THE 2002 US FARM BILL'S IMPLICATIONS FOR COMMODITY MARKETS AND CANADA'S AGRI-FOOD SECTOR

This report's intent is to analyze the 2002 US "Farm Bill" to determine whether it is production and trade distorting, and how it will affect commodity markets as well as how it will affect Canadian agri-food. The objectives are to:· To explain the producer subsidy programs and how payments under these programs will be calculated;· To explain other provisions in the Farm Bill that are of interest to the Canadian agriculture and agri-food industry;· To discuss the implications of the producer subsidy programs for US producers' decisions to grow the major commodities and pulses, and the likely implications of those decisions for market prices;· To discuss the implications of other Farm Bill provisions, including trade and conservation programs, and country of origin labeling;· To discuss the implications of the Farm Bill for the current round of WTO negotiations; and· To provide some initial thoughts on how governments and firms in Canada and other countries might respond to the Farm Bill.To accomplish the objectives, we provide a thorough description of the Act and its provisions. We apply it to a fictitious 1000 acre farm in the US Midwest to show its financial consequences. We also use production costs from certain regions of the US to determine the level of incentive built into the Act.