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U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenues
Author(s) -
Lence Sergio H.,
Hayes Dermot J.
Publication year - 2002
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/1467-8276.00301
Subject(s) - volatility (finance) , economics , revenue , commodity market , monetary economics , commodity , agriculture , agricultural economics , market economy , financial economics , finance , ecology , biology
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.