Tuesday, September 18, 2007

New "Safety Net" Program Analysis

The extension people are doing explanations of how the program proposed by Sens. Durbin and Brown to replace loan deficiency and counter-cyclical payments might work. University of Illinois here and Ohio State here.

Without getting into the overall program, the idea of going to state-level prices and yields is interesting. The price support people at FSA have experience with the variation within a state because they set county-level loan rates. But this would create new learning opportunities for my old friends, what few are left, in FSA. The definition of a "farm" will be challenging. (I remember the early 80's when we suddenly switched from worrying about disasters, where the farmer wanted the smallest possible "farm" to maximize the likelihood of a loss to worrying about production adjustment, where the farmer wanted the largest possible "farm" so he had the most leeway on the diverted acreage.

Here Congress would be putting the bulk of payments in a "disaster" context, so small farms will be desired. But the location of a "farm" may become more critical along state lines (unless maybe FSA already has a rule prohibiting combination of land across state lines--to get the farm into a state with more favorable price/yield combination).

And I'm sure the prospect of working more closely with RMA thrills everyone in both agencies. Well, it's early days and we'll see what happens.

1 comment:

  1. One interesting note on revenue, is that all insurance policies that do not allow for an individual safety net are unpopular. The popular revenue plans allow for either fluctuations in price and/or yield, such as Crop Revenue Coverage, Revenue Assurance, or Income Protection or based entirely on revenue, such as Adjusted Gross Revenue or AGR-Lite. Even county level plans, such as Group Risk Protection plans, where a county wideloss will pay everyone, regardless of loss, is considered an inequitable treatment of producers. This should make Statewide even more interesting.

    The other note of interest is duplicate payments for a similar loss. Well, since the loss is statewide for the new farm bill, and my loss is personal, the loss is not the same, so will never be duplicate - that may be one possibility.

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