Farm price distortions, chemical use, and the environment

Excerpt

CROP surpluses have constituted a persistent and conspicuous problem for U.S. agriculture. These surpluses appear to be particularly wasteful when they are caused by chemical inputs that pollute the environment. Past surpluses resulted in part from the encouragement of farm price support programs to increase application of chemicals and other nonland inputs. Initiatives during 1985 farm bill deliberations and, more recently, during negotiations under the General Agreement on Tariffs and Trade have focused on means toeliminate farm program influences on input use. More modest initiatives, undertaken in anticipation of the 1990 farm bill discussions, would reduce program influences over input use while preserving much of past price support program structures. The latter are stimulated partly by environmental and conservation concerns (2, 7).

Current programs and proposed policy options have several implications. Although some farm programs and water quality are in conflict, complementarities between farmers' goals and water quality also exist. Some options offered mainly to reduce price and resource use distortions could benefit both farmers and the environment.

Subsidies for a commodity or a production input raise profits, which can encourage firms to use more inputs, such as fertilizer or irrigation water, to produce more of the profitable …