Sustainability of Large Payments by ACRE

Like any risk management program, ACRE can make large payments. Given current revenue levels and a large decline in revenue, ACRE payments could exceed $10 billion in a year. However, unlike the marketing loan rate and counter-cyclical target price, ACRE’s benchmark values adjust downward as market revenue declines. While the decline is capped at no more than 10% per year, the decline will accumulate over time. This downward adjustment limits the period over which ACRE will make large payments, both in terms of the number of consecutive years of payments and relative to the length of large payments historically made by farm programs. Thus, ACRE results in less long term trade distortion than historically has been the case with the traditional U.S. price support programs. .

Date published: 
Tuesday, November 29, 2011