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U.S. Cotton Subsidies: Drawing a Fine Line on the Degree of Decoupling

  • Andrew Schmitz (a1), Frederick Rossi (a1) and Troy G. Schmitz (a2)

Abstract

The impact of the U.S. cotton policy depends on several interrelated factors: how input subsidies interact with producer price supports, producer price expectations, and the extent to which price supports are decoupled from production. Cotton subsidies have a direct impact on world cotton prices, depending on the extent to which price supports are coupled to production. At one extreme, there is a price impact of 12.4% when producers make decisions at the loan rate, but the average price impact is 20.9% when producers make decisions based on the target price. Results are presented for intermediate cases of decoupling.

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Keywords

U.S. Cotton Subsidies: Drawing a Fine Line on the Degree of Decoupling

  • Andrew Schmitz (a1), Frederick Rossi (a1) and Troy G. Schmitz (a2)

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