Shifting From a Price Safety Net to a Revenue Safety Net

In late July, the U.S. House of Representatives passed the Farm, Nutrition, and Bioenergy Act of 2007, or the “2007 Farm Bill,” to reauthorize farm, food, and other agricultural programs for 2008 through 2012. This culminated more than two months of discussion in the House Agriculture Committee and subcommittees and reflected much of the policy direction championed by committee chair Collin Peterson of Minnesota. In the Senate, the agricultural committee under Chairman Tom Harkin of Iowa has yet to begin formal consideration of the 2007 Farm Bill. However, given some comments from Senator Harkin, there are some elements of the House-passed version that could show up in an eventual compromise that would mean changes in the basic mechanics of farm commodity programs. One of the potential changes is a shift from a federal farm income safety net based on price to one that is in part based on revenue. Specifically, the House has proposed a revenue-based counter-cyclical payment (revenue CCP) as an alternative to the current price-based CCP. The revenue-based program would add yield to the safety net calculation and would make a payment to participating producers when the combination of national average yield and national average price produced a revenue calculation that fell below a target established in the legislation. The target for each program crop was set at the product of the five-year Olympic-average national yield times the adjusted target price as used for the existing price CCP (and as amended in the proposed language). Any shortfall below this target for each crop would be paid out on participating base acres for the respective crop, after adjusting for differences in farm versus national average CCP yield levels and accounting for payment on only 85 percent of base acres as with the existing direct and CCP programs