Has the price behavior of major midwestern field crops changed after the farm policy reforms of 1996?
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Date
1996
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Publisher
The Ohio State University
Abstract
Objective of this analysis was to examine whether the mean, standard deviation, and correlation of annual U.S. crop year prices for barley, corn, oats, sorghum, soybeans, and wheat has changed after the 1996 farm bill was enacted. The mean, standard deviation, and correlations among these major Midwestern field crops did not differ statistically between three pre-1996 farm bill subperiods identified based on the type of farm policy in effect. The subperiods were crop years 1974/75 through 1981/1982, 1982/83 through 1990/91, and 1991/92 through 1996/97. Thus, these subperiods can be combined in this analysis. Compared with the 1974/75 through 1996/97 crop years, most mean prices were lower and most standard deviations were smaller during the post-1996 farm period involving the 1997/98 through 2002/03 crop years. Both a t-test and non-parametric rank-sum test found that only the corn and soybean mean annual price was significantly lower during the post-1996 farm bill period. An F-test found that the standard deviations did not differ significantly between the pre- and post-1996 farm bill periods. Although statistical significance was not found, 11 of 15 correlations were more positive during the post-1996 farm bill period and the average correlation was 29% higher. These correlations bear close watching because, if additional data confirm that they have increased by a statistically significant amount, then the common strategy of reducing risk by using these crops in rotation with each other has declined in value.