ACRE: time is short for decision
By Robert Tigner
SW4 Agricultural Extension Educator
The 2008 Farm Bill’s new ACRE program has an important deadline coming.
Aug. 14 is the final day to elect the new ACRE program for agricultural crops. If growers have not taken a close look at ACRE, this is the time to do it. It may be your best choice.
ACRE provides revenue support rather than just price support, as DCP did, for covered agricultural commodities. This is an important change in the risk management for farmers.
The ACRE program looks more like a revenue type of crop insurance than previous programs.
To analyze whether to elect ACRE for 2009, projections of state yields and the US marketing year average (MYA) price for covered crops is necessary. Both are known for wheat but fall harvested crops are still unknown. However price points for the ACRE triggers based on trend line yields can be calculated.
The 2009 Nebraska state revenue guarantee for covered crops are as follows: irrigated corn—$686.61, non-irrigated corn—$449.21, irrigated soybeans—$511.04, non-irrigated soybeans—$370.85 and milo—$278.46.
Since we know the total revenue covered, calculating various yield and price combinations that trigger ACRE payments is easy. Wheat can illustrate this calculation.
The revenue guarantee for wheat is $232.71 and the MYA price is $6.63. That means the state average yield must be below 35.1 bushels for the state trigger to be hit.
Or if the 5-year Olympic yield is assumed, the price must be below $5.97 to trigger a wheat payment. Neither of these conditions are likely applicable for Nebraska (NE) this year.
Now let’s look at irrigated corn. If we use the trend—line yield for NE, 186.4 bushels, the MYA price must be $3.68. The mid-point of USDA’s early July corn price projection was $3.75 but another model USDA has is futures based and puts the MYA price at $3.24. Which projection is more correct changes the ACRE election decision.
Non-irrigated corn is in the same boat. Using the NE trend-line yield of 116 bushels the ACRE trigger price is $3.87. NE has exceeded 135 bushels dryland corn six years of the last 30 years; this yield would give an ACRE trigger price of $3.33.
So what does this mean?
The probability that an ACRE payment would be received appears to be increasing for corn produced during 2009. If farmers choose ACRE, they must remain with the program until 2012.
Payment projections are just that. Corn price projections from Iowa State University and Kansas State University differ from USDA. Both university price projections are low enough to trigger ACRE payments if trend-line or Olympic average yields are assumed in the ACRE calculations.
But during 2009, average wheat yields were assumed in ACRE payment projections, too. NE statewide wheat yields are likely to be near a record. Thus no ACRE payment will be received for 2009 wheat. That could happen to corn, as well.
A new plantings report will be released by USDA Aug 12 and should help in making the ACRE versus DCP decision.