An integrated econometric model of the U.S. corn-livestock sector was developed to investigate the impacts of the Farmer-Owned Reserve (FOR) program on the market behavior of the sector. The model was formulated and estimated on a quarterly basis, in order to increase the number of observations on FOR-influenced markets, and permit a seasonal, as well as interyear evaluation of the program;Econometric simulation was used to contrast the performance of the program with an alternative policy design reflecting continuation of the storage policies in existence prior to the reserve program. Over the period 1977-1982, the analysis indicated that the FOR exerted appreciable effects on both the mean price of corn, and the year-to-year variation in corn prices. Relative to the alternative storage policy, the reserve program enhanced prices in surplus years, while moderating the upward pressure on prices in tight years. The program also made a substantial contribution towards the objective of expansion of carryover stock levels;The Farmer-Owned Reserve exerted noticeable, although no large, effects on the U.S. livestock sector over the period. Reserve-induced higher corn prices resulted in small reductions in livestock herds, and hence, production relative to continuation of the pre-1977 policies. Livestock prices were increased moderately by the operations of the program.
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