Farm Savings Accounts
Managing the financial risk associated with farming is a central concern for farmers. Government subsidized farm savings accounts have gained attention as possible risk management tools. Farm savings accounts are based upon the idea of providing farmers with financial incentives to set aside funds in high income years for use in low income years. Like revenue insurance products, most farm savings account proposals rely upon tax records to determine eligibility for contributions and withdrawals from the accounts. Unlike revenue insurance products, the producer does not pay a premium, but rather places funds in a deposit account. These funds remain the property of the producer. Additionally, deposits to the account may be tax deferred, and/or matched by a deposit from the government.
These accounts encourage farmers to set aside funds in high income years to be drawn upon in low income years. This study considers two potential savings programs, Farm and Ranch Risk Management (FARRM) accounts and Counter-Cyclical (CC) farm savings accounts. FARRM accounts use tax deferral as the primary incentive for participation and under CC accounts the government would match farmer deposits up to $5,000.
The analyses consider the potential benefits of these accounts for New York dairy farmers and for New York specialty crop growers. The various studies consider a wide variety of issues important to the assessment of farm savings accounts. These issues include eligibility, withdrawals, and ability to fund the accounts. In general, the studies indicate that producers would benefit from farm savings accounts, but as considered, the accounts would not provide a complete risk management solution. All of our research reports are available for download below.
Gerald White, Editor. "2007 Farm Bill: Policy Options and Consequences for Northeast Specialty Crops Industries, Small Farms, and Sustainability Programs." Research Bulletin 4(2006). 100 pages. Department of Applied Economics and Management, Cornell University.
Enahoro, D.K. and B.A. Gloy. “Examining the Benefits of Federally Subsidized Farm Savings Accounts for Dairy Farmers.” Selected Paper, 2006 Annual Meetings of the American Agricultural Economics Association, Long Beach, CA.
Gloy, B.A. and M.L Cheng. "Farm Savings Accounts for Specialty Crop Growers." Research Bulletin 3(2006). 38 pages. Department of Applied Economics and Management, Cornell University.
Gloy, B.A., E.L. LaDue, and C. Cuykendall. “Farm Savings Accounts: Examining Income Variability, Eligibility, and Benefits.” Staff Paper 2(2005). 30 pages. Department of Applied Economics and Management, Cornell University.
Gloy, B.A. and M.L. Cheng. “Specialty Crops and the 2007 Farm Bill: The Potential Role of Farm Savings Accounts.” Staff Paper 3(2006). 7 pages. Department of Applied Economics and Management, Cornell University.
Gloy, B.A., et al*., “Multi-State Efforts to Evaluate Alternative Farm Savings Account Programs” Presentation at the 2003 NCT-194 Annual Meeting, Kansas City, MO, October 6, 2003. *Presentation based on the work of numerous multi-state collaborators including: R. Dismukes, R. Durst, P. Ellinger, E.L. LaDue, M. Langemeier, J. Monke, G. Schnitkey, B. Schurle, A. Swenson, J. Williams.