Issued by Carl Zulauf, Department of Agricultural, Environmental and Development Economics, The Ohio State University
The mix of crops grown in the U.S. is in a constant state of flux. However, the elimination of annual acreage set aside in the 1996 Farm Bill allowed U.S. farms to decide what crops to produce, with the exception of restrictions on fruit and vegetable production. This policy change in concert with the development of the corn ethanol market has resulted in sizable acreage shifts among crops.
Among what are often referred to as the major program crops, only corn and soybeans have more planted acres during the last 5 crop years (2008-2012) than in the 5 crop years preceding the elimination of set asides (1991-1995). Moreover, except for rice, these crops have experienced double digit declines (see Figure 1).
University of Illinois' Farmdoc takes a look at the fundamental issues at stake for crop insurance in the next round of Farm Bill talks
The same conclusion results when acreage shifts are examined from the perspective of farm policy by comparing 2008-2012 planted acres with program base acres which determine payments by some safety net programs (see Figure 2). The importance of these acreage shifts to the current farm bill debate is that the U.S. corn and soybean sectors rarely ponder their potential disappearance from the American farm portfolio. Such is not the case with the other program crop sectors. At present, this concern is especially prevalent among the southern crops of cotton, peanuts, and rice.
Needless to say, concerns over long term survivability will alter the perspective brought to the farm policy debate.
Elimination of Annual Acreage Set Asides
The elimination of set asides in the 1996 Farm Bill has created consequences with which the U.S. is still grappling. Annual acreage set asides allowed policy to be adjusted between Congressional Farm Bills. If costs increased for either crops in general or a specific crop, set asides could be increased in general or for the specific crop to reduce costs. The ability to annually adjust policy reduced the importance of accurately predicting program costs.