Some agricultural economists prefer the 1996 Farm Bill to traditional farm legislation. One of the things they especially like about it is decoupled payments. If payments must be made, those economists reason, then the payments should be decoupled that is they should not be tied to production decisions. These agricultural economists like decoupled payments because, theoretically, acreage-use decisions are made independently of the fixed payments. And, of course, the contract payments of the 1996 Farm Bill are fixed.
Farmers receive the same contract payment no matter which crops they plant.
While decoupled payments sound like just another name for planting flexibility, it s more inclusive than that. From the perspective of many economists, decoupled payments is planting flexibility on steroids. It not only includes the idea of farmers planting whatever they want, but, just as importantly, it explicitly includes not planting anything at all. Thus, with decoupled payments, economists expect the total acreage of major crops to fall in response to a decline in the prices of all major crops, in addition to observing changes in the crop mix if the prices of some crops change more than others. Hence, supply of the major crops should be more responsive to changes in general price levels when payments are decoupled.