GEOG 216 Chapter Notes -Common Agricultural Policy, Common Ethanol Fuel Mixtures, Supplemental Nutrition Assistance Program
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Reading 16: US Agricultural Policy 12/5/12 1:33 AM
Increased production in the late 19th century declined prices and bankrupted
many farmers. 20th 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”
! parity price
" equality between the prices farmers could sell their
products for and the price they spend on goods and
services to run the farm
" determined between 1910-1914 when prices were high
for farm goods
• Agriculture subsidies, price floors
o Above market price
o Government bought all wheat and corn from farmers
o Stored surplus ! encouraged surplus