FAPRI Considers Three Scenarios in Farm Bill Analysis
The farm bill analysis released by the Food and Agricultural Policy Research Institute at the University of Missouri looks at three alternatives to a current farm policy baseline to see how different commodities might be impacted. The first scenario retains all assumptions of the baseline except that the Direct Counter-cyclical and Average Crop Revenue Election programs are eliminated beginning with the 2013 crop year. The analysis shows that at one extreme - soybean producers would lose 11-dollars per base acre in DCP payments and three-dollars per planted acre in ACRE payments. At the other extreme - rice producers would lose 96-dollars per base acre in DCP payments. The report states that corn producers would lose more payments per acre than wheat producers in absolute terms - but the proportional effect on wheat producer income would be greater because of the market value of corn production per acre versus that for wheat. Eliminating DCP and ACRE also results in a slight increase in market prices. This increase in the value of market sales does offset a small portion of the loss in government payments. Still - the report shows that market receipts and government payments fall considerably relative to the baseline.
Scenario 2 introduces the new ARC and STAX programs in 2013, eliminates DCP and ACRE and revises the cotton marketing loan to allow the loan rate to decline under certain conditions. FAPRI estimated average ARC payments at about 20-dollars per acre for corn, 10-dollars per acre for soybeans, seven-dollars per acre for wheat, 16-dollars per acre for rice and 14-dollars per acre for peanuts. The STAX net indemnities average 41-dollars per acre. The report notes that payments can be quite large when the decline in revenues relative to a benchmark is large enough - but many STAX and ARC outcomes result in no payments to producers. The averages reported reflect the distribution of possible benefits - including outcomes where no payments occur - and where they are at their maximum value.
The report says the difference between base acreage and planted acreage has important implications for the net effect of the program changes for returns on particular farms. Those with a lot of base acreage relative to planted acreage will be most affected by the loss of DCP payments - while those with more planted acreage than base acreage are more likely to benefit from the shift to ARC and STAX.
In the final scenario - the FAPRI report makes the same assumptions as Scenario 2 - but introduces the new lower cap on CRP enrollment. To see the full report - visit www dot fapri dot Missouri dot edu (www.fapri.missouri.edu). You'll find a link right there on the homepage under the heading recent work.
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