Economic Assessment of the Freeze on Program Yields

摘要

The paper analyzes the economic consequences of the freeze on program payment yields which was introduced in the Food Security Act of 1985. It appears that this policy change reduced variable input usage in wheat production, while raising market prices and net returns. Estimates for a hypothetical 1991 crop year indicate that unfreezing program payment yields would have the opposite effect of raising variable input usage and output, while depressing prices and net returns. A preferable alternative for adjusting program yields would be to index them. This option would raise net returns while avoiding the negative environmental consequences associated with unfreezing program payment yields.