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ACRE VS DCP Food, Conservation, and Energy Act of 2008

ACRE VS DCP Food, Conservation, and Energy Act of 2008. Michael R. Dicks Department of Agricultural Economics Oklahoma State University. Thanks to: Larry Sanders Kim Anderson Dan Skipper Francie Tolle. June 6, 2008. It’s Done, Finally!!!. Overview. Two Commodity Program Options

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ACRE VS DCP Food, Conservation, and Energy Act of 2008

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  1. ACRE VS DCP Food, Conservation, and Energy Act of 2008 Michael R. Dicks Department of Agricultural Economics Oklahoma State University Thanks to: Larry Sanders Kim Anderson Dan Skipper Francie Tolle June 6, 2008

  2. It’s Done, Finally!!!

  3. Overview • Two Commodity Program Options • DCP same as in past with some changes in Target price and Loan rates. • Average Crop Revenue Election (ACRE)

  4. ACRE assumptions • 30 years of historic yield forecasts future yield volatility • Price volatility in actual price changes (percent change – elasticity computed for wheat only) • County planted yield = farm planted yield • Loan rate is price floor, not 30% reduction in loan rate. • No payment restrictions

  5. Historic Comparison • Apply ACRE and DCP to past 30 years and compare.

  6. Summary$3.30 Avg. Annual Price

  7. Future Comparison • Past 30 years yield and price volatility @ USDA baseline average annual price • $4.55/ bushel wheat

  8. Summary$4.55 Avg. Annual Price

  9. Breakeven Analysis • At what average annual price does it pay to switch to ACRE from DCP? • Compare average annual total payment over 30 years yield and price volatility.

  10. Breakeven Price – Switch from DCP to ACRE

  11. Comparison of price volatility measures

  12. Yield explains 63% of the variation in TR for the DCP payment, more than twice the value for the ACRE payment, 25%. • Three counties in Oklahoma for Wheat.

  13. Commodity Programs SEC. 1601. ADMINISTRATION GENERALLY. (c) REGULATIONS.— (1) IN GENERAL.—Except as otherwise provided in this subsection, not later than 90 days after the date of enactment of this Act, the Secretary and the Commodity Credit Corporation, as appropriate, shall promulgate such regulations as are necessary to implement this title and the amendments made by this title.

  14. Commodity Programs (d) ADJUSTMENT AUTHORITY RELATED TO TRADE AGREEMENTS COMPLIANCE.— (1) REQUIRED DETERMINATION; ADJUSTMENT.—If the Secretary determines that expenditures under this title that are subject to the total allowable domestic support levels under the Uruguay Round Agreements (as defined in section 2 of the Uruguay Round Agreements Act (19 U.S.C. 3501)) will exceed such allowable levels for any applicable reporting period, the Secretary shall, to the maximum extent practicable, make adjustments in the amount of such expenditures during that period to ensure that such expenditures do not exceed such allowable levels.

  15. This simply won’t help!! Questions?

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