AGEC 429: EXAM 2 (A+ Graded Already)

Why is it effective to get congress to act on passing farm bills? correct answers The 49 bill is effective at getting the new bill passed because if the new bill doesn't pass, then we revert to the '49 bill, which would allow commodities to have the same purchasing power as they did in (Parity prices), and it would be way too expensive for the government to maintain that today, and nobody wants that to happen. What was the reason for the "coverage gap" in the 1990s farm bill? correct answers Technology was the reason the actual yield was increasing as much as it did. Due to historical yield farmers had and the farm problem in the 80s, the pay yield was much lower than the actual yield farmers had. The difference between your actual yields and your pay yields is called the coverage gap. The government fixed the coverage gap by allowing farmers to update their base and yield. In the 1990 farm bill, how does ARP move on the graph? correct answers Supply does not shift parallel, but rotates backwards, creating a pie shaped shift. -with ARP, if govt says they're setting aside 5%, production will only go down 2% because producers will set aside the land with worst production (flooding, low soil fertility, etc.) -Producers farm the land they use more intensely now What is ARP and reverse slippage? correct answers Acreage reduction program(set-aside program): - Supply control mechanism - USDA analzes the market without ARP and if price is too low, they implement it If a farmer takes out 10% of his farming acreage (likely his worst 10%), the remaining acreage will be farmed more intensely. so there may a 10% reduction in acreage, but only 6% decrease in production. The slippage is the 4% difference. What are the 3 reasons ACRE wasn't good for Texans? correct answers 1. It was a two trigger program that required a state loss and a personal or farm level trigger for loss. - you could get wiped out and your state not trigger and you wouldn't get anything (Texas has a lot of production variability) 2. If chosen, there was a 30% loan rate reduction 3. There was a 20% direct payment reduction How are supplemental coverage option (SCO) and STAX different? correct answers - SCO paid subsidies of 65% (you pay 35%), while STAX had 80% govt subsidy (you pay 20%) - SCO covers everything as long as you have insurance, STAX only covers cotton