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The Impact of Decoupled Payments on the Cost of Operating Capital

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  • Kropp, Jaclyn D.
  • Whitaker, James B.

Abstract

We estimate the impact of direct payments under the 2002 Farm Act on the credit terms of farm operators, specifically the interest rate on short-term operating loans. In the analysis, we control for farm financial characteristic, farm operator characteristics, and other factors. Using data from the Agricultural Resource Management Survey (ARMS) for the year 2007, we show that as the proportion of base acres to total operated acres increases, interest rates decline by a small but statistically significant amount. This implies that direct payments lead to lower operating costs through better credit terms. Lower operating costs may in turn allow some farmers to produce on land that would otherwise be unprofitable to operate.

Suggested Citation

  • Kropp, Jaclyn D. & Whitaker, James B., 2009. "The Impact of Decoupled Payments on the Cost of Operating Capital," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49311, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49311
    DOI: 10.22004/ag.econ.49311
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    References listed on IDEAS

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    Agricultural and Food Policy; Agricultural Finance; International Relations/Trade;
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