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We show that the U.S. agricultural price support system, and certain other government insurance programs, can be interpreted as the provision of a random number of put options to program beneficiaries. Because the number of puts being supplied is random, the value of the guarantees is no longer given by the standard Black-Scholes put option formula. This paper uses the contingent-claims methodology of modern finance theory to derive an appropriate valuation formula for such programs. We estimate the value to farmers of agricultural price supports for several commodities covered by the U.S. agricultural price support system. Our results indicate that the current system raises the ex ante value of some crops by as much as 9 percent. The method of valuation is applicable to other forms of government guarantees, as well, such as exchange rate insurance and export subsidy guarantees. [ABSTRACT FROM AUTHOR]

Purpose - The purpose of this paper is to develop a modelling approach that enables the analysis of long-term food security policies. Specifically, the authors explore the effect of China's agricultural domestic support on its agricultural and food market by also considering the impact of incomplete price transmission. Design/methodology/approach - The authors extend the standard Global Trade Analysis Project (GTAP) modelling framework. First, the authors incorporate incomplete price transmission into the GTAP model by generating tariff-equivalent price transmission elasticities. Second, the authors improve the current representation of China's agricultural domestic support in the GTAP model and the underlying database by considering the production requirements and the trade-distorting effect of different policy instruments. Running a set of simulations, the authors examine first how the incorporation of incomplete price transmission affects the model's results and second how increased agricultural domestic support affects China's agricultural and food market accounting for incomplete price transmission. Findings - Considering incomplete price transmission mitigates the domestic price increases as responses to high international agricultural prices, which also lead to an increase in China's trade deficit and prohibits net food sellers from receiving high prices. In the long term, an increase in China's agricultural domestic support to its World Trade Organisation de minimis commitment level would increase domestic agricultural production and reduce its demand pressure on the international market. Originality/value - This paper contributes to the literature by examining the impact of increased agricultural domestic support on the domestic market while innovatively accounting for incomplete food price transmission. The authors combine econometric estimated price transmission elasticities and an extended GTAP framework to underscore the importance of enhancing the model's ability in accounting for incomplete price transmission when analysing the impact of agricultural policies. [ABSTRACT FROM AUTHOR]

The article addresses the tension in U.S.-China agricultural trade caused by Chinese agricultural support policies. It investigates the 2016 U.S. complaint that China's domestic support for wheat, rice and corn exceeded its World Trade Organization (WTO) commitments. Also discussed is the relation of the measurement of China's domestic support to the price gap between domestic and international prices.

The article provides information on China's agricultural support policies since its accession to the World Trade Organization (WTO). It explores some of the challenges due to the implementation of new agricultural policies in China and their impact on U.S. exports. The increasing gap between Chinese domestic and international prices is discussed, as well as the country's growing commodity stockpiles and its policies to address the issues.

Purpose China has shifted its agricultural policy from tax agriculture to support it. The purpose of this paper is to examine the agricultural policy changes of China in recent years, focussing on the support policy. China supports its agriculture sector through tax elimination, area payment and input subsidy. In this paper, the author intends to evaluate China’s agricultural support policy effect with a modified policy evaluation model (PEM).Design/methodology/approach The author modifies PEM used by OECD to estimate the effects of these support policies on production and farmer’s income.Findings The main findings are input subsidy policy has more effect than area payment policy in general; input subsidy policy has more effects on production while area payment has more effects on farmer’s income; and the sensitivity analysis further indicates that input subsidy policy has more influence than area payment as regarding production impact ratio, while area payment has more influence on income impact ratios.Practical implications Based on these findings, when it comes to the support policy in terms of area payment and input subsidies only, the author puts forward the following policy implications: to increase input subsidy in budgets and expand the covering scope, and to continue implementing area payment policy with more budgets. However, support policies playing an important role in improving production efficiency and marketing support should be given priority.Originality/value The main contributions of this paper are modifying the OECD PEM to China’s conditions; and quantifying China’s agricultural policy effects. [ABSTRACT FROM AUTHOR]

Many empirical models make assumptions about the primacy of domestic politics that fail to accommodate new trends in supranational policy making. Scholars now acknowledge that national political decisions often depend on other countries, international institutions, or global economic conditions. More interestingly, many sovereign countries have either lost or purposely delegated away policy autonomy to supranational institutions. For example, fixed exchange rates, regional trade agreements, and transnational regulations create the distinct possibility that domestic politics no longer provide a sufficient explanation for many policy outcomes. In some respects, two types of countries now exist: those that retain decision- making authority over a given policy space and those that do not. Combining both types of countries into a larger cross-national sample may generate flawed substantive results and fails to adequately test hypotheses. I use the example of European Union (EU) governance over trade policy to demonstrate the empirical dangers of disregarding differences in policy autonomy among countries. [ABSTRACT FROM AUTHOR]

Policy makers in the United States often justify agricultural subsidies by stressing that agriculture is the engine of the rural economy. We use the increase in crop prices in the late 2000s to estimate the marginal effect of increased agricultural revenues on local economies in the U.S. Heartland. We find that $1 more in crop revenue generated 64¢ in personal income, with most going to farm proprietors and workers (59%) or nonfarmers who own farm assets (36%). The evidence suggests a weak link between revenues and nonfarm income or employment, or on population. Cuts to agricultural subsidies are therefore likely to have little effect on the broader rural economy in regions like the Heartland. [ABSTRACT FROM AUTHOR]

The article discusses the behavior of American politicians when considering federal crop insurance programs. Topics discussed include the amount of administrative and operating subsidies and underwriting gains received by private insurance firms between 2005 and 2009, the average U.S. subsidy per acre between 1999 and 2005, and the conditionality of insurance on price levels.

An introduction is presented in which the editor discusses various reports within the issue on topics including welfare effects of Price Loss Coverage, Agricultural Risk Coverage, and the Supplemental Coverage Option, the negligible welfare impact of the international food aid provisions in the 2014 U.S. Farm Bill, and the research title of the said bill.

Over the forty years since Ireland's accession to the European Economic Community, the Common Agricultural Policy (CAP) has undergone a series of incremental reforms, transforming the policy from one of simple price support to a complex policy package. The evolution of the policy and its impact on Irish farming over the past four decades are reviewed in this article, drawing heavily on Teagasc National Farm Survey data to chart the performance of the Irish agricultural sector over the period. The role of the CAP and its impact on agricultural productivity, trade, prices and farm income are specifically considered. The continued reform of the policy in the context of the sustainable intensification of Irish agriculture is also discussed. [ABSTRACT FROM AUTHOR]

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Purpose – This paper aims to develop a market-driven mechanism for commodity price insurance in developing countries lacking access to futures markets or other forms of hedging products. Design/methodology/approach – The model incorporates futures, exchange rate and local basis risk under the Black-Scholes framework to develop quanto (quantity adjusting option). When the domestic price of a commodity in a developing country is strongly correlated to the price in a futures market, price support premiums can be estimated. The authors use daily corn futures prices, exchange rate MXP/USD, and prices of corn and sorghum at several locations in Mexico. Findings – The authors calculated the price insurance premium at various local markets in Mexico for corn and sorghum. The results are consistent with those for the USA, showing that relative price premiums are similar. Research limitations/implications – The results provide a benchmark to estimate the net welfare effects of government programs for agricultural price support. Practical implications – The model shows that privately provided agricultural price insurance is feasible under certain conditions for developing countries without an established futures market. Originality/value – This paper provides market-based agricultural options in Mexico which contributes to the existing government price support program. [ABSTRACT FROM AUTHOR]

Abstract: The paper investigates the effects of the entry price scheme (EPS) for a specific sector of agriculture: fresh fruit and vegetables. The analysis is conducted on the EU prices of tomatoes, lemons and apples for some of the main competing countries on the EU domestic markets: Morocco, Argentina, Turkey and China. The econometric analysis is based on testing and estimating a switching vector autoregressive model with endogenous threshold entry price level. The model shows the isolation effects and the accumulation of Standard Import Values (SIVs) above the trigger entry price. This paper contributes to clarify the role played by the EPS in avoiding or deterring low priced imports from main EU partner countries. [Copyright &y& Elsevier]

The article addresses why crop insurance has taken on a primary position among farm support programs and examines alternative paths that crop insurance could take in the future, including some ways it could assume an even larger role in the U.S. Topics discussed include the ascendancy of crop insurance, farm program characteristics and future farm safety net programs.

The author discusses the U.S. Farm Bill. He talks on the history of the U.S. farm subsidy, mismanagement at the loss of taxpayers, and the positive and negative impact of the agricultural subsidies. He discusses the Agricultural Adjustment Act of 1933 passed by the U.S. Congress to help stabilize agricultural prices, keep food affordable, and make the American farming to be the most productive worldwide. He adds that farm subsidies cause more harm than good.

A study of distortions to agricultural incentives in 18 developing countries from 1960–84, by Krueger, Schiff, and Valdés (1988; 1991), found that policies in most of those developing countries were directly or indirectly harming their farmers. Since the mid-1980s, there has been a substantial amount of policy reform and opening up of many developing countries. Indicators of that progress have been made available recently by a new study that has compiled estimates for a much larger sample of developing countries, and for as many years as possible since 1955. The new study also covers Europe's transition economies and comparable estimates for high-income countries, thereby covering more than 90% of world agricultural output and employment. This article summarizes the methodology used in the new study, compares a synopsis of the indicators from Krueger, Schiff, and Valdés and the new study for the period to 1984, summarizes the changing extent of price distortions across countries and commodities globally since then, and concludes by evaluating the degree of distortion reduction over the years since 1984 compared with how much still remains, according to the results of a global economy wide model. [ABSTRACT FROM PUBLISHER]

This article shows the convenience of combining the Country-Product- Dummy (CPD) model and the Theil-Goldberger (TG) mixed estimator to obtain better estimates of missing prices than those obtained by marginal mean imputation. We use the TG estimator to combine aggregate price data for regions of Ecuador with producer-level data (the sample data) to fill-in the missing price observations. Our results show better price estimates for predicting missing data than estimates obtained from using the CPD model on the sample data only. Through this approach, missing data can be replaced with economically meaningful data. [ABSTRACT FROM AUTHOR]

Farm households are economic agents whose income is derived from farm, off-farm, and government sources. This article uses farm-level data from the Agricultural Resource Management Survey (ARMS) and recent advances in the econometric theory of dynamic pseudo-panels to show that farm households consume various sources of income differently at the margin. Particular attention is given to a specific type of lump-sum government transfer payment intended to be decoupled from (independent of) farm production decisions. The results suggest that relatively decoupled government subsidies have a greater marginal effect on farm household consumption than subsidies that are tied to market conditions. [ABSTRACT FROM AUTHOR]

This article discusses the economic aspects of free trade when examined with general equilibrium models. This assessment, which questions the assumptions used in the computer modeling of global trade by the Global Trade Analysis Project and the World Bank LINKAGE project, suggests that the limited benefits of free trade for developing countries might be limiting its appeal. The economic impacts of different approaches to trade liberalization including the removal of agricultural price supports and export subsidies are projected. These estimates are applied to the economic conditions relating to the current state of the Doha Round of negotiations sponsored by the World Trade Organization.

Agricultural Trade Liberalization is one of the most complex issues in International Trade. Regarding the aforesaid, the World Trade Organization (WTO) legal framework has developed the Agreement on Agriculture (AoA) as the specific treaty that governs agricultural subsidies. This agreement specifically addresses the structure of an agricultural subsidy, but it does not develop any kind of rule that would allow Member States to challenge a specific agricultural subsidy depending on its trade distortion effects. This paper will focus on the fact that agricultural subsidies may be challengeable and controlled depending on their trade-distorting effects through the application of the Subsidies and Countervailing Measures Agreement (SCM) to agricultural subsidies. Accordingly, WTO judicial bodies -Panels and the Appellate Body- have the instruments to examine and review agricultural subsidies through its trade-distorting effects by the cumulative application of both the SCM and the AoA. [ABSTRACT FROM AUTHOR]

Abstract: The support of the agricultural sector in developed countries plays a major role in the international policy agenda. The producer support estimate (PSE) is one of the best known measures which has been developed by OECD and is used all over the globe. In the PSE all types of support are aggregated and one of the main components (70% at OECD level) is the market price support (MPS). Here we show by means of characteristic examples that the MPS has no clear relation to basic economic measures determining support for producers as a consequence of policy intervention. The MPS overestimates the consequences of tariffs and export subsidies and underestimates the consequences of quota systems in determining producer support. Misperception of the size and directions of support may affect policy decision-making wrongly. The paper indicates that weighted average producer prices, corrected for quantity restrictions, may be more useful than the reference prices and quantities used by OECD. [Copyright &y& Elsevier]

Abstract: In their sweeping criticism of the OECD’s approach to measuring agricultural support, Oskam and Meester (O–M) pay little attention to what it is that OECD wants to measure. However, it is only when the objective of a given measurement concept is properly defined and understood that the usefulness of the approach employed can be assessed. Criticising a thermometer for its inability to measure distance misses the point. Hence, we need to start with the question of why the OECD is engaged in calculating PSEs, before dealing with some of the more specific points made by O–M. [Copyright &y& Elsevier]

This article explores the relationship between milk quota values and economic efficiency in order to analyze government interventions in quota allocations among producers. For this purpose, we estimate quota values using a panel of Spanish dairy farms. Quota values are then decomposed into economic efficiency, price, and scale effects in order to assess the relative influence of these factors. We find that efficiency is important in explaining quota values but is uncorrelated with observable farm characteristics. This casts doubts on the government's ability to allocate quotas to efficient farms. [ABSTRACT FROM AUTHOR]

This paper provides quantitative estimates of the impact of removing agricultural support in both OECD and developing countries in partial and general equilibrium frameworks. The results show that agricultural support in OECD countries is highly distortionary, and tariffs have a larger distortionary impact than subsidies. Removal of agricultural support would likely raise the international prices of food, resulting in an increase in the cost of food for many net-food importing countries, although the size of the increase is generally small. The results also show that most of the benefits from removing agricultural support accrue to the countries that liberalise. [ABSTRACT FROM AUTHOR]