What is in this article?:
- 7 Questions About the Farm Bill
- Question 2: Will the programs focus on across-year or on within-year protection?
- Question 3: Will the across-year programs focus on price or revenue protection?
- Question 4: Will the support levels for across-year programs react to changes in market conditions?
- Question 5: Will the program use historical or planted acres to indemnify producers?
- Question 6: How much overlap will be allowed between farm bill programs and crop insurance?
- Question 7: Does a farm have to have a loss to trigger payments?
Designs of the farm bill programs will largely answer the following seven questions. In some cases, these are contentious issues across regions and across crops. For example, some may want a revenue program while others desire a target price program. Hence, resolution of these issues likely will require compromise, perhaps leading to unclear answers. It is highly unlikely that any party to the farm bill negotiations will receive all their desired answers to the above questions and will therefore have to choose which of these questions are more important to them.
Question 3: Will the across-year programs focus on price or revenue protection?
It is easier to forecast payments with a price program. Prices lower than the support price will results in payments. In contrast, payments by a revenue program depend on low revenue, not low price. Low prices may be offset by high yields resulting in no payments. Thus, forecasting payments by a revenue program requires consideration of the interactions of yield and price when determining revenue and thus revenue program payments. On the other hand, low revenues, not low prices, are generally a more accurate indicator of poor financial performance. Thus, revenue programs generally are viewed as targeting payments better to years in which revenues are low.