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, ERS, USDA
In this report ... Chapters are
in Adobe Acrobat PDF format.
- Abstract, Contents, and Summary, 244 kb.
- Introduction and Overview, 1,083 kb.
- Stochastic Evaluation of Commodity Support Program Alternatives, 967 kb.
- Provisions of Revenue-Based Support Determine Much, 75 kb.
- Conclusion, 69 kb.
- Appendix A—A Nonstochastic Comparison of Price- and Revenue-Based Support, 153 kb.
- Appendix B—Technical Details of the Stochastic Analysis, 123 kb.
- Appendix C—Relationship Between the Mean and Variability of Revenue and the Price-Yield Correlation, 93 kb.
- References, 84 kb.
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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Updated date: April 7, 2009
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