1887

OECD Food, Agriculture and Fisheries Papers

Selected studies on various food, agriculture and fisheries issues from the OECD Trade and Agriculture Directorate.

NB. No. 1 to No. 58 were released under the previous series title OECD Food, Agriculture and Fisheries Working Papers.

English

Evaluation of farm programmes in the 2014 US farm bill

A review of the literature

Main changes to US farm programmes under the 2014 Farm Bill aim to strengthen instruments for risk management, both in commodity and in crop insurance programmes. In addition, the 2014 Farm Bill consolidated voluntary conservation programmes supporting agricultural land preservation and the adoption of environmentally friendly production practices. In the literature reviewed, analysts generally acknowledge the reinforced capacity of farm programmes to reduce farm revenue losses and the diversity of options offered to farmers to manage risk. They also discuss farmers' choices of participation in programmes and coverage level in terms of optimisation of their benefits. They also outline the scope for higher budget costs if prices keep falling, but note that some provisions limit the increase. Regarding the impact of programmes on land and markets, the consensus is that by design, the two new crop commodity programmes do not influence current planting decisions, but they could generate small wealth and risk effects. Similarly the new dairy programme could affect the decisions of risk adverse farmers. Support to crop insurance on the other hand is based on current parameters, and unlimited, thus it is expected to encourage higher input use to maximise profit, in addition to the wealth and risk effects. Empirical analyses find very small effects of crop insurance subsidies on total land use, but some suggest a non-negligible impact on crop rotation, and variable input use. Overall, the literature finds that conservation payments seem to have had a positive impact on the environment. In particular, they have encouraged farmers to adopt more environmentally-friendly practices and address a broader set of environmental objectives. Some experts note, however, that some programmes may not necessarily bring additional benefits. Experts consider that cross-compliance mechanisms have partly contributed to reduce soil erosion by encouraging farmers to use less erosive cropping practices (e.g. conservation tillage, conservation crop rotations) and to retire particularly erodible land.

English

Keywords: crop insurance, risk management, conservation programmes, Agricultural policy
JEL: Q18: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Agriculture / Agricultural Policy; Food Policy
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