Marketing Loan Rates and Acreage Responses

Paul Westcott

Elsewhere No. (0403), January 1900

This ERS Elsewhere report provides an overview of an article from Choices magazine which analyzes potential effects of fixed commodity loan rates under the 2002 Farm Act. Results illustrate that setting loan rates at fixed, predetermined levels when market-price-based, formula loan rates would be lower results in land being held in production that otherwise might not be planted, altering the cropping mix and resulting in "policy-induced inefficiency" in the sector. Such a situation could occur if commodity markets return to a low price environment during the years covered by the 2002 Farm Act.

Keywords: commodity loans, marketing loans, nonrecourse loans, loan deficiency payments, price support, commodity programs, agricultural programs, ERS, USDA

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Updated date: January 1900