What is in this article?:
Comparing ACRE and DCP
Electing ACRE results in the ACRE revenue program replacing the counter-cyclical U.S. price program. To facilitate a comparison of these two programs, an implied ACRE price was calculated. The calculation used the ACRE benchmark revenue that underlay the revenue guarantees in Figure 2 and an expected yield per planted acre for the U.S. for 2013. An expected yield was used instead of the historical ACRE benchmark yield to put the ACRE implied price on a more current basis.
If available, the expected yield was from the USDA, OCE baseline estimate released in February 2013. If not available, a trend-line yield was estimated for 2013 using USDA, NASS yields per planted acre beginning with the 1974 crops. Expected 2013 yield in bushels per planted acre are 61 for barley, 160 for corn, 58 for sorghum, 44 for soybeans and 38 for wheat. Expected 2013 yields in pounds per planted acre are 680 for upland cotton, 3,147 for peanuts, 6,932 for long-grain rice and 8,013 lbs. for medium grain rice. The implied ACRE prices for 2013 are presented in Figure 3.
For all the crops examined here, ACRE's implied price is higher than the target price (see Figure 4). However, notable differences exist. For crops grown in the Midwest and upper plain states, ACRE's implied price is at least 49% higher than the target price. In contrast, ACRE's implied price is closer to the target price for the crops associated with the south, especially upland cotton and peanuts. In summary, the ACRE program appears to offer higher risk assistance than the counter-cyclical price program, except possibly for upland cotton and peanuts.
Electing ACRE also results in a 20% reduction in direct payments. Figure 5 presents the average 20% reduction per base acre for the 9 U.S. crops that receive direct payments. This reduction ranges from $0.20 per base acre of oats to $19.24 per base acre of rice. The average U.S. reduction per corn and soybean base acre is $4.87 and $2.30, respectively. The values in Figure 5 include the provision that direct payments are made on only 85% of base acres.