POLICY TOOLS FOR U.S. AGRICULTURE

Ronald D. Knutson
Professor of Agricultural Policy

James W. Richardson
Professor of Agricultural Policy

Danny A. Klinefelter
Professor of Agricultural Finance

C. Parr Rosson
Associate Professor of International Trade

Edward G. Smith
Professor of Agricultural Policy
and Distinguished Roy B. Davis Professor
of Agricultural Cooperation

Agricultural and Food Policy Center
Department of Agricultural Economics
Texas Agricultural Experiment Station
Texas Agricultural Extension Service
Texas A&M University

FOREWORD

This document summarizes what has been learned from more than 60 years of experience dealing with more than 100 agricultural and food policy tools. Contemporary federal policy regarding agriculture has its origin in the late 1920s. Since that time policy has evolved continuously as problems, conditions, goals and/or philosophies toward government involvement in agriculture have changed.

So many policies have been tried or evaluated that it is often said that few, if any, truly new policy options exist. It is also said that agricultural policies tend to cycle between various degrees of concern about the need for income support, conservation, food assistance, and export orientation. These realities make it possible to learn from our experience with policy tools that have been tried, as well as those that have been analyzed but for one reason or another not tried.

This is the third edition of agricultural and food policy tools. The first publication dated August 1984 had 41 tools. The second dated August 1986 had 69 tools. It was honored by the American Agricultural Economics Association with a Quality of Communication Award. This edition contains 101 tools. The increased number of tools reflects the broadened scope of agricultural and food policy as well as its increased complexity. While every Congress and administration since 1980 has vowed to reduce the complexity of farm bills, they have not succeeded. This edition, for example, adds a maze of conservation and environment tools authorized by the 1990 farm bill.

Perhaps most important, this publication has no axe to grind. There is no hidden agenda. Its purpose is to provide just enough objective and factual information on a tool to wet the appetite of a congressional staffer who is thirsty for knowledge, a farm organization director who needs to sharpen his/her policymaking tools, or a student who is involved in policy education. Because time is valuable, each tool is allotted a single page.

Keywords: Domestic farm policy, commodity programs, conservation, environment, international trade policy, marketing policy, demand expansion programs, food assistance, nutrition, food safety, credit policy.

ACKNOWLEDGEMENTS

This publication has benefitted from the comments, suggestions, and work of many individuals. Primary among these are the staff of the Agricultural and Food Policy Center, particularly Dawne Hicks, our staff assistant, and Sue Jones, our editor. Faculty reviewers of the manuscript included John Nichols, Dan Padberg, John Penson, David Leatham, Larry Lippke, and Gary Williams. Our friends at the Texas office of the Agriculture Stabilization and Conservation Service, particularly Lester Byrd, Darrell Davis, and Kermit Decker, reviewed the sections of the manuscript related to the farm program.

Since the original publication of Tools, we have received many suggestions, corrections, and additions from our friends in the Economic Research Service/USDA, from farm organization leaders, and from congressional staff for whom this publication was designed.

The authors accept full responsibility for any errors that appear in this publication.

INTRODUCTION

Agricultural policy is a broad term used to encompass government programs that directly affect the prices and incomes received by farmers. Producers and agribusiness leaders, agriculture related organizations, and government policymakers must sort through a myriad of potential policy tools in developing this nation's agricultural policy.

Each policy tool or government program is intended to deal with a specific farm problem in a specific way. For example, target prices raise farm income through direct payments from the government while support prices raise income by setting a floor on market prices. Some policy tools are more effective than others in accomplishing the objectives for which they are intended. For example, quotas that dictate the volume a producer can market are more efficient in controlling production than acreage reduction programs. Policy tools often have side effects that need to be considered before selections are made. For example, when price supports are set above world market prices, exports fall.

This publication provides brief descriptions of individual policy tools that are most directly related to agriculture and the U.S. Department of Agriculture (USDA). The report is designed to be a comprehensive list of those policy tools that are used currently, have been used in the past, are used in other countries, or have been proposed for use in the United States. These tools are divided into five general categories:

A single-page summary describes each policy tool with respect to the following:

The following publications offer comprehensive discussions of the policies described in this publication.

TABLE OF CONTENTS

Domestic Farm Programs

Income Support Price Support Supply Control

Conservation and Environmental Programs

International Trade Programs

Domestic Industry Protection Trade Agreements Embargoes Export Subsidies Trade Barrier Reduction

Marketing

Demand Expansion Market Organization and Control Market Facilitators

Food Assistance, Nutrition, and Safety

Credit Programs

Debt or Payment Restructuring Government Loans Government Regulation and Intervention Secondary Financial Markets