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Raising agricultural price policies on costs of production is commonlyapplied. although with reservations by agricultural economists.Agricultural economists' concerns are centered on the problems withassigning values to the contributions of durable inputs and to the value ofthose inputs supplied by the farm operator and the operators' household.Some of these expressed reservations of agricultural economists can bereduced if focus is placed on the policy goal to be achieved in developingthe production cost estimate. The policy goal affects the selection of thepopulation on which the cost estimates are made and the items of cost to beincluded in the cost estimate.Policies designed to provide incentives to producers must be targetedtoward the costs of those producers supplying the major portions of outputfor the commodities in questions. Thus, the costs of an often relativelysmall number of large producers become heavily weighted. However, policiesto sustain the income of selected groups of farmers must be based on thecosts of production experienced by a large number of small farmers.Costs estimates should distinguish between financial costs andeconomic costs. Structural differences occur in the cost structure amongfarmers. In setting prices, major attention should be given to the annualand capital replacement financial costs. Price policies cannot be directedto meet a specifically targeted economic cost.

Subject(s): Agricultural and Food Policy

Issue Date: 1985-07

Publication Type: Report

PURL Identifier:

Total Pages: 11

Series Statement: ANRE Research Report

AR: 85-2

Record appears in: Colorado State University > Department of Agricultural and Resource Economics > Research Reports

Autor: Skold, Melvin D.


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