The Impact of Decoupled Payments on the Cost of Operating Capital

Jaclyn D. Kropp and James B. Whitaker

No 49311, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: We estimate the impact of direct payments under the 2002 Farm Act on the credit terms of farm operators, specifically the interest rate on short-term operating loans. In the analysis, we control for farm financial characteristic, farm operator characteristics, and other factors. Using data from the Agricultural Resource Management Survey (ARMS) for the year 2007, we show that as the proportion of base acres to total operated acres increases, interest rates decline by a small but statistically significant amount. This implies that direct payments lead to lower operating costs through better credit terms. Lower operating costs may in turn allow some farmers to produce on land that would otherwise be unprofitable to operate.

Keywords: Agricultural and Food Policy; Agricultural Finance; International Relations/Trade (search for similar items in EconPapers)
Pages: 23
Date: 2009
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49311

DOI: 10.22004/ag.econ.49311

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