Existing subsidy programs often fail to address the needs of farmers when disaster hits and are narrowly focused on supporting prices, not revenues.
A genuine government safety net should protect farmers against unexpected losses in revenue (price multiplied by yield) based on actual market conditions, rather than pay farmers based on historical production or when prices fall below artificial targets set by Congress.
The Average Crop Revenue Election (ACRE) program—inspired by the Durbin-Brown Farm, Safety Net Improvement Act—fundamentally reforms the way subsidy programs operate:
- ACRE offers better protection because it covers yield and price at a state level, it offers better protection than current national level price-only support programs in Title I.
- ACRE is supported by mainstream agricultural groups. Six state corn grower associations issued a joint statement in support of a revenue-based safety net. "We need a program that provides assistance when we need it most, not one that is in place because we’ve always done it that way,” said Matt Gibson, Indiana Corn Growers Association president.
According to the National Corn Grower's Association, "As our agriculture economy evolves, so must our farm policy. U.S. farmers deserve
and demand a viable choice in our agricultural safety net."
- ACRE is optional so producers are not forced to enroll; in fact, if they don’t like ACRE, they can just stay in the current system.
- ACRE removes market distortions from federal farm policy because it moves commodity support away from government targets towards a market-based support system. Removing government distortions, over the long-term, will be better for the environment.
- ACRE could save $1.0 - $1.5 billion over 10 years that can be spent on other priorities. It requires producers who opt in to the program to give up part of their current direct payments upon enrollment. This frees up funding for both ACRE and other farm bill programs. It's anticipated that a combined House-Senate package of the program could save between $1B and $1.5B over 10 years (PDF).
» ACRE represents subsidy reform (PDF)
Why It's Better
Current safety net programs only protect against price. But in years like this one, when many farmers face yield losses due to droughts, floods and other natural disasters, they will not be covered despite a drop in revenue.
Visit the U.S. Drought Monitor for an interactive map of current drought conditions in your area.
Current Commodity Programs and Crop Insurance Damage the Land
A study released by the U.S. Government Accountability Office (GAO) found that access to commodity programs and crop insurance are key factors in motivating farmers to plow up native grass land into crop land [PDF]. The study shows that crop insurance, in particular, is encouraging the conversion of marginal land into cropland by greatly limiting the risks for farmers to produce crops on land that has been, historically, less productive.
“We need to have farm policy that protects farmers from the vagaries of economic and weather cycles, but also protects the environment from unintended consequences,” said Senate Agriculture Committee Chairman Senator Tom Harkin (D-IA). “Today, rising prices for commodities are creating powerful incentives to put marginal acres into crop production. So the need for federal policy to actively promote good conservation on working land is greater than ever.”
The Average Crop Revenue Election program is a first step towards fundamentally reforming subsidy programs to be more market oriented with fewer incentives to overproduce.