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Assuming wealth effect elasticities for each of the seven U.S. crops covered by PFCs fall within the range provided by these corn and soybean estimates and assuming that farmers' wealth increases by the full value of PFC pay- ments implies a possible aggregate acreage impact of 180,000 to 570,000 acres annually.
Results suggest that crop insurance subsidies generate small shifts in aggregate plantings. For eight major field crops, annual federal crop insurance subsidies averaged $1.4 billion during 1995-98. Assuming a con- tinuation of this subsidy level, aggregate acreage in the long run was estimated to increase annually by approximately 600,000 acres (0.2%).2 Interestingly, this estimated crop insurance impact exceeds the PFC impact estimated in the previous section even with a lower subsidy level, because crop insurance program benefits are more directly coupled to the production decision.
A recent study (Westcott and Price) ana- lyzed how the marketing loan program can lead to market distortions. The study uses the USDA's 1999 baseline and simulations of an econometric model for the U.S. agri- cultural sector (FAPSIM), focusing on the marketing loan program for soybeans. From a scenario with soybean price expectations 40 to 50? below the soybean loan rate in 1999 and 2000, soybean marketing loans were estimated to add 1.1 to 1.2 million acres to soybean plantings in those years. Higher net returns for soybeans drew some of this increase in soybean plantings from competing crops (cross commodity effects), particularly corn, sorghum, and upland cotton. However, total planted acreage increased 100,000 to 200,000 acres. Importantly, acreage distor- tions were largely confined to those years when prices were below the loan rate for soybeans, years when marketing loan bene- fits augmented market returns and distorted production incentives. Only small effects on plantings in subsequent years occurred when prices rose above loan rates and marketing loan benefits were no longer present.
If disaster assistance is expected with some probability when prices or production fall to low levels, such expectations modify the bot- tom of the revenue distribution. The result- ing increase in expected producer returns may lead to higher production than would otherwise occur. In so doing,
these programs encourage producers to keep riskier land in production.
these programs encourage producers to keep riskier land in production.
n.b. No estimate for disaster insurance was provided.
So the net increase here is ~a couple million acres of production. Which is a couple orders of magnitude smaller than the total irrigated crop land (~200 million acres).
Agricultural use is about ~40% of consumption, so farm subsidies contribute to 0.4%. Personal use is 11%. So eliminating farm subsides would be equivalent in water consumption patterns to 11 million people. That's assuming that consumption would scale linearly to number of people, and there's a good reason to think otherwise (consumption has leveled off in recent decades, IIRC, despite the increase in population).
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