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

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  • Cooper, Joseph

Abstract

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.

Suggested Citation

  • Cooper, Joseph, 2009. "Payments under the Average Crop Revenue Program: Implications for Government Costs and Producer Preferences," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(1), pages 49-64, April.
    • Handle: RePEc:cup:agrerw:v:38:y:2009:i:01:p:49-64_00
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    1. Cooper, Joseph C. & Langemeier, Michael R. & Schnitkey, Gary D. & Zulauf, Carl R., "undated". "Constructing Farm Level Yield Densities from Aggregated Data: Analysis and Comparison of Approaches," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49216, Agricultural and Applied Economics Association.
    2. Woolverton, Andrea E. & Edwin, Young, 2009. "Factors Influencing ACRE Program Enrollment," Economic Research Report 55954, United States Department of Agriculture, Economic Research Service.
    3. Cooper, Joseph C., 2009. "Economic Aspects of Revenue-Based Commodity Support," Economic Research Report 55838, United States Department of Agriculture, Economic Research Service.
    4. Claassen, Roger & Carriazo, Fernando & Cooper, Joseph C. & Hellerstein, Daniel & Ueda, Kohei, "undated". "Grassland to Cropland Conversion in the Northern Plains: The Role of Crop Insurance, Commodity, and Disaster Programs," Economic Research Report 262239, United States Department of Agriculture, Economic Research Service.
    5. Joseph Cooper & Carl Zulauf & Michael Langemeier & Gary Schnitkey, 2012. "Implications of within county yield heterogeneity for modeling crop insurance premiums," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(1), pages 134-155, May.

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