This study tests the hypothesis that lobbying by food firms does not contravene United States farm policy, particularly commodity programs. The research is important in the analysis and understanding of the difficulties of designing and reforming agricultural policies. If farm programs significantly benefit downstream food firms, there is effectively no countervailing power to the farm lobby because (1) farm input supply and marketing firms have been shown to benefit from existing farm policies - and have therefore no incentive to lobby against the policies - and (2) consumers and taxpayers, two important stakeholders in agricultural policies, are known to be quite inefficient in lobbying due to their "large-group" characteristics. Information on food firms' total lobbying expenditure is combined with the behavioral assumption of profit maximization to generate an econometric model of lobbying expenditure allocation by food firms. The model is used to carry out the test. The results indicate that food firms do not lobby to influence agricultural commodity markets. The ultimate implication is that the food processing sector of the agribusiness sector has no serious incentive to act as a countervailing power to the farm lobby in the forming or reforming of agricultural policy. Thus, attempts to reform agricultural policies will be resisted by a coalition of agribusiness and the farm sector. A limitation of the study is that the hypothesis test does not separate agricultural commodities from other inputs to food firms. However, because agricultural commodities constitute almost half of the food firms' overall input costs, the test provides evidence about lobbying for agricultural policies.

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Working or Discussion Paper
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Staff Paper P94-25

 Record created 2017-04-01, last modified 2017-04-04

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