Evaluation of Texas-Farmer Choices For The 2014 U.S. Farm Bill

Abstract

The 2014 Farm Bill eliminated direct payments to farmers in favor of two alternative safety net programs; Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). Farmers must make a one-time, irrevocable choice of PLC, a county ARC program, or an individual ARC program for each covered commodity on their farm. The main objective of this study is to determine which program would be most beneficial for Texas farmers to choose.

The study will utilize the Agricultural and Food Policy Center (AFPC) database of representative farms to determine how farmers will respond to the farm bill. Stochastic simulation will be used to examine farmers’ choices and will provide insight into when the farmers should choose PLC versus ARC enrollment. By incorporating historical price and yield risk into the analyses the decision between PLC and ARC can be made knowing which of the two choices would perform best under uncertainty.

The results show that most of the Texas representative farms in this study would choose PLC as their farm program decision. A total of eleven representative farms preferred PLC as the program decision for their entire farm, including whole farm and each crop’s choice. PLC is expected to be the most popular program decision based on the whole farm analysis. There were zero farms showing ARC as the whole farm program decision.