Evaluation of Agricultural Policy Reforms in the United States.

215 Pages·2011·6.837 MB·English

by  OECD

Evaluation of Agricultural Policy Reforms
in the United States
The United States is one of the most important agricultural producers in the world. It has a very large domestic
Evaluation of Agricultural
market and is the world’s largest exporter of agricultural products. Indeed, the share of US agricultural
production exported is more than double that of any other US industry, and the trade surplus in agricultural
products acts as an important stimulus to the US economy. Thus, US agricultural policies exert a strong
Policy Reforms
infl uence on world agricultural markets.
The United States maintains an array of agricultural policies with goals that range from the traditional objectives
in the United States
of stabilising agricultural production and supporting farm income, to those that have more recently increased in
importance, such as assuring adequate nutrition, securing food safety, encouraging environmental protection
and facilitating rural development.
This study analyses and evaluates US agricultural policies, focusing on the Food, Conservation, and Energy Act
of 2008, in the context of developments in agricultural policy that have taken place in the United States since
1985. It looks closely at fi ve US Farm Acts: the Food Security Act of 1985; the Food, Agriculture, Conservation,
and Trade Act of 1990; the Federal Agriculture Improvement and Reform Act of 1996; the Farm Security and
Rural Investment Act of 2002 (2002 Farm Act); and the Food, Conservation, and Energy Act of 2008. This
study also discusses several emerging issues and challenges for US agricultural policies, and offers key policy
recommendations.
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Please cite this publication as: e
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Evaluation of Agricultural
Policy Reforms
in the United States
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governments of its member countries.
Please cite this publication as:
OECD (2011), Evaluation of Agricultural Policy Reforms in the United States, OECD Publishing.
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FOREWORD
Foreword
T
he purpose of the study is to analyse and evaluate the Food, Conservation, and Energy
Act of2008, in the context of the developments in US agricultural policy that have taken
place since1985. The study will cover five Farm Bills: the Food Security Act of1985
(1985Farm Act); the Food, Agriculture, Conservation, and Trade Act of1990 (1990Farm Act);
the Federal Agriculture Improvement and Reform Act of1996 (1996Farm Act); the Farm
Security and Rural Investment Act of2002 (2002Farm Act); and the Food, Conservation and
Energy Act (2008Farm Act).
The author of the report is Dimitris Diakosavvas, of the Directorate for Trade and
Agriculture. The study benefited from contributions from Roger Martini, for the PEM
analysis and Scott Pellow, for the Aglink analysis. Editorial assistance was provided by
Theresa Poincet. Françoise Bénicourt and Theresa Poincet provided secretarial support and
prepared the report for publication.
EVALUATION OF AGRICULTURAL POLICY REFORMS IN THE UNITED STATES © OECD 2011 3

TABLE OF CONTENTS
Table of Contents
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Chapter 1. The Role of Agriculture intheUSEconomy . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Agriculture in the economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Farm structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Farm household incomes and wealth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Developments in farm output, inputs and productivity. . . . . . . . . . . . . . . . . . . . . . . 22
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Chapter 2. Agricultural Support in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Evolution of agricultural support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 3. Crop Sector Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Support policies for “programme” crops under the2008 Farm Act . . . . . . . . . . . . . 48
Sugar support policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Chapter 4. Livestock Sector Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Dairy support policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Chapter 5. International Trade Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Export support programmes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Import protection measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
International food aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Chapter 6. Agri-environmental Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Evolution of US conservation programmes before the2008Farm Act. . . . . . . . . . . 85
Conservation provisions in the2008 Farm Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Chapter 7. Rural Development Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Rural development programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Rural development provisions under the2008 Farm Act. . . . . . . . . . . . . . . . . . . . . . 102
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
EVALUATION OF AGRICULTURAL POLICY REFORMS IN THE UNITED STATES © OECD 2011 5
TABLE OF CONTENTS
Chapter 8. Renewable Energy Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Major provisions under the2008 Farm Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Chapter 9. Domestic Food Assistance Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Policy background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Domestic Food Assistance Provisions in the2008Farm Act . . . . . . . . . . . . . . . . . . . 116
Chapter 10. Food Safety, Marketing andOtherPolicies. . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Food safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Country of origin labelling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Chapter 11. Future Directions forAgriculturalPolicies . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Assessment of policy reform progress since1985. . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Some emerging issues and challenges for policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Key policy recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Annex A. Main Elements of the1985, 1990, 1996 and2002FarmActs. . . . . . . . . . . . 155
Annex B. Cotton Support Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Annex C. Impact of the Energy Independence Security Act onBiofuels
and Crop Markets: Aglink Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Annex D. The OECD Policy Evaluation Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Annex E. Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Tables
1.1. Long-term trends of structural change in USagriculture . . . . . . . . . . . . . . . . . . 15
1.2. Sources of farm output growth, 1979-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1. NAC and PNPC, United States and OECD average. . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2. Explaining the change in the PSE over time (%) . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1. Payment rates for crops under the 2002 and 2008Farm Acts . . . . . . . . . . . . . . 49
4.1. Expenditure under the Dairy Export Incentive Program . . . . . . . . . . . . . . . . . . . 66
5.1. Applied m.f.n. tariffs, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5.2. International food aid funding under the 2002Farm Act, FY2002-09 . . . . . . . . 80
6.1. Funding for major conservation programmes under the 2002 and
2008Farm Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.1. USDA’s rural development programmes, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.1. Impacts of imposing drought in2013 on yields, prices and ACRE payments. . 131
11.2. ACRE payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Annex Tables
B.1. Commodity payments not requiring production, FY1996-2008 . . . . . . . . . . . . . 165
6 EVALUATION OF AGRICULTURAL POLICY REFORMS IN THE UNITED STATES © OECD 2011
TABLE OF CONTENTS
B.2. Producer and Consumer Single Commodity Transfers to UScotton producers,
1986-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
C.1. EPAct2005 renewable fuel standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
C.2. EISA renewable fuel standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
C.3. EPAct2005 renewable fuel standard projection assumptions . . . . . . . . . . . . . . 174
D.1. CARA parameters for 1% risk premium ( =0.01), 1986-2008 . . . . . . . . . . . . . . . 182
D.2. Covariance matrices, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
D.3. Price premium  as used in PEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
E.1. Agricultural value added and other economic indicators, 1985-2009 . . . . . . . . 189
E.2. Leading exporters and importers of agricultural products . . . . . . . . . . . . . . . . . 190
E.3. Agricultural Gross Domestic Product and employment, 1985-2008. . . . . . . . . . 190
E.4. Characteristics of farm and farm operators, 2007 . . . . . . . . . . . . . . . . . . . . . . . . 191
E.5. Changes in the size distribution of farms and production, 1982-2007 . . . . . . . 192
E.6. Income of farm operator households, by farm type and size class, 2004-08 . . . . . . 193
E.7. Share of value of production by commodity and sales class size of farms,
1989, 2002 and2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
E.8. Farm output, input and productivity indexes, 1985-2008 . . . . . . . . . . . . . . . . . . 195
E.9. Distribution of government payments by selected criteria, 2007. . . . . . . . . . . . 196
E.10. Share of US agricultural commodity output exported, 1990-2007 . . . . . . . . . . . 197
E.11. Agricultural exports, imports and trade balance, 1980-2008. . . . . . . . . . . . . . . . 197
E.12. US and world production and exports of selected commodities, 1995-2008 . . 198
E.13. Value of US agricultural exports by principal commodities, 1990-2008 . . . . . . 198
E.14. Agricultural trade indexes, 1985-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
E.15. US volume of agricultural exports and imports by principal commodities,
1990-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
E.16. Top13 USagricultural export destinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
E.17. Top10 USexport markets for selected commodities, 2008. . . . . . . . . . . . . . . . . 201
E.18. USagricultural imports by selected commodities, 1990-2008. . . . . . . . . . . . . . . 202
E.19. USagricultural imports by selected countries of origin. . . . . . . . . . . . . . . . . . . . 202
E.20. Products covered by tariff quotas, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
E.21. Section32 bonus purchases for selected commodities, FY1995-FY2008. . . . . . 204
Figures
1.1. Contribution of agriculture to the economy, 1985-2007. . . . . . . . . . . . . . . . . . . . 15
1.2. Number of farms by sector, 2002 and2007 (’000s) . . . . . . . . . . . . . . . . . . . . . . . . 17
1.3. Value of production by farm size, 1982-2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.4. Distribution of farm households by measures of economic well-being, 2008 . 20
1.5. Average farm operator household income by source and total UShousehold
income, 1988-2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.6. Farm operators’ sources of income, average2002-08. . . . . . . . . . . . . . . . . . . . . . 22
1.7. Total factor productivity for agriculture and the non-farm business sector,
1980-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.8. Prices received and paid by farmers (index), 1985-2008. . . . . . . . . . . . . . . . . . . . 25
2.1. Evolution of producer support in selected OECD countries, 1986-2009. . . . . . . 32
2.2. Evolution of USsupport indicators, 1986-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.3. USPSE level and composition by support categories, 1986-2009 . . . . . . . . . . . . 34
2.4. USpayments with input constraints, 1986-88 and2007-09 . . . . . . . . . . . . . . . . 34
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2.5. Producer Single Commodity Transfers by commodity, 2007-09. . . . . . . . . . . . . 35
2.6. Evolution of Single Commodity Transfers by commodity, 1986-2009. . . . . . . . 35
2.7. Evolution of Consumer Support Estimate in the United States and OECD average,
1986-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.8. Evolution of support to General Services, 1986-2009 . . . . . . . . . . . . . . . . . . . . . . 37
2.9. Total Support Estimate by country. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.10. Government commodity payments by farm size, 1989, 2002 and2007. . . . . . . 39
2.11. Government commodity payments by farm household’s economic
well-being measures, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.12. Distribution of conservation payments by farms and farm typology, 2007 . . . . . . 40
2.13. Iso-indices, 1986-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.14. Risk effects of programmes and Iso-income index, 1986-2008. . . . . . . . . . . . . . 44
4.1. USannual support price and average annual manufacturing grade milk
price, 1986-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.1. Agricultural output exported, 2002-06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.2. Agricultural exports, imports and trade balance, 1980-08. . . . . . . . . . . . . . . . . . 71
5.3. Value of USagricultural exports of bulk and high-value commodities,
1980-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.1. Trends in conservation expenditures by major programme categories,
1985-2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
6.2. Trends in conservation expenditures by major programme categories, 2008-12. . 89
6.3. Comparison of 2002 and 2008Farm Acts, by major conversation programmes,
FY2008-12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.1. Food assistance outlays by major programmes, FY1995-2008 . . . . . . . . . . . . . . 113
11.1. Evolution of producer support: Most distorting and other components. . . . . . 127
11.2. ACRE maize and soybean prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
11.3. Emergency surplus removal (bonus) purchases, FY1992-2008 . . . . . . . . . . . . . . 143
Annex Figures
B.1. UScotton production, consumption, exports and market prices, 1997-2008. . 162
B.2. UScosts of cotton production and farm revenues, 1997-2009 . . . . . . . . . . . . . . 163
B.3. Evolution of support indicators for UScotton, 1986-2009 . . . . . . . . . . . . . . . . . . 167
B.4. Decomposition of UScotton Single Commodity Transfers, 1986-2009. . . . . . . . . . . 167
B.5. UScotton prices, 2002-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
C.1. Reduction in maize-based ethanol production. . . . . . . . . . . . . . . . . . . . . . . . . . . 174
C.2. EPAct reduction in biodiesel production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
C.3. Reduction in ethanol-maize use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
C.4. Percentage reduction in USmaize, soybean and soybean oil prices . . . . . . . . . 176
D.1. Hypothetical impacts of two policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
D.2. Hypothetical policy set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
8 EVALUATION OF AGRICULTURAL POLICY REFORMS IN THE UNITED STATES © OECD 2011