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Abstract
In this paper, we examine the impacts of changes in Canada’s AgriStability program on crop
allocation, particularly the change in the payment trigger associated with the shift from
Growing Forward (GF) to Growing Forward 2 (GF2). To examine whether this change could
affect production decisions, and thereby potentially violate the WTO’s ‘green box’ criteria,
we construct farm management models for representative farms in six different Alberta
regions. To incorporate risk and uncertainty into the farm model, we assume that, instead of
maximizing overall gross margin, a farmer varies her crop activities to maximize expected
utility subject to technological and market constraints. The models are calibrated using
positive mathematical programming (PMP), which then facilitates their use for policy
analysis; however, PMP is not straightforward in the case of expected utility maximization
because a risk parameter also needs to be calibrated. Possible ways to address this issue are
examined. Results indicate that the initial introduction of the AgriStability program tilted
farmers’ planting decisions towards crops with higher returns and greater risk, but that a
change in the AgriStability payout trigger (going from GF to GF2) would not further alter
land-use decisions. However, the latter shift does reduce indemnities and farmers’ expected
profits; increases in farmers’ aversion to risk will lead to changes in crop allocations,
although it is not clear to what extent it impacts trade.