Analysis of Commodity Program Adjustments for U.S. Rice in Stochastic Framework

Eddie C. Chavez and Eric J. Wailes

No 119754, Staff Papers from University of Arkansas, Department of Agricultural Economics and Agribusiness

Abstract: Potential adjustments in U.S. commodity program for rice are evaluated in this paper using stochastic analysis in a global modeling framework. Corresponding threshold and loss-compensatory increases in target price and loan rates are determined with assumed outright and gradual elimination of direct payments. Results show that if direct payments (DP) are eliminated in 2012, a 23% increase in both the target price (TP) and loan rate (LR) triggers counter-cyclical payments (CCP) 80% of the time; and it will take an increase of 48% in TP and LR to generate CCP enough to compensate for the loss in total DP. If DP is gradually removed over 5 years, the trigger and compensatory increases in TP and LR are 41% and 46%, respectively. Furthermore, if DP is eliminated outright and TP maintained, an increase of 71% in LR triggers loan deficiency payments (LDP) 75% of the time; and it will take an increase of 130% in LR to generate enough LDP to recoup the total loss in DP. Under gradual removal of DP, the trigger and compensatory increases in LR are 71% and 92%, respectively.

Keywords: Agricultural and Food Policy; Crop Production/Industries (search for similar items in EconPapers)
Pages: 21
Date: 2012-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uarksp:119754

DOI: 10.22004/ag.econ.119754

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