Do Government Programs Affect Farm Prices?

We often discuss the variables that play a role in farm prices, particularly grain prices and interest rates.  However, there are many other factors that help shape the market as well and one of those is government programs.  A recent article published on the University of Illinois Farm Doc Daily website highlights the impact of direct payments (The Influence of Direct Payments on US Cropland Values).  As the article discusses, the direct payment program was not directly tied to the current price for grain, but was based on historical base acres.  This program gave producers a floor to help with budgeting and cash flows.  In the 2014 Farm Bill the direct payment program was eliminated in favor of an insurance-based system to help manage risk.  It remains to be seen how this may affect the income to farmers, and as a result, how land prices will be affected.  According to the article, a recent study showed that for every dollar in direct payments, land prices increased by $18 per acre.