AGEC 429 Exam 2-Farm bills

1990 Farm Bill — Main goal

Reduce government stocks and costs while making U.S. crops more competitive internationally.

1990 Farm Bill — Carrot

Marketing loans: let farmers receive the loan rate even when market prices were lower.

1990 Farm Bill — Stick

Acreage Reduction Program (ARP): required farmers to idle a percentage of acreage.

ARP — What does it do?

Reduces planted acreage to reduce production and help support commodity prices.

Slippage

Production falls by less than the ARP percentage because farmers can increase yields on remaining acres.

1990 Farm Bill — Target prices

Used deficiency payments to support farm income when prices fell below specified levels.

1990 Farm Bill — Nonrecourse loan rate

Provides a price floor mechanism; farmers can forfeit eligible crops to repay the loan.

1996 Farm Bill — Nickname

Freedom to Farm.

1996 Farm Bill — Main change

Moved toward market-oriented farming and reduced government control over planting decisions.

1996 Farm Bill — PFC payments

Production Flexibility Contract payments; fixed payments generally decoupled from current production and prices.

AMTA

Agricultural Market Transition Act; authorized fixed PFC payments under the 1996 Farm Bill.

1996 Farm Bill — Why a success?

Farmers gained planting flexibility and payments were less tied to current production.

1996 Farm Bill — Why a failure?

Low crop prices exposed farmers to losses; fixed payments did not automatically rise, prompting emergency aid.

2002 Farm Bill — Major programs

Direct payments, counter-cyclical payments (CCPs), and marketing loan benefits.

2002 Farm Bill — Base and yield updates

Allowed base acreage and payment yields to be updated for the first time since their creation.

Direct payments (DPs)

Fixed payments generally decoupled from current production and market prices; introduced as such in 2002.

Counter-cyclical payments (CCPs)

Payments increase when the effective price falls below the target price; coupled to price.

Marketing Loan Gains (MLGs) / LDPs

Benefits when market price is below the loan rate; coupled to market price.

CCP formula

Target price − direct payment rate − higher of market price or loan rate; not below zero.

MLG/LDP formula

Loan rate − market price, when market price is below the loan rate.

2008 Farm Bill — Major new option

Average Crop Revenue Election (ACRE).

ACRE — Payment trigger

Required both a state-level revenue loss and an individual farm revenue loss.

ACRE — What is it coupled to?

Revenue, which reflects both price and yield.

2014 Farm Bill — Major programs

Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC).

2014 Farm Bill — What happened to ACRE?

ACRE was eliminated and replaced by new choices including ARC and PLC.

PLC — What triggers payment?

The effective price falls below the statutory reference price; coupled to price.

ARC — What triggers payment?

Actual revenue falls below a revenue guarantee; coupled to revenue.

Which bill introduced CCPs?

2002 Farm Bill.

Which bill introduced ACRE?

2008 Farm Bill.

Which bill introduced ARC and PLC?

2014 Farm Bill.