Study on risk management in EU agriculture : case study no.7 : what could EU policymakers learn from agricultural risk management policy in the United States?

The United States has perhaps the richest history of any jurisdiction in regards to agricultural policy, having started with various legislation in the late 1800s that created land grant colleges, agricultural experiment stations and county-level extension agencies - the functions of teaching, research and outreach. This was followed by agricultural legislation in the 1930s that focused on rural poverty, soil conservation, access to credit, and crop insurance (protection against production risk). Early legislation was followed by farm bills that implemented target prices and loan rates, with the latter setting a price floor on production and the former used to calculate a deficiency payment equal to the target price minus the loan rate or market price (whichever was higher) multiplied by historical yields determined over a decade. The result was overproduction, export subsidies, set asides and other mechanisms to reduce output, and an increasing federal outlay on agriculture. Despite an Agreement on Agriculture struck in the last round of GATT negotiations (coming into effect in 1995 with the WTO) and various attempts to decouple output from farm programs, this system remains in place to the present, although the terminology has changed and more focus has been put on agricultural business risk management (BRM) programs beginning with the 2008 Farm Bill.