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A Closer Look at the ARRM Farm Bill Proposal

The Aggregate Risk and Revenue Management program, or ARRM, is a Farm Bill proposal from Senators Sherrod Brown, D-Ohio, Dick Durbin, D-Ill., Richard Lugar, R-Ind., John Thune, R-S.D.

ARRM would replace direct payments, the counter-cyclical program, marketing loans, Average Crop Revenue Election and SURE. According to University of Illinois Farm Management Specialist Gary Schnitkey the program is most like ACRE.

"ARRM will make payments based on what happens to five years of revenue at the crop reporting district level," Schnitkey said. "So ACRE was a state level, ARRM is a crop reporting district level. It has a 90% revenue trigger and makes payments on a maximum of 15% of the revenue guarantee; 90% is the same as ACRE, 15% is less than ACRE. The big change is it is based on five years of revenue, Olympic average, whereas ACRE was based on five years of yields and two years of prices."

Schnitkey says the five year Olympic average would provide stable price protection, and using crop reporting districts would help the program better reflect local field conditions and make it useable in fringe areas. ARRM replaces many programs with one and it does so under the constraints of the budget. Schnitkey says it works but perhaps not as lucratively as previous programs.

"In Illinois, and we looked at this from 95 to 2010, ARRM would have made payments in 98, 99, 2000, 2001 and 2005," Schnitkey said. "The 98 through 2001 period was a period of low incomes primarily because of low incomes. Prices fell pretty dramatically from prior to that and ARRM would have made payments during that period."

But Schnitkey says those payments over the four years including 1998, 1999, 2000 and 2001 would have been substantially less than the government programs of the time. Factually, many farmers in central Illinois would have lost money four years in a row if ARRM had been in place. The program, under the current budget constraints, just isn't robust enough to deal with sub $2 corn. That said, Schnitkey believes it's not a bad compromise.

"It would make less payments than the current set of programs," Schnitkey said. "The current set of programs made an average payment of $42 per acre over that time period, ARRM would make $11. So it is significantly less, but given the budgetary environment that's probably what is going to happen and it does target those years when revenues were low."

To learn more about the Aggregate Risk and Revenue Management program from Gary Schnitkey visit www.farmdocdaily.illinois.edu.