Average Crop Revenue Election (ACRE): Market Based Reform or Boondoggle?

The American Farmland Trust argues for the provision in the new farm bill that is being called ACRE:

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.

Dan Morgan notes a potential problem with ACRE:

A major new program in the recently enacted farm bill could increase taxpayer-financed payments to farmers by billions of dollars if high commodity prices decline to more typical levels, administration and congressional budget officials said yesterday … The voluntary program guarantees farmers a subsidy if they suffer losses because of low prices or poor crops. Since the amount of the subsidy for 2009 is tied to recent record prices, farmers could reap a windfall if prices drop suddenly … A blog item posted Monday by the agricultural magazine Pro Farmer described the new program, known as Average Crop Revenue Election (ACRE), as “lucrative beyond expectations,” and said it is a “no brainer” for farmers to sign up for it. The Agriculture Department estimates that subsidy payments to corn farmers alone could reach $10 billion a year if prices – which have been $5 to $6 a bushel – were to drop to $3.25 a bushel, a level seen as recently as last year … Currently, corn farmers receive a government subsidy when prices drop below $2.63 a bushel. But critics say that subsidy does not protect farmers who bring in low yields in a year when prices are high … But as the farm bill moved through Congress, lawmakers sweetened the subsidy provisions, in part to encourage more farmers to sign up. The final version of the program is more generous than ones proposed earlier by the House and the Bush administration. The new program insures a farmer’s revenue at close to the current high prices. USDA estimates that a farmer could draw a payment even with corn prices at $4.39 a bushel. “They have taken a good idea and gone to an extreme in terms of creating an opportunity for revenue flows at the highest possible level,” Conner said.

President Bush wants to veto this bill. On this one – I think he’s right!