ANALYSIS OF THE 2002 FARM BILL AND NEW FARM BILL ALTERNATIVES

This report evaluates the 2002 farm bill and the effects of the individual programs within the bill on North Dakota net farm income. A stochastic simulation model was developed, using @Risk by Palisade. @Risk replaces the mean values for price and yield with a distribution of values for the eight major commodities grown in North Dakota. The counter-cyclical (target price) program, marketing loan program, and federal crop insurance benefits were separated and analyzed to determine which components were the most important to North Dakota producers. The U.S. Trade Representative offered to decrease the country's trade distorting subsidies by 60% if the European Union would lower its export subsidies 75%. The study estimates the impact of that plan. Two additional scenarios, a revenue insurance plan and an income insurance plan, were evaluated. Both plans were compared to the scenarios of no government support and the current legislation. The insurance plans support either revenue or income at the 70% level, as suggested by the World Trade Organization.