The 2012 Farm Bill currently is being debated, with some prospects that it will be passed this year. Much debate centers on the commodity title and how to reconfigure direct payments, the counter-cyclical price and revenue programs (e.g., target price and ACRE programs), and the standing disaster assistance programs (e.g., SURE). Predicting what form these programs will take is difficult. At this point, however, it appears that direct payments will not be included and overall budget outlays authorized in the 2012 Farm Bill will be less than in previous Farm Bills. What likely will result is a counter-cyclical revenue program somewhat similar to the current ACRE program. An ACRE-like program will have risk implications. The risk implications are discussed in this post assuming that providing a safety net is a goal of the 2012 Farm Bill.
Crop Insurance Provides Within Year Revenue Protection
To avoid duplicate coverage, considerations should be given to risk protection offered by crop insurance. Crop insurance is a major program providing within year revenue protection. According to the Summary of Business produced by the Risk Management Agency, 265 million acres were insured in 2011. The 265 million acres represents 83 percent of the 319 million acres planted in principal crops reported by NASS for 2011. Farmers tend to buy revenue products where those revenue products are available. For example, revenue products were purchased on 93 percent of the corn acres insured in 2011.
Commodity Etf
Commodity Etf
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