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Economic Aspects of Revenue-Based Commodity Support

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  • Cooper, Joseph C.

Abstract

Interest in revenue-based commodity support is evident in the Food, Conservation and Energy Act of 2008 (the 2008 Farm Bill), which gives eligible producers the option of participating in the Average Crop Revenue Election (ACRE) program in return for reductions and eliminations of payments under more traditional programs. This report examines how the uncertainty in U.S. domestic commodity support payments for corn may differ between traditional-style approaches (defined as price-based payments plus yield-based disaster payments) to support and two revenue-based support scenarios. Variability around the total expected annual payment was found to be lower under revenue-based support, as was the probability of high payments. These results suggest potential advantages to this type of support, both in terms of lower budgetary uncertainty for the Federal Government and in better ensuring that agricultural support outlays stay below a certain ceiling. In addition, the volatility of corn revenue was found to be lower in almost all corn producing counties under the revenue-based alternatives than under the traditional price-based approaches.

Suggested Citation

  • Cooper, Joseph C., 2009. "Economic Aspects of Revenue-Based Commodity Support," Economic Research Report 55838, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:55838
    DOI: 10.22004/ag.econ.55838
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    References listed on IDEAS

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    1. Woolverton, Andrea E. & Edwin, Young, 2009. "Factors Influencing ACRE Program Enrollment," Economic Research Report 55954, United States Department of Agriculture, Economic Research Service.
    2. Arriola, Christine & Dismukes, Robert & Coble, Keith H. & Ubilava, David & Cooper, Joseph C., 2011. "Alternatives to a State-Based ACRE Program: Expected Payments Under a National, Crop District, or County Base," Economic Research Report 262235, United States Department of Agriculture, Economic Research Service.
    3. 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.
    4. Hungerford, Ashley & O'Donoghue, Erik, 2016. "Federal Crop Insurance Options for Upland Cotton Farmers and Their Revenue Effects," Economic Research Report 249774, United States Department of Agriculture, Economic Research Service.
    5. Jansen, Jim A. & Lubben, Bradley D. & Stockton, Matthew C., 2012. "Analyzing Crop Revenue Safety Net Program Alternatives and Impacts on Producers and Program Costs," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119784, Southern Agricultural Economics Association.
    6. Song, Feng & Zhao, Jinhua & Swinton, Scott M., 2010. "Alternative Land Use Policies: Real Options with Costly Reversibility," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61510, Agricultural and Applied Economics Association.

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