Tuesday, August 21, 2007

The Revenue Option

The House version of the farm bill has an option for producers to choose between the current program structure, where payments are triggered by, and computed based on, the amount by which national prices for the crop is less than the target price for the crop. That is, if wheat has a $4 target price, and farmers get $3.75, there's a $.25 per bushel payment. (Lots and lots of specifics ignored in this summary.)

The option would say, if wheat has a $4 target price and the national yield target is 25 bushels (being unrealistic to make for easy computation), the expected revenue per acre is $100. So if the national prices for wheat and the national actual yield are such as to make the actual revenue $10, there's a $10 per acre payment. See these links for more specific discussion:
Brad Lubben at U of Nebraska.
and U Of Illinois extension

I can think of lots of complications, particularly as the bill is written to make this a one-time option. But then, since I've left USDA, FSA has had experience with one-time options, so maybe I'm wrong about the complexity.

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