A Simulation Analysis of Alternative Target Price and Loan Rate Combinations*

Daryll E. Ray, Milton H. Ericksen and James Richardson ()

Journal of Agricultural and Applied Economics, 1975, vol. 7, issue 2, 85-94

Abstract: During the first 4 months of 1975, Congress considered a number of amendments to the Agricultural and Consumer Protection Act of 1973. The amendments were principally directed toward raising loan rates and target prices for major U.S. crops and support rates for dairy. Pressure for raising target prices and loan rates was largely due to substantial increases in input prices occurring since the enactment of the August, 1973 Act. Between July of 1973 and December of 1974, the index of prices paid for production items, interest, taxes and wage rates increased by 22 percent. Farmers and farm leaders expressed fear that high yields, coupled with the full production stance of the Administration,, could throw the crop sector into a cost-price squeeze, depressing farm income. Given these circumstances, proponents of the amendments argued that target prices and loan rates under the Act of 1973 gave farmers inadequate protection from low prices.

Date: 1975
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