University of Illinois Studies Option to Replace Direct Payments

Direct payments are likely to be reduced or eliminated in the next Farm Bill.

Published on: Jul 26, 2011

The fact that farmers receive payments even during periods of high farm profits tends to be the strongest and most consistent criticism of the fixed direct payment program. This implied desire to reduce the inefficiency of the agricultural safety net can help to guide additional changes to Commodity Title programs, which University of Illinois Ag Policy Specialist Nick Paulson says could help reduce farm program costs while providing more timely support.

Paulson says one option discussed, and supported in the Midwest, is a revenue support program based on a county-level revenue measure. And that it could take the form of a modification to the existing Average Crop Revenue Election program.

"It hasn't really necessarily been a formal proposal yet," Paulson said. "But one of the things some of the commodity groups in the Midwest have talked about, for example the Illinois Corn Growers or the Iowa Farm Bureau, have talked about that if we're going to have to give up a chunk of the direct payments or direct payments in their entirety, could we use some of those savings to strengthen or modify some of the remaining programs in the safety net. Shifting this ACRE program from a state level trigger to a county level trigger is one idea that has been tossed around."

To that end, Paulson decided to see just what might have happened if a county-based acre policy were in place over the last several decades. What they found was not unexpected. The historical analysis shows a county-based ACRE program would distribute funds in larger amounts and more often than a state triggered program. It's a program not likely to be well received in Washington, D.C. where the budget axe continues to fall. Still, Paulson says if you drop the coverage level, then things get interesting.

"You can end up with payment levels that are pretty similar," Paulson said. "Even with the higher payments at the similar coverage level to the state design, you could pay for the increase cost of a program like that with the reduction of direct payments expected in the next Farm Bill, or a portion of those reductions."

If you'd like to see the dollars and cents of Nick Paulson's work on the ACRE program, click HERE.