FAPRI Releases Study of Senate Farm Bill

May 30, 2012 06:10 AM

The Food and Agricultural Policy Research Institute released a report (link) looking at some of the key provisions of the farm bill passed by the Senate Ag Committee:

The following is a a summary of the report on page 1, which is reproduced below:

The U.S. Senate Committee on Agriculture, Nutrition and Forestry approved the "Agriculture Reform, Food and Jobs Act of 2012" on April 26, 2012. This report examines the possible consequences of several key provisions in the proposed legislation.

  1. The elimination of the current Direct and Countercyclical Payment (DCP) and Average Crop Revenue Election (ACRE) programs.
  2. The establishment of the Agriculture Risk Coverage (ARC) program and the Stacked Income Protection Plan (STAX).
  3. The reduction in the acreage cap for the Conservation Reserve Program (CRP) from the current 32 million acres to 25 million acres by 2017.


Models maintained by the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) are used to estimate possible impacts of these proposed policy changes. Results are presented relative to a baseline prepared in early 2012 that assumes a continuation of existing farm policies. The analysis uses a stochastic approach that considers 500 possible future outcomes for agricultural commodity markets to examine the consequences of continued market volatility.

Eliminating the DCP and ACRE programs would reduce government farm program outlays, farm income and agricultural land values, but would only have modest impacts on agricultural commodity markets. By itself, eliminating DCP and ACRE would result in a small reduction in the total area devoted to major program crops and marginally higher crop prices.

The new ARC and STAX programs would make payments when per-acre revenues fall sufficiently below benchmark levels. Both programs cover relatively "shallow" losses; other crop insurance policies would continue to provide protection against larger losses.

Relative to a scenario that only eliminates DCP and ACRE, introducing ARC and STAX results in a little more land used for crop production and slightly lower crop prices.

  • Average payments to producers under ARC and STAX would be lower than payments under DCP and ACRE, so the net effect of these changes is to reduce federal farm program spending by an estimated $18 billion over the next ten years.
  • Relative to the baseline, the decline in budgetary outlays is proportionally larger for rice, peanuts and wheat than it is for other crops. Soybean outlays increase slightly.
  • Estimated payments under ARC average approximately 2 percent of the market value of eligible crops. ARC payments are proportionally larger for corn and wheat than for rice and peanuts.
  • STAX net indemnities average about 5 percent of the market value of cotton production.
  • Budgetary outlays under ARC and STAX will vary greatly, but because both programs cover only a certain band of revenue losses, the budgetary exposure does have limits.

Reducing the CRP acreage cap would result in increased crop production and lower crop prices.

Other provisions of the Senate committee-passed bill are not examined in this report.

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