption to associations of agricultural producers
Allows farmers to collectively market their products.
When did food assistance programs (SNAP) begin?
1933
When did farm credit programs begin?
- They provided emergency and long term credit
What was the Ag Adjustment Act 1933 (AAA)?
Offered farmers subsidies in exchange for limiting their production of certain crops.
It was intended to limit overproduction so that crop prices could increase.
Coordinated with processors to control prices paid to producers
USDA could spend money to expand markets or remove surpluses
Why is the AAA important?
It is the default for all subsequent Ag policy.
Most of the current policies have their roots in this act.
Which Ag Policy was declared unconstitutional?
Ag Adjustment Act of 1933
When was the Soil Conservation Service established?
1935
What was the unintended consequence of the AAA?
It favored large land owners over sharecroppers
What characteristics made up the “Golden Years” ?
Bad weather Russians bought grain Negative real interest High Parity prices Farm net income and land values increased tremendously
What are parity prices?
They give current commodities the same purchasing power they had through 1910-1914
What is the Farm Problem?
Unstable farm prices which lead to unstable farm income
What factors contribute to the Farm Problem?
- Inelasticity of supply and demand
- Shifts in international demand
- fixity of ag resources
- bad policy
What is a common characteristic of farm bills?
They are usually implemented after the end of the fiscal year
What is the Commodity Credit Corporation CCC?
-USDA’s bank or “credit card”
Are all commodities included in a farm bill?
No.
Which commodity is never included in a farm bill?
Hay
What is a covered commodity?
a crop that gets help
What comprises a bad policy?
Someone doesn’t like the way you’re helping people
What are the Building Blocks for farm payments?
Base Acres
Program Yields
When were base acres and program yields frozen?
1985
What were the implications of the freeze period?
support payments were determined by what had been planted prior to ‘85
farmers had to plant what they had base acres for
program yields were not allowed to increase with technology
What does “planting for the program refer to?
If farmers wanted to receive support payments, they had to plant their base acres, regardless of market demand
Payments were coupled to prices and production
1990 Farm Bill
Coverage Gap- you never get enough help to make up for your loss
Last bill to have individual commodity titles
**Last bill with supply management provisions
What were supply management provision?
If you wanted to get payments, you had to set aside your land. (reducing land in production)
What were the Crop Policy Tools in 1990?
- Target Prices
- Non-recourse loans
- Introduced marketing loan rate
- ARP Programs (set-aside)
- Deficiency payments
What were deficiency payments from the 1990?
Farmer had to plant the program crop to receive payment for that crop
DP = TP - higher of {LR or MP} x [crop base acreage x (1-ARP%)] x farm program yield
What were deficiency payments from the 1990?
Farmer had to plant the program crop to receive payment for that crop
= TP - LR
DP = TP - higher of {LR or MP} x [crop base acreage x (1-ARP%)] x farm program yield
Why does the world not like these policy tools?
Because it makes the world absorb more production and we didn’t have to put the output the in storage
What is the carrot and the stick?
Deficiency payments were associated with the higher target price, so farmers had to set aside land that they didn’t want to
What is a non-recourse loan?
If the borrower defaults on his loan, the lender is entitled to claim any assets which were used as collateral to secure the loan.
Non-recourse favors the borrower in that the lender is prevented from possessing any other assets other than collateral
