Provisions and Potential Impacts of the Average Crop Revenue Election (ACRE) Program

Kent Olson and Matthew R. DalSanto

No 42980, Staff Papers from University of Minnesota, Department of Applied Economics

Abstract: The Average Crop Revenue Election (ACRE) program is a new, optional safety net for farmers provided by Congress in the Food, Conservation, and Energy Act of 2008 (commonly called the farm bill). Choosing this new safety net is not an obvious choice. Farmers who choose to elect this program also must accept a 20% reduction in direct payments and a 30% reduction in marketing assistance loan rates. In this paper, we describe the general provisions and calculations of the ACRE and counter-cyclical payment (CCP) programs and present our estimates of potential payments under the two programs. If prices are expected to remain at or above the ACRE price guarantee, CCP is the best choice since government payments are expected to be lower under the ACRE program—as shown in the first price scenario. However, if national market prices fall sufficiently, the ACRE program becomes the best choice since ACRE payments will be higher—as shown in the third price scenario. The national market price does not have to be much lower for ACRE to be the preferred choice—as shown for wheat-soybean farms in the third price scenario. It is essentially impossible to describe simple rules of thumb or breakeven prices to help farmers decide whether to sign up for ACRE or stay with CCP. This difficulty is due to several factors: the complexity of the program rules, the requirement to sign up all program crops on a farm, the potential government payment for only one crop even though direct payments and loan rates are cut for all crops, the uncertainty of future prices and yields, and the variation in how an individual farm’s yields vary in relationship to its State yields.

Keywords: Agricultural and Food Policy; Crop Production/Industries (search for similar items in EconPapers)
Pages: 18
Date: 2008-09
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:umaesp:42980

DOI: 10.22004/ag.econ.42980

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