October 7, 2008
The research analyzes the differences between the ACRE and the current counter-cyclical payment (CCP) programs for cotton in the state of Texas.
The Cotton Economics Research Institute at Texas Tech University found that Texas’ irrigated cotton growers may see fewer payments under a new program included in the 2008 farm bill.
The Average Crop Revenue Election (ACRE) is slightly different from previous farm programs and focuses on farm revenue instead of just prices. However, the new program follows a complex set of procedures involving both farm and state-level average revenues to determine whether a farmer is eligible to receive payments.
“We looked at several actual farm histories for both dryland and irrigated cotton in the Texas High Plains,” said Darren Hudson, the Larry Combest Endowed Chair in Agricultural Competitiveness and institute director. “The new ACRE program differs considerably from the current program in how the ‘triggers’ for payments are determined and how payments are calculated. We compared the magnitude of payments under the existing program and what payments would have been under the new ACRE program for the past five years,” Hudson said.
The results of the analysis suggest that ACRE does not perform well for cotton in Texas, especially for irrigated cotton.
“The ACRE program would have only triggered a payment about 20 percent of the time over the last 20 years compared with 65 to 70 percent of the time for the current program for irrigated cotton,” Hudson said. “But for dryland, it would have potentially triggered a payment about 45 percent of the time. Even so, the size of the payments appears to be larger under the current program as compared to the new ACRE program.”
Hudson notes, however, that ACRE is a whole-farm program.
“It may make sense to participate in ACRE for other crops,” Hudson said.
Because of that, he believes cotton farmers should not immediately dismiss ACRE for their operation.
“Our analysis is only for Texas cotton” Hudson said. “Cotton in other states and different crops in Texas may have a different outcome with ACRE. The results of the program are highly farm specific and each farmer should carefully weigh their options before making a decision.”
Darren Hudson is the director of the Cotton Economics research Institute and Larry Combest Endowed Chair in Agricultural Competitiveness.
View his profile in our online Experts Guide.
CERI provides cotton economic analysis for policymakers and others interested in agricultural economy. The group conducts economic research on all aspects of cotton production, marketing, trade and processing.