What is in this article?:
- Cutting farm payments might not save much?
- More complex
- Much of the budget savings from cutting direct payments could be offset by sharp increases in ACRE program expenditures.
- FAPRI report compares payment cuts to expected expenditures in the 2012 MU FAPRI baseline.
- Cutting direct payments would have important effects on federal budgets, farm income and farmland value.
- Impacts on crop production and prices would be small.
“The story becomes more complex if ACRE enrollment increases to 100 percent,” Westhoff said. That would eliminate most marketing loans and all countercyclical payments, but ACRE payments would increase.
For new participants, ACRE payments could offset part of the cuts of direct payments.
“ACRE payments are most likely to offset lost direct payments for soybean growers and least likely for cotton growers,” Westhoff said.
“Actual participation in ACRE is hard to predict,” he said. “It would likely fall between the two FAPRI scenarios, which provide a bracket of outcomes.
“Another difference with ACRE is that landlords must agree to allow the renter to participate. That could affect enrollment.”
Now, direct payments are not tied to acres planted. Under ACRE, payments are based on actual planted acres. This could increase crop acreage and boost production, offsetting some effects of direct-payment cuts.
“Even with 100 percent participation in ACRE, the change remains quite small on total area planted to major crops,” Westhoff said. “While most crops increase slightly, cotton acreage declines.”
Switching to ACRE would bring minimal change to food expenditures. “Food costs are projected to change less than 0.1 percent,” Westhoff said.
“Potential Impacts of Eliminating Direct Payments,” an 18-page report, is posted on the MU FAPRI website: http://fapri-mu.org/.
For more than 25 years, MU FAPRI has provided financial analysis to the U.S. Congress on proposed policy changes in agriculture. Economic models of all crops and livestock are in the FAPRI computers. The models are used to prepare annual 10-year baselines.
“One advantage of the FAPRI model is that it shows when a small change in one area causes a big change in another area,” Westhoff said. “In our economy, all things are connected. What appears as a commonsense move can have unintended consequences.”