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

Published online by Cambridge University Press:  28 April 2015

Andrew Schmitz ,
Frederick Rossi  and
Troy G. Schmitz
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
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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.

Keywords

cottoncounter-cyclical paymentsdecouplingloan rateQ17Q18Q25Q28
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 135 - 149
Copyright
Copyright © Southern Agricultural Economics Association 2007

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