Reading 16- U.S. Agricultural Policy.pdf

Reading 16: US Agricultural Policy 12/5/12 1:33 AM Increased production in the late 19 thcentury declined prices and bankrupted th many farmers. 20 century was a prosperous time for U.S. farmers as they provided food for Allied Troops during WW1. But, many farmers lost their fortunes during the Great Depression. WW2 increased profits, yet again. Then prices decreased until the US created grain trade agreements. The farm sector faces higher operating costs and lower revenues. Since the green revolution, US exports have become uncompetitive due to value of the US dollar, cost of technology, cost of seeds, fertilizer etc… The Farm Problem in North America • Demand for farm products is price-inelastic o Consumers do not demand significantly more food when prices are low • Increase in yield in the past few years o Technological and mechanical improvements • Quantity has increased faster than demand • Drastically increased supply, moderately increased demand, and falling prices • Low returns to farmers • World farm prices have fallen as well • Farms are difficult to adapt to new economic use • Due to US government price support for agriculture, resources have not shifted to a new economic activity The U.S. Farm Subsidy Program • 1933: Agricultural Adjustment Act o designed to help population in rural areas o artificially raised prices so farmers could enjoy a “fair price” à parity price § equality between the prices farmers could sell