ACRE: Price Support or Crop Insurance?

Abstract

<p>Although farm programs and crop insurance programs are increasingly similar, one feature continues to differentiate them: crop insurance programs use prices that refl ect market conditions at sign-up time, whereas farm programs do not. Crop insurance programs must use current price information to set guarantees to keep farmers from moving into or out of the program based on whether revenue guarantees are more or less likely to generate a payout. Because the government does not ask farmers to contribute toward meeting the costs of farm programs, there is less fi nancial need for the programs to refl ect current market conditions. But the lack of infl uence of current market conditions on the prices used to set farm program guarantees often means that these programs will offer too little or too much support to farmers.</p>