The 2002 Farm Bill commodity programs: a tool for improving rotation crop profitability and reducing risk in potato cropping systems

John Halloran

Applied Economics Letters, 2006, vol. 13, issue 3, 171-175

Abstract: The Farm Security and Rural Investment Act ('Farm Bill') of 2002 has modified the provisions under Title 1 (Commodity Programs) regarding commodity eligibility. Concurrently, potato producers in Maine have expanded their use of program crops as rotations in potato cropping systems. These changes could affect the economic viability of the potato cropping system. An economic simulation model using budgeting techniques that incorporate stochastic elements to measure risk was developed to evaluate profitability and income risk of four cropping systems with and without participation in the 2002 Farm Bill. The four systems modeled were barley-potato, canola-potato, corn-potato, and soybean-potato. Participation in the 2002 Farm Act's commodity support programs increases the profitability of each cropping system, ranging from $26.00/acre for canola-potato to $122.00/acre for corn-potato. The use of stochastic dominance criteria shows that participation is more risk-efficient than non-participation. Furthermore, two measures of income risk - coefficient of variation and probability of loss - are also reduced with participation. For those growers using program crops in rotation with potatoes, participation in the commodity programs is a valuable tool to improve economic viability and reduce risk.

Date: 2006
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DOI: 10.1080/13504850500393188

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