FarmPolicy

August 30, 2014

Farm Bill; Ag Economy; Trade; and MF Global

Farm Bill Issues

University of Illinois Agricultural Economist Nick Paulson indicated yesterday at the farmdoc daily blog (“Graphical Illustrations of Proposed Farm Revenue Programs and Crop Insurance”) that, “It is likely the Commodity Title of the next Farm Bill will include a program designed to provide protection against declines in farm revenues from some sort of guarantee based on historical averages. While the specific parameters of such a program will continue to be debated, two distinct program design themes have emerged and been coined ‘deep loss’ and ‘shallow loss’ programs.

“Previous farmdoc daily posts have estimated payments levels and timing associated with these types of programs (here, here, and here) and discussed the differences between the multi-year price protection offered by these revenue programs and the within-year price risk protection offered through crop revenue insurance (here, here, and here). However, based on some recent comments and questions received regarding the outlook for changes to Commodity Title programs, it is apparent that there exists confusion over the basic concepts behind the deep and shallow loss design alternatives. Today’s post provides a simple graphical illustration of how both types of programs address revenue risk, and how they may work with the existing crop insurance program.”

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