U.S. Cotton Subsidies: Drawing a Fine Line on the Degree of Decoupling

Andrew Schmitz, Frederick Rossi and Troy G. Schmitz

Journal of Agricultural and Applied Economics, 2007, vol. 39, issue 1, 135-149

Abstract: The impact of the U.S. cotton policy depends on several interrelated factors: how input subsidies interact with producer price supports, producer price expectations, and the extent to which price supports are decoupled from production. Cotton subsidies have a direct impact on world cotton prices, depending on the extent to which price supports are coupled to production. At one extreme, there is a price impact of 12.4% when producers make decisions at the loan rate, but the average price impact is 20.9% when producers make decisions based on the target price. Results are presented for intermediate cases of decoupling.

Date: 2007
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