BASE REVENUE PROTECTION
AND REVENUE
COUNTERCYCLICAL
PROGRAMS
Dwight Aakre, Ron Haugen, Andrew Swenson
North Dakota State University Extension Service
Fargo, ND
April, 2007
Major Points
• Maintain current calculation methods for
direct payments.
• Change non-recourse loans to recourse
loans.
• Create new Base Revenue Protection
(BRP) program.
• Modify current countercyclical payment
program into a Revenue Countercyclical
Program (RCCP).
Overall Objective of BRP-RCCP
• To better stabilize farm income for
producers of all program crops
Calculations
• Calculations where made using the BRPRCCP Calculator developed by the
National Corn Growers Association.
• Historical comparison to the current farm
program was completed for 2002 to 2005.
• Projected comparison to the current farm
program was completed for 2006 to 2010.
North Dakota Corn Farms Analyzed
North Dakota Soybean Farms Analyzed
North Dakota Wheat Farms Analyzed
BRP Per-Acre Net Revenue
farm yield
x national price (NASS)
- regional variable costs (ERS)
• BRP payments would be triggered when:
– Net farm corn revenue falls more than 30
percent below 5-year Olympic average of peracre net corn revenue
– Each program crop would stand alone
Table 7. Calculated BRP Revenues, Guarantees and Payments for Example Farms
Year
Richland
Barnes
Foster
County
County
County
BRP Revenue
($ per acre)
1997
130.72
79.20
22.59
1998
96.34
62.59
-0.27
1999
108.72
43.57
35.01
2000
89.73
75.86
37.01
2001
91.20
118.59
74.06
2002
195.05
157.00
27.32
2003
171.46
161.78
35.45
2004
107.60
12.64
-72.23
2005
96.99
102.56
39.08
BRP Guarantee (70% of 5-Year Olympic Average of past BRP Revenues)
2002
69.13
50.78
22.07
2003
69.13
59.97
23.18
2004
86.66
82.00
25.08
2005
86.39
82.00
23.28
2006
87.74
88.23
23.76
BRP Payment (BRP Guarantee minus BRP Revenue)
2002
0.00
0.00
0.00
2003
0.00
0.00
0.00
2004
0.00
69.37
97.31
2005
0.00
0.00
0.00
• RCCP replaces the price trigger with a
revenue trigger
– Payments would be made when actual
per-acre county revenue falls below
county revenue trigger
• Actual per-acre county revenue
– NASS season average price times NASS
county average yield
• County revenue trigger
– Current effective target price times the county
trend yield
– Effective target price is the target price minus
the direct payment
• Maximum RCCP payment would equal 30
percent of the county trigger revenue level
• BRP coverage is designed to cover losses
in excess of this 30 percent level
Table 8. RCCP Trigger Revenue, Actual County Revenue, and RCCP Payments
Year
Richland
Barnes
Foster
County
County
County
RCCP Trigger Revenue
($ per acre)
2002
277.54
249.34
130.90
2003
284.12
257.09
137.24
2004
290.70
265.08
143.59
2005
297.28
272.84
150.17
2002
311.11
273.06
143.38
2003
305.65
295.97
169.64
2004
250.08
155.12
70.25
2005
257.71
262.68
199.20
RCCP Actual Revenue
RCCP Payment (RCCP trigger revenue minus RCCP actual revenue)
2002
0.00
0.00
0.00
2003
0.00
0.00
0.00
2004
40.61
79.52
43.08
2005
39.57
10.16
0.00
Numbers in bold indicate maximum RCCP payment
Corn Results (2002 to 2005)
• Barnes County farm would have received
$24.14/acre more for the 4 year period with
BRP-RCCP.
• Foster County farm would have received
$10.05/acre less for the 4 year period with
BRP-RCCP.
• Richland County farm would have received
$78.03/acre less for the 4 year period with BRPRCCP.
Table 10. Payment Comparison by Year and Total for Example Farms
Year
LDP + CCP + CI
Richland
Barnes
Foster
County
County
County
($ per acre)
2002
0.00
0.00
0.00
2003
3.79
3.67
1.40
2004
59.64
43.93
79.94
2005
94.78
87.32
69.10
158.21
134.92
150.44
2002
0.00
0.00
0.00
2003
0.00
0.00
0.00
2004
40.61
148.89
140.39
2005
39.57
10.16
0.00
80.18
159.04
140.39
Total
RCCP + BRP
Total
Soybean Results (2002 to 2005)
• Benson County farm would have received
$58.56/acre more for the 4 year period with
BRP-RCCP.
• Cass County farm would have received
$33.35/acre more for the 4 year period with
BRP-RCCP.
• Stutsman County farm would have received
$16.20/acre more for the 4 year period with
BRP-RCCP.
Wheat Results (2002 to 2005)
• Ward County farm would have received
approximately the same for the 4 year period
with BRP-RCCP.
• Hettinger County farm would have received
$37.88/acre more for the 4 year period with
BRP-RCCP.
• Cavalier County farm would have received
$7.56/acre more for the 4 year period with
BRP-RCCP.
Limitations
• Economic Research Service (ERS) cost of
production value is a regional number and
may not be reflective of North Dakota.
• NASS prices are critical to program
calculations.
• Two years in a row with low revenue would
dramatically lower the BRP coverage
guarantee.
Issues
• Would BRP-RCCP replace crop insurance
or enhance it?
• Would producers have double coverage or
only buy up coverage over the BRP-RCCP
protection?
• Would the current relatively high
commodity prices affect the coverage?
• Would volatile prices make this program
an adequate safety net?
Conclusions
• BRP-RCCP is innovative in that it targets
both yield and price.
• National study needed to examine all
program crops to evaluate the BRP-RCCP
program further.