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3. 2009 National Extension Risk Management Education Conference

Combining SURE, Crop Insurance, and Marketing

G. Art Barnaby, Jr.

Summary

ACRE is a substitute for traditional farm programs in the new Farm Bill. However, farmers must forgo 20% of their direct payment for each year remaining in the Farm Bill. A key risk management question is does ACRE provide risk reduction or does it increase risk, such as on cotton and rice?

SURE is a replacement for traditional ad hoc disaster aid. However, SURE is a whole farm revenue guarantee. Under ad hoc disaster aid all farmers received the same guarantee, but under SURE the percent level of revenue coverage is the same as selected for crop insurance by the farmer. For example farmers who purchase 80% crop insurance coverage will have an 80% whole farm SURE revenue guarantee too.

Because SURE decisions are directly tied to the crop insurance decision, SURE is now included in the Risk Assessed Marketing (RAM) workshops. RAM participants select their type of crop insurance coverage and level of coverage for the simulated case farm they are managing. The case farm includes all of RMA’s alternative crop insurance policies and private hail. Participants make the decisions for the simulated case farm that include crop insurance, SURE coverage ACRE participation and marketing decisions.

At harvest, participants randomly draw a crop yield based on a pre-determined yield distribution, to simulate yield risk. Participants will then tally up all market revenue, indemnities, SURE, ACRE, payments and deduct production expenses. Those participants having the highest net farm income for each of the four pre-determined yield categories are recognized.

Details

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