Agricultural subsidies in the United States and their effect on two annual Chilean crops: corn and wheat

Abstract

Abstract:The development strategies for Chile have been oriented toward a greater commercial openness. Chile and the United States signed a Free Trade Agreement (FTA) that has triggered controversies between producers directed to the internal market due to the production and export subsidies that this country carries out. This study analyzed the effect of subsidies granted by the United States to wheat (Tritricum aestivum) and corn (Zea mays) growers (Farm Bill 2002). For the study, Technical Standard sheet were drawn up, from which were determined the direct production costs and the gross margins. The variables used (market prices, subsidies, freight costs and tariffs) and determining the average variable costs allowed us to do a sensitivity analysis, thus establishing the minimum level of production that national farmers must achieve in order to maintain competitiveness while a free trade is in force. The signing of a trade agreement could provoke the eventual withdrawal of many Chilean producers from the business arena while at the same time, favoring consumers with lower prices for the goods derived from these grains.