The term effective price refers to the price determined for a covered commodity during a specific crop year. This price is calculated by the Secretary of Agriculture to assess whether counter-cyclical payments should be made to farmers for that crop year. Essentially, it serves as a benchmark for evaluating the financial support available to agricultural producers when market prices fall below a certain level.
Effective price is primarily used in agricultural law, particularly within the context of commodity programs. It plays a crucial role in determining eligibility for counter-cyclical payments, which are designed to support farmers during periods of low market prices. This term is relevant for farmers, agricultural economists, and policymakers involved in commodity pricing and subsidy programs.
Here are a couple of examples of abatement:
For instance, if the effective price for corn in a given year is set at $3.50 per bushel and the market price drops to $2.50, farmers may qualify for counter-cyclical payments to help offset their losses. This ensures that farmers can maintain their operations despite fluctuating market conditions.
(hypothetical example) If the effective price for wheat is calculated at $5.00 per bushel, and the market price falls to $4.00, farmers may receive financial assistance based on this difference.
The effective price is defined under 7 USCS § 7901 and is further elaborated in 7 USCS § 7914, which outlines the calculation methods and criteria for counter-cyclical payments. These statutes are part of the broader agricultural policy framework in the United States.
| Term | Definition | Key Differences |
|---|---|---|
| Market Price | The current price at which a commodity is being sold in the market. | Market price reflects real-time trading conditions, while effective price is a calculated figure for subsidy purposes. |
| Counter-Cyclical Payment | Financial assistance provided to farmers when market prices fall below a certain threshold. | Counter-cyclical payments depend on the effective price and are triggered by market price fluctuations. |
If you are a farmer and believe that the effective price may impact your financial situation, consider the following steps:
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| Attribute | Details |
|---|---|
| Typical Calculation Period | Annually, for each crop year |
| Jurisdiction | Federal, under agricultural law |
| Related Payments | Counter-cyclical payments |
The effective price is the price calculated to determine eligibility for counter-cyclical payments for covered commodities in a crop year.