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Payments under the Average Crop Revenue Program: Implications for Government Costs and Producer Preferences

  • Cooper, Joseph C.

This paper develops a stochastic model for comparing payments to U.S. corn producers under the U.S. Senate’s Average Crop Revenue Program (ACR) versus payments under the price-based marketing loan benefit and countercyclical payment programs. Using this model, the paper examines the sensitivity of the density function for payments to changes in expected price levels. We also assess the impact of the choice of yield aggregation used in the ACR payment rate on the mean and variance of farm returns. We find that ACR payments lower the producer’s coefficient of variation of total revenue more than does the price-based support, although ACR may not raise mean revenue as much. While corn farmers in the heartland states might still prefer to receive the traditional forms of support when prices are low relative to statutory loan rates and target prices, this outcome is not necessarily the case for farmers in peripheral production regions.

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File URL: http://purl.umn.edu/49864
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Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 38 (2009)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:arerjl:49864
Contact details of provider: Web page: http://www.narea.org/

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  1. Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 508-519.
  2. Barry K. Goodwin & Alan P. Ker, 1998. "Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 139-153.
  3. Barry K. Goodwin & Ashok K. Mishra, 2006. "Are “Decoupled” Farm Program Payments Really Decoupled? An Empirical Evaluation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 73-89.
  4. Babula, Ronald A. & Ruppel, Fred J. & Bessler, David A., 1995. "U.S. corn exports: the role of the exchange rate," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 13(2), November.
  5. Victor Fenton & Gallant, A. Ronald, 1996. "Qualitative and Asymptotic Performance of SNP Density Estimators," Working Papers 96-17, Duke University, Department of Economics.
  6. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  7. Anton, Jesus & Mouel, Chantal Le, 2004. "Do counter-cyclical payments in the 2002 US Farm Act create incentives to produce?," Agricultural Economics, Blackwell, vol. 31(2-3), pages 277-284, December.
  8. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
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