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Abstract
The 1983 Farm Program included a provision for Payment-in-Kind (PIK) as part of the program benefits for producers who participated in the program. The PIK concept used in 1983 was similar to that employed in the farm programs of the 1960s, but with a larger magnitude. In addition to the PIK provision, the program also provided target price protection, a loan provision, paid land diversion, and a deficiency payment provision. A simulation model was used to estimate program participation based on economic considerations on the part of the producers. Expected variable production costs, yields, and anticipated market prices were the primary variables. The simulated participation corresponded very closely with actual participation. The farm program provisions were then varied to simulate the impact on producer participation, reduced production, program costs, and the impact on the economy of the farm sector. The simulation model is designed to be commodity or commodity group specific, but can easily be adapted to any commodity. Corn and grain sorghum participation and simulated response to program changes were evaluated specifically. The simulation model is designed to evaluate a commodity program with user determined program provisions, and PIK does not have to be included. Producer price expectations were based on the December 1983 futures prices during the sign-up period.
