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12 terms

AP Economics: Chapter 19

STUDY
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farm commodities
agricultural products such as grains, milk, cattle, fruits, and vegetables that re usually sold to processors, who use the products as inputs in creating farm products
food products
sauerkraut and yogurt, processed agricultural commodities sold through grocery stores and restaurants. examples: bread, meat, fish, chicken, pork
agribusiness
Commercial agriculture characterized by integration of different steps in the food-processing industry, usually through ownership by large corporations.
parity concept
prices received by farmers/ prices paid by farmers
parity ratio
(price of farm goods/price of non farm goods). This is the ratio of the price of farm products to the price of non-farm products. This ratio has been declining since world war 1. A declining parity price ratio implies that farmers are faring relatively worse than other sectors of the economy over time, and serves as the justification for government assistance to farmers such as agricultural price supports (price floors) and/or subsidies to farmers.
price supports
subsidies provided by the federal government, primarily to agriculture, whereby surpluses of products are purchased and kept off the market; this action reduces supply and keeps prices at a level required by the producer
acreage allotments
A pre-1996 government program that determined the total number of acres to be used in producing (reduced amounts of) various food and fiber products and allocated these acres among individual farmers. These farmers had to limit their plantings to the allotted number of acres to obtain price supports for their crops.
Freedom to Farm Act
overhauled the system while reducing farm subsidies and giving farmers fixed payments.
Food, Conservation, and Energy Act of 2008
kept high subsidies and encouraged farmers to plow grasslands. But it does have programs to conserve soil and wetlands
direct payments
Cash transfers
countercyclical payments
income transfer paid to farmers for difference between target and market prices 15-334
marketing loan program
a federal farm subsidy under which certain farmers can receive a loan from a government lender and then, depending on the price of the corp, either pay back the loan with interest or keep the loan proceeds while forfeiting their harvested crop to the leader