Hostname: page-component-7c8c6479df-94d59 Total loading time: 0 Render date: 2024-03-28T10:04:24.980Z Has data issue: false hasContentIssue false

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

Published online by Cambridge University Press:  28 April 2015

Andrew Schmitz
Affiliation:
Food and Resource Economics Department, University of Florida, Gainesville, FL
Frederick Rossi
Affiliation:
Food and Resource Economics Department, University of Florida, Gainesville, FL
Troy G. Schmitz
Affiliation:
Morrison School of Management and Agribusiness, Arizona State University, Mesa, AZ
Get access

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.

Type
Articles
Copyright
Copyright © Southern Agricultural Economics Association 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anton, J., and Le Mouel, C.. “Do Counter-cyclical Payments in the FSRI Act Create Incentives to Produce?” Paper presented at the 25th Intemational Conference of Agricultural Economists: Durban, South Africa, 2003.Google Scholar
Beach, R., Murray, B., Piggott, N., and Wohlgenant, M.. “Interaction Effects of Promotion, Research, and Price Support Programs for U. S. Cotton.” Working Paper 02-07, RTI International, Research Triangle Institute: Research Triangle Park, NC, 2002. Internet site: http://www.rti.org/pubs/rtipaper_02_07.pdf.Google Scholar
CDWR, Applied Water Table, 2001: Statewide Values (in acre-feet/acre), Annual Land & Water Use Data Webpage, California Department of Water Resources, 2006. Internet site: http://www.landwateruse.water.ca.gov/docs/annualdata/2001/AW_2001_WA_State(AF-Ac).xls (Accessed September 5, 2006).Google Scholar
EWG, California Water Subsidies, Environmental Working Group Webpage, 2006. Internet site: http://www.ewg.org/reports/watersubsidies/ (Accessed September 5, 2006).Google Scholar
Elliott, I.Canada investigates U. S. corn dumping,Feedstuffs 77,40(2005):4.Google Scholar
Gardner, B.North American Agricultural Policies and Effects on Western Hemisphere Markets since 1995, with a Focus on Grains and Oilseeds.” Working Paper WP-02-12, Department of Agricultural and Resource Economics, University of Maryland, College Park, MD, 2002.Google Scholar
Goodwin, B.K., Mishra, A.K., and Ortalo-Magne, F.N.. “Explaining Regional Differences in the Capitalization of Policy Benefits into Agricultural Land Values.” Chapter 6, in Government Policy and Farmland Markets: The Maintenance of Farmer Wealth, Moss, C.B. and Schmitz, A. eds., p. 97114. Ames, IA: Iowa State Press, 2003.CrossRefGoogle Scholar
Goodwin, B.K., and Mishra, A.K.. “Another Look at Decoupling: Additional Evidence on the Production Effects of Direct Payments.American Journal of Agricultural Economics 87,5(2005):12001210.CrossRefGoogle Scholar
Karp, L., Dumas, C., Koo, B., and Sacheti, S.. “Internationalization of Environmental Damages in Agriculture.” United Nations Conference on Trade and Development. UNCTAD/COM/53, April 25,1995. Internet site: http://www.iisd.org/trade/unctad/intern_b.txt. (Accessed September 5, 2006).Google Scholar
Lin, W., and Dismukes, R.. “Risk Considerations in Supply Response: Implications for Countercyclical Payments' Production Impact.” Paper presented at the American Agricultural Economics Association Annual Meeting, Providence, RI, 2005.Google Scholar
Pan, S., Mohanty, S., Ethridge, D., and Fadiga, M.. “The Impacts of U. S. Cotton Programs on the World Market: An Analysis of Brazilian and West and Central African WTO Petitions.” Working Paper, Department of Agricultural and Applied Economics, Texas Tech University: Lubbock, TX, 2004.Google Scholar
Poonyth, D., Sarris, A., Sharma, R., and Shui, S.. “The Impact of Domestic and Trade Policies on the World Cotton Market.” FAO Commodity and Trade Policy Research Working Paper, FAO: Rome, Italy, April 2004.Google Scholar
Powell, S., and Schmitz, A.. “The Cotton and Sugar Subsidies Decisions: WTO's Dispute Settlement System Rebalances the Agreement on Agriculture.Drake Agricultural Law Journal 10,2(2005):287330.Google Scholar
Rossi, F., Schmitz, A., and Schmitz, T.G.. “The Multiplicative Effect of Water Subsidies and Price Support Payments: The Case of U. S. Cotton.” Journal of International Agricultural Trade and Development 1,1 (2005):5570.Google Scholar
Schmitz, T.G., Schmitz, A., and Dumas, C.. “Gains from Trade, Inefficiency of Government Programs and the Net Economic Effects of Trading.Journal of Political Economy 105(1997):637–47.CrossRefGoogle Scholar
Sumner, D.A Quantitative Simulation Analysis of the Impacts of U. S. Cotton Subsidies on Cotton Prices and Quantities.” Mimeo, Department of Agricultural and Resource Economics, University of California: Davis, CA, 2003.Google Scholar
USDA/ERS. The Cotton Industry in the United States. Agricultural Economic Report No. 739, Commercial Agriculture Division, Economic Research Service, United States Department of Agriculture: Washington, DC, 1996.Google Scholar
USDA/ERS. Cotton and Wool Yearbook 2006 Economic Research Service, United States Department of Agriculture: Washington, DC, 2006. Internet site: http://www.ers.usda.gov/data/sdp/view.asp?f=crops/89004/ (Accessed September 5, 2006).Google Scholar
Westcott, P.C., and Price, J.M.. Analysis of the U. S. Commodity Loan Program with Marketing Loan Provisions. Agricultural Economic Report No. 801, Economic Research Service, USDA, Washington, DC, 2001.Google Scholar
Westcott, P.C., Young, C.E., and Price, J.M.. “The 2002 Farm Act: Provisions and Implications for Commodity Markets.” Washington, DC: U. S. Department of Agriculture, Economic Research Service, Agriculture Information Bulletin No. AIB778. 2002.Google Scholar