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Identifying and Reducing Overlap in Farm Program Support

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  • Cooper, Joseph C.
  • O'Donoghue, Erik J.

Abstract

The current debate surrounding the 2012 Farm Act stresses cutting costs while maintaining, or even strengthening, farmers’ “safety net.” One way to cut costs is to reduce or eliminate potential overlap of farm program payments. Using simulations, we explore the interaction between the Average Crop Revenue Election (ACRE) program and a revenue assurance (RA) crop insurance program for corn, soybean, and wheat farmers in IL, MN, and SD. Additionally, we examine whether receiving benefits from multiple programs (an RA program, the Supplemental Revenue (SURE) program, and an ad hoc disaster assistance program) distorts farmers’ business decisions. We find overlap between ACRE and crop insurance, which could lead to budgetary savings if these two programs were to be integrated. Moreover, despite policymakers explicitly incorporating insurance indemnities into SURE payment calculations, access to both programs can alter behavior. Finally, in a counter-factual analysis, we show that removing ad hoc payments from the SURE would likely alter farm behavior.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 103261.

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Date of creation: 2011
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Handle: RePEc:ags:aaea11:103261

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Related research

Keywords: commodity support; average crop revenue election; Supplemental Revenue Assistance; expected utility; corn; wheat; soybeans; Agricultural and Food Policy; Production Economics; Risk and Uncertainty;

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  1. Zulauf, Carl R. & Schnitkey, Gary D. & Langemeier, Michael R., 2010. "Average Crop Revenue Election, Crop Insurance, and Supplemental Revenue Assistance: Interactions and Overlap for Illinois and Kansas Farm Program Crops," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(03), August.
  2. Robert J. Hauser, 2004. "Relationships among government payments, crop insurance payments and crop revenue," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(3), pages 353-368, September.
  3. Chad E. Hart & Bruce A. Babcock, 2005. "Loan Deficiency Payments versus Countercyclical Payments: Do We Need Both for a Price Safety Net?," Center for Agricultural and Rural Development (CARD) Publications 05-bp44, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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