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

Published online by Cambridge University Press:  15 September 2016

Joseph Cooper
Joseph Cooper*
Affiliation:
Economic Research Service (ERS) of the U.S. Department of Agriculture in Washington, D.C.
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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.

Keywords

domestic supportcounter-cyclical paymentsrevenuepricecornyieldpairs bootstrapkernel densitycombinatorial optimization
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 38 , Issue 1 , April 2009 , pp. 49 - 64
Copyright
Copyright © 2009 Northeastern Agricultural and Resource Economics Association 

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