While Senatorial procedural issues have halted debate on the 2007 Farm Bill, it gives Cornbelt farmers the chance to examine one of the key commodity program proposals to determine how hard they want to lobby their Senators to vote it up or down. That is the Average Crop Revenue (ACR) program. Farmers would have a different mechanism for computing the USDA safety net. Critics say it offers no change from the status quo, but most farmers would disagree.

The ACR program provides crop subsidy payments based on state-level revenue per acre falls below a trigger price for a given crop. The revenue trigger is a computation of price and yield. The proposal being debated by the Senate would give farmers a choice of the ACR or a continuation of direct and countercyclical payments and non-recourse loans, but once a farm shifted to the ACR it would not be able to go back to the traditional program.

University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) computed agricultural economic variables over the 5 year life of the Farm Bill, and compared the programs with and without the ACR component. The outcome not only gives the Congress an idea on how much money the program would cost, but also gives farmers an idea of how they would fare under the ACR program. FAPRI estimated that 70% of farmers with wheat, barley, oats and sunflowers would participate, 60% of farmers with soybeans would participate, and 50% of farmers with corn and sorghum would participate.

Under the legislation being debated the ACR program would not be available until the 2010/11 crop year, no payments would be made until after Oct 1. 2011. For the benefit of Congressional spending limits, the cost of the program in the final year of the Farm Bill would not be charged until a new Farm Bill is written.

ACR Program details:
• There are no direct or countercyclical payments, and if a marketing loan is taken on a crop, the loan must be repaid in cash. Crop forfeiture is not an option.
• ACR program participants are paid $15 per base acre on all program crops.
• An additional payment is made if actual statewide revenue (price X yield) is less than a program guarantee. The price factor would be used to determine crop insurance indemnities under a harvest price revenue program.
• The guarantee is computed from trend yields and a 3-year moving average of prices, but may not change more than 15% per year, and equals 90% of that revenue calculation.
• The payment rate on a given farm is further adjusted by the crop insurance APH yield and how it compares to the state trend yield, and the revenue component is paid on 85% of base acres.
• Payments would be made in October, after the marketing year ends, which is 12 months after the harvest of the crop.

In addition to saving money because of the delayed start of the program and shifting the expense for the final year of the Farm Bill into the next Farm Bill, FAPRI says there is very little difference between the ACR and traditional program for the producer. The impact on the commodity market is also minimal, since the program is voluntary. FAPRI says a mandatory program would change acreage balances, since benefits are less for cotton and rice producers, who would opt for more lucrative crops.
• FAPRI estimates the ACR program would mean a $5.07 per acre net loss on corn, an $11.75 net gain per acre on soybeans, and a $2.73 net gain on wheat per acre compared to the traditional program.
• Under the current parameters for the ACR proposal, producers would receive anywhere from $18 (peanuts) per base acre to $26 (soybeans) per base acre. That would be the case as long as per acre revenues held above trigger levels, as they would be in today’s market scenario. However, when the revenue portion of the program is triggered, payments would be much larger because of the fall in either yields or prices or both.

Summary:
The Average Crop Revenue program being considered in Congress for the 2007 Farm Bill would eliminate direct and countercyclical payments, and make changes in the loan program, in return for a per acre payment and a complex mechanism that triggers a payment when commodity revenue falls. The program would be voluntary for farmers who would have the choice of saying with the traditional farm safety net program. While the program is designed to save money, it does not begin until halfway through the tenure of the new Farm Bill, and the final year payments are made after the 2007 Farm Bill expires.