Reference no: EM136377

Part A:
1. Russian farmers, again, have a poor crop. Their government has announced that they will not ban exports. This year they are going to release grain stocks from their government held reserves. Analyze, using graphs, and discuss the impact on domestic and world prices, consumers and producers the effects of the Russian government's decision.

2. The new farm bill (whether the House plan or the Senate plan, or some mix of the two, is adopted) is very different from the current farm program. Analyze the effect of the new farm bill proposals on price and income risk compared to the current farm program.

3. As you know, the House farm bill proposal includes the use of a reference price to set average crop revenue. The Senate farm bill uses an average of market prices to set average crop revenue. Compare the effects of this difference in farm bill proposals on the level of revenue safety for farmers, advantages, and disadvantages of each. Do the proposals differ in their effect on margin risk (a farmer's margin being revenue minus production costs).

4. The Conservation Reserve Program (CRP) began in the 1985 farm bill and took marginal land out of production. It has been popular with farmers, hunters, and has reduced soil erosion. High crop prices are encouraging farmers to take their land out of CRP and begin planting it again. Analyze using graphs and explain the impacts of this on a crop like corn (or wheat). What would a farmer require in the next CRP registration period to keep his land in the CRP program?

5. Farm programs do have an effect on land values. The proposed farm bill (House and Senate versions) eliminates direct payments and replaces them with a type of revenue safety net. Analyze the effect of this change on farmland values. The direct payment is a direct, decoupled payment that is paid on base acres whether that crop is grown or not (cotton grown on cotton base acres, for example) or even if no crop is grown. Do you think elimination of the direct payment would also affect the variability, or risk, in farmland values? Why?

PART B:
1. There is a group of people who are proponents of crop growing processes without the use of commercial fertilizer and using non-biotech crop varieties. Analyze the impact of eliminating these technologies. Use a graph in your answer. What might offset those impacts?

2. Over the last 6 months, the dollar has fallen in value sharply versus the world's other currencies. Analyze the effect of this on the corn market (the U.S. is a major exporter of corn). What might this imply for a producer who signed up for ACRE? (use a graph in your answer).

3. The U.S. imports a majority of its oil and fertilizer, major inputs in crop production. Analyze the effect of a weaker dollar on these commodities. Use your analysis in #2 and #3 to briefly discuss the net effect on corn farmers.

4. The prices for most of our program crops are above the Target Price. Given this fact, analyze the effectiveness of the Direct Payment, Counter-Cyclical Payment, and Loan Rate as a "safety net" for producers. Does ACRE provide an effective safety net? What is the effectiveness of the safety net if production costs are now 50 percent higher than the loan rates?

5. You have been asked to advise the government of a small country about their agriculture programs. They currently have government controlled support prices. Their goals are to reduce prices to consumers, support their producers, and reduce their reliance on imported food (because food is a lot more expensive now). Use your knowledge of U.S. farm programs to advise them on how they might change their programs to accomplish their goals. Use graphs in your answer.

PART C:
1. Farm Programs are often called "safety net programs" in that they provide a "safety net" for farmers. They provide income support for farmers in the event of adverse events. Since 2006 the prices of all program commodities (except cotton) have been above the Target Price. Using your knowledge of current farm program tools evaluate the effectiveness of the safety net if prices are well above the Target Price.

2. The worldwide economic and financial crisis led to a rapid increase in the value of the dollar then, as recessionary fears eased, the value of the dollar has rapidly declined. Analyze the impact of the decline in the value of the dollar on U.S. agricultural exports, and prices and production in the importing and exporting countries.

3. Due to a severe drought, Russia banned wheat exports earlier this year. Analyze the effect of this decision on the world wheat market. The U.S. is also a wheat exporter. What is the effect of the Russian decision on other exporting countries?

4. In order to cut budget expenditures the U.S. government is considering ways to reduce farm program spending. Given that commodity prices are above the target price, how could farm programs be adjusted to reduce spending? If prices declined sharply in the future what would be the effect of the proposed changes on future farm program spending?

5. Mandated use of ethanol has increased the demand for corn. Analyze the effect of the elimination of mandated ethanol use on corn price, production, and farm program expenditures.