Producer behavior in the presence of an income stabilization program

Abstract

Passage of the 1996 Farm Bill marked a dramatic departure in federal farm policy as the longstanding deficiency payment program was replaced with non‐risk responsive transition payments. In light of the departure, subsidized savings has been proposed as a mechanism to provide risk protection to agricultural producers. Using Canada’s National Income Stabilization Account (NISA) program as an example of a subsidized savings program, a stochastic programming model of income stabilization is developed. The model is then used to investigate the optimizing behavior of a typical Midwestern crop producer. The results suggest a fair amount of program design flexibility exists, and that the government can use this flexibility to stimulate initial and continual participation while minimizing capital outlays.

Citation

Stokes, J.R., Coble, K.H. and Dismukes, R. (2000), "Producer behavior in the presence of an income stabilization program", Agricultural Finance Review, Vol. 60 No. 1, pp. 34-59. https://doi.org/10.1108/00214680080001109