Has the Market's Estimate of Crop Price Variability Increased since the 1996 Farm Bill?

Carl R. Zulauf and E. Neal Blue

Review of Agricultural Economics, 2003, vol. 25, issue 1, 145-153

Abstract: Following enactment of the 1996 Farm Bill, corn and soybean implied volatilities covering the preharvest and storage seasons increased 16–23% between 1987–1995 and 1997–2001. The increase was statistically significant at the 90% confidence level. Standard deviation of corn and soybean prices derived from the implied volatilities increased 7–25%, but only the increase for preharvest corn was statistically significant. Further muddling the picture is the decline in variability of annual U.S. average corn and soybean cash price. These mixed findings point to continuing disagreement about government's role in managing farm risk in the post-1996 Farm Bill world.

Date: 2003
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