Average Crop Revenue Election: A Revenue-Based Alternative to Price-Based Commodity Payment Programs

This article develops a stochastic model of the Average Crop Revenue Election (ACRE) program, which offers revenue-based commodity payments under the 2008 Farm Act. Our analysis shows that adding ACRE revenue payments to gross revenue reduces downside revenue risk for corn, wheat, and soybean farmers in 2009 on average by 16%, 21%, and 23%, respectively. Results indicate that farms with higher expected yields and lower variance of yields tend to benefit the most from ACRE. Integrating federal crop insurance with ACRE lowers insurance premiums from 10% to 40%, depending on the crop and location. Copyright 2010, Oxford University Press.