Assessing the impacts of the 1985 farm bill and its alternatives on rural economies : the case of Terry County

Abstract

The Food Security Act of 1985 (1985 farm bill) provides a structure for farm program administration through 1990. The 1985 farm bill continues the conservative trend in farm programs initiated by its 1981 predecessor. Important provisions include mandated reductions in target prices and deficiency payments. Rising farm program costs and falling agricultural prices have triggered debate focused on modifying the 1985 farm bill. Among the topics addressed in such debate is the impact of farm policy on rural communities. This study focuses on the relationship between farm policy and rural communities. A case study approach is adopted to evaluate the economic impacts of the 1985 farm bill on the Terry County economy in the Texas Southern Plains. The impacts of the 1985 farm bill are examined in conjunction with macroeconomic and structural variations. In addition, policy alternatives including reduced target prices, increased price supports, and maximum Conservation Reserve participation are evaluated. The methodology used in this research incorporated the interindustry structure of the Terry County economy into an agricultural linear programming model. The model provided annual estimates of agricultural net returns and output, as well as output from the nonagricultural sector necessary to support agricultural activity. Estimated output was used to project employment differences associated with the various scenarios. The results indicate that under the 1985 farm bill, agriculture in Terry County will experience a slight decline in output and a large decline in net returns. The nonagricultural sector remains steady with the exception of household-related industries like services and retail trade which experience declines in output. Agricultural employment continues a gradual declining trend. A more conservative macroeconomic environment appeared to benefit agriculture. A structural shift to mid-size farms increased employment but decreased output in the agricultural and nonagricultural sectors. Varying farm policy had significant impacts on the level of agricultural sector net returns. These impacts were primarily reflected in the nonagricultural sector through output changes for household-related industries. Reductions in farm program benefits were felt more uniformly throughout the economy than increases in farm program benefits, indicating considerable leakage could be present.