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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.

Suggested Citation

  • Cooper, Joseph C. & O'Donoghue, Erik J., 2011. "Identifying and Reducing Overlap in Farm Program Support," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103261, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea11:103261
    DOI: 10.22004/ag.econ.103261
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    References listed on IDEAS

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    1. Robert J. Hauser, 2004. "Relationships among government payments, crop insurance payments and crop revenue," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(3), pages 353-368, September.
    2. 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(3), pages 1-15, August.
    3. Claassen, Roger & Morehart, Mitchell J., 2006. "Greening Income Support and Supporting Green," Economic Brief 34097, United States Department of Agriculture, Economic Research Service.
    4. 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.
    5. Dismukes, Robert & Arriola, Christine & Coble, Keith H., 2010. "ACRE Program Payments and Risk Reduction: An Analysis Based on Simulations of Crop Revenue Variability," Economic Research Report 262248, United States Department of Agriculture, Economic Research Service.
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    Keywords

    Agricultural and Food Policy; Production Economics; Risk and Uncertainty;
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