Modeling Government Intervention in Agricultural Commodity Markets: U.S. Dairy Policy Under the Agricultural Act of 2014

摘要

The U.S. Agricultural Act of 2014 creates a new "margin insurance" program under which dairy farmers can receive indemnity payments from the U.S. government if a margin (defined as the difference between milk prices paid to farmers and an index of feed costs) falls below the insured level. The design of this Margin Protection Program (MPP) suggests that it has the potential to substantially weaken feedback processes that would adjust milk production, prices and margins if margins fall below program threshold levels, especially if the proportion of milk covered by insurance is large. This paper describes potential impacts of the MPP using a CLD, then uses an empirical SD commodity model for the U.S. dairy industry based on the commodity model described in Sterman (2000) to assess the impacts quantitatively. We compare the results of a Baseline scenario representing status quo dairy policies to outcomes under implementation of the new MPP during 2015 to 2018. Our analyses indicate that if margins fall to levels that activate indemnity payments, weakened feedback processes are likely to result in persistent lower margins, lower farm incomes and larger government expenditures than the continuation of current policies. We also evaluate impacts under alternative assumptions about feed and dairy market conditions, the date of the annual deadline for participation decisions and the extent of farmer participation (proportion of milk covered by the MPP). Stochastic simulations indicate that lower margins, decreased farm incomes and higher government expenditures are highly probable during 2015 to 201 8, but that the differences with status quo policies are smaller with lower feed prices or higher demand for dairy products, when participation decisions are required earlier, and when aggregate farmer participation (proportion of milk covered) is less. These results imply that assessments of producer decision strategies based on historical data that do not account for program impacts may be misleading, and that participation decisions by individual producers may need to consider the aggregated market effects of collective producer decision making.