Economic Aspects of Revenue-Based Commodity Support
by Joseph Cooper
Economic Research Report No. (ERR-72) 49 pp, April 2009
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 yieldbased 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.
Keywords: Domestic commodity support, revenue-based support, marketing loan benefits, countercyclical payments, disaster assistance, Federal crop insurance
In this publication...
- Report summary,
- Entire report,
- Abstract, Contents, and Summary,
- Introduction and Overview,
- Stochastic Evaluation of Commodity Support Program Alternatives,
- Provisions of Revenue-Based Support Determine Much,
- Appendix A—A Nonstochastic Comparison of Price- and Revenue-Based Support,
- Appendix B—Technical Details of the Stochastic Analysis,
- Appendix C—Relationship Between the Mean and Variability of Revenue and the Price-Yield Correlation,
Charts and graphs (in .png format) from this report are available in the .zip file listed below. The .zip file also contains a document (readme.txt) that lists the name and title of each chart or graph file.
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