Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 92, Issue 3, Pages 849-858Publisher
OXFORD UNIV PRESS INC
DOI: 10.1093/ajae/aap009
Keywords
base acreage; decoupled payments; expectations; program yield; updating
Categories
Funding
- Marlin Cole professorship fund
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We analyze the coupling effect of expectations about base acreage and yield updating in future farm policy on production decisions in the presence of price, yield, and policy uncertainty for a risk-averse farmer producing a single crop The farmer receives market revenue and government payments Using stochastic dynamic programming. optimum decisions under present value calculations positively link current acreage and fertilizer decisions to future government payments through expected updates of base acreage and yield in the future regime Moving from a zero probability of updating to a probability of one increases optimum acreage and yield by 6.25% and 0 134%, respectively
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