Agricultural Economic Report No. (AER-526) 0 pp

January 1985

Possible Economic Consequences of Reverting to Permanent Legislation or Eliminating Price and Income Supports

If the agricultural legislation expiring in 1985 is not replaced, farm price and income supports will revert from the programs provided for in the Agriculture and Food Act of 1981 and subsequent legislation to the programs provided for in the permanent support statutes. Reverting to the permanent support programs, dating back in some cases to the 1930s, would raise price and income support levels significantly and greatly reduce the role of market forces in determining farm returns. Conversely, if all price and income supports were eliminated in 1985, Government intervention in the market would end and supply and demand forces would determine farm returns. Adopting either of these two outerbound policy alternatives would have significant and far-reaching impacts on farm operations, the agribusiness sector, the general economy, and ultimately the world market for farm products.

Keywords: agribusiness, agricultural trade, conservation, crops, economy, elasticity, farm inputs, farm policy, finance, food costs, land use, land value, livestock, parity, permanent farm legislation, price support

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