Sunday, July 29, 2007

What Happens When A Farm Program Ends

The report is that Virginia tobacco acreage has increased a bit, after falling after the end of the program. Of course, this means nothing. But just a few Sunday afternoon guesses at what would happen if farm programs were ended:

  • land values would fall very drastically
  • retired farmers and widows would have to reduce their standard of living
  • farms would consolidate, as those farmers with the capital take advantage of the lower land values to rent/buy more land
  • there would be some shifts in who produced what. But I'd guess that the pursuit of flexibility since 1996 has lessened the amount of shifting. Some land would go out of cotton and rice to other crops (perhaps marijuana?--I'm only following in the footsteps of those economists who focus on economic rationality)
  • if ag land values fall, then there might be more suburban sprawl, or maybe just lower housing prices
  • there'd be more volatility in farming, and perhaps more interest in mechanisms to reduce volatility (i.e., vertical integration, contract farming)
Notably, I'm skeptical of Oxfam and others who argue that ending the programs would cause prices to rise, at least, not in the sense of rising and staying on a new plateau. I'd guess the increased volatility would mean temporary price increases, and then decreases.

All of this is wasted electrons, because the farm program isn't going to end any time soon.

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