Lecture 2 – Global Trends in Agriculture EconS350 Fall Semester, 2010

Domestic policy “The Farm Bill” is the most important piece of policy for US agriculture Defines objectives for the US food economy domestically. Most recent version is the “Food, Conservation, and Energy Act of 2008”.

Brief history of US agriculture policy Agricultural Adjustment Act (AAA), 1933 – Provided price and income support programs Food and Agriculture Act of 1965 – Tried to reduce price supports 1985 Food Security Act & 1990 Food, Agriculture, Conservation, and Trade Act – Encouraged marketing of commodities rather than relying on selling to government Federal Agriculture Improvement and Reform Act – “Decoupled payments”: government payments are not tied to a farmer’s current production decisions. Supply controls and price supports lead to “inefficiencies”. – Produce more than what is demanded, etc.

2008 Farm Bill

Farm bill payments

Conservation payments in the Farm Bill

US agriculture and foreign markets : “Golden age” for US agriculture 1920’s saw drop in prices that led to the Smoot- Hawley tariffs. Volume of US ag exports fell by 20% from 1920s to 1930s. Exports increased only in the 1970s.

US agriculture and foreign markets

Global production of major crops

World trade policy Doha Round – Follows the Uruguay Round (1982) and the GATT (General Agreement on Tariffs and Trade, 1949). – Multilateral trade negotiation under the World Trade Organization – Started in 2001 and still going Conflict between rich and poor countries – Developed or richer: US, EU, Japan – Developing or poorer: Brazil, China, Russia, India Points of conflict – Improve market access by cutting tariffs – Reduce export subsidies – Reduce trade distorting domestic support – Consider non-trade concerns such as food security, environmental protection, rural development, poverty alleviation.

World trade policy Agriculture is THE FOCAL POINT of conflict in multilateral trade negotiations. Knowledge of these “macro” level factors is a critical part of being an effective farm manager.