A Revenue-Based Alternative to the Counter-Cyclical Payment Program

Joseph Cooper ()

No 6197, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper develops a stochastic model for comparing payments to U.S. corn producers of a revenue-based counter-cyclical payment (R-CCP) that is offered as an alternative in the 2007 House "Farm Bill" (H.R. 2419) to the current price-based CCP (P-CCP). We minimize the potential for miss-specification bias in the model by using nonparametric and semi-nonparametric approaches as specification checks in the model. Using this model, the paper examines the sensitivity of the density function for payments to changes in expected price levels. A mean-variance utility function approach is used to assess producer preferences for choice of CCP program alternative. The results show that as risk reduction instruments at the farm level, there appears to be little effective difference between the P-CCP and the R-CCP. At the national level, however, the R-CCP has the potential for increasing Federal budgetary exposure relative to the P-CCP when expected prices are low.

Keywords: Agricultural and Food Policy; Crop Production/Industries (search for similar items in EconPapers)
Pages: 32
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea08:6197

DOI: 10.22004/ag.econ.6197

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