Farmer participation in government commodity programs: A multiyear risk management analysis
Monke, James Dale
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https://hdl.handle.net/2142/20162
Description
Title
Farmer participation in government commodity programs: A multiyear risk management analysis
Author(s)
Monke, James Dale
Issue Date
1995
Doctoral Committee Chair(s)
Hauser, Robert J.
Department of Study
Agricultural and Consumer Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Economics, Finance
Political Science, Public Administration
Language
eng
Abstract
Government programs for agricultural commodities affect planting decisions and farm income for many producers. Many proposals to reduce federal expenditures are being considered for reform in the 1995 Farm Bill. In order to determine the effect of these proposals on both farmers and government, the producer's planting and participation behavior must be analyzed. This study determines the value to an individual farmer of participating in government programs in a stochastic, multiyear planning environment. It also determines how producer behavior might change if certain proposals for the 1995 Farm Bill are adopted.
Stochastic elements are important because program participation and crop diversification may be substituted to manage risk. Multiyear planning is important because the ability to collect program benefits depends on dynamic planting decisions. The mathematical model uniquely combines a discrete stochastic program of uncertain ARP parameters and nested MOTAD submodels of intrayear variability. This new approach is the first known empirical study applying both risk- and variability-aversion coefficients in a multiyear model.
Results indicate that government programs are very valuable to producers by both increasing income and reducing risk. Reducing target prices affects a cross section of Illinois farmers more equally than decreasing acres eligible for deficiency payments but penalizes them more to achieve the same effect on the federal budget. Variability aversion is important.
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