Decision timehas arrived for the new Average Crop Revenue Election (ACRE) Program. The ACRE Program has been discussed in meetings and articles for months, and many university farm management specialists have done analysis and developed calculation spreadsheets for ACRE. The drop in expected 2009 corn and soybean prices in July, followed by a slight improvement in prices in early August, has seemed to make ACRE sign-up decision much more difficult. As of early August, ACRE sign-up was very slow throughout the country. Farm operators and land owners have until Aug. 14, 2009, to sign-up for the program at county Farm Service Agency (FSA) offices.
Following are some key questions that producers should ask themselves as they are deciding on whether or not to enroll in the ACRE program for 2009:
- Do you think the 2009 12-month national average corn price (9-01-09 to 8-31-10) will be lower than $3.65/bu., or that the 12-month national average soybean price will be lower than $8.75/bu.?
If a producer answers yes to this question, there is a high likelihood that they may be able to earn an ACRE payment on the 2009 corn and soybean crop if the 2009 state yield for Minnesota is close to the five-year olympic average yield for corn and soybeans, and if a farmer qualifies for ACRE at the farm-level.
- Do you think that the statewide average corn and soybean yields for 2009 in Minnesota will be near, exceed or be less than the five-year olympic average yields of 161 bu./acre for corn and 41 bu./acre for soybeans ?
If the state yield for Minnesota for 2009 is near the five-year average yields, the price threshold for earning an ACRE payment would likely be near $3.70/bu. for corn and near $9/bu. for soybeans. If the Minnesota state yield for 2009 is 10% above the five-year olympic average yield (169 bu./acre for corn and 45 bu./acre for soybeans), the price threshold to earn an ACRE payment drops to near $3.50 for corn and $8.50/bu. for soybeans. However, if 2009 statewide corn and soybean yields are reduced by 10% (145 bu./acre for corn and 37 bu./acre for soybeans), the price threshold to trigger ACRE payments would be about $4.10/bu. for corn and $10/bu. for soybeans.
- Are my farm-level yields for 2009 likely to exceed my five-year Olympic average yields by more than 10%?
If not, your odds are greatly increased to meet the ACRE threshold at the farm level. Crop conditions in many areas of Minnesota that looked good to excellent in mid-July have started to deteriorate by early August due to very dry conditions in some areas, and crop development is one to two weeks behind normal in many areas. If a producer is enrolled in federal crop insurance for 2009, with premium of $20/acre or more, they should be able to have 2009 corn and soybean yields close to 10% above their five-year average yields at a 2009 12-month average price of $3.65/bu. for corn and $8.85/bu. for soybeans. If the 12-month average price drops to $3.40/bu. for corn and $8.25/bu. for soybeans, producers could have 2009 farm-level yields about 20% above their five-year average yields and still meet the ACRE threshold. However, it should be noted that the level of the five-year proven yields will be a big factor as to whether or not above-average yields for 2009 will be too high to reach the farm-level ACRE threshold for 2009.
- Why not just wait until 2010 to evaluate sign-up for the ACRE Program?
Many of the university farm management experts feel that the 2009 crop year may offer
the best opportunities to earn ACRE payments for corn and soybeans during the next four years (2009-2012) due to the current grain price projections for the 2009 crop. The state-level and farm-level revenue guarantees are adjusted each year, based on the updated yield and price data, so the guarantees for the 2010 crop year will likely be different than the 2009 guarantees.
- Are the potential benefits from ACRE worth the 20% reduction in direct payments over the next four years (2009-2012)?
The reduction in direct payments for most Minnesota corn and soybean producers will likely be between $3.50 and $5/crop base acre, depending on the mix of base acres, or about $15-20/base acre reduction in direct payments for the entire four years (2009-2012). Assuming that actual 2009 statewide yields are close to the five-year state guarantee yields, the 12-month national average corn price for 2009 would have drop below $3.60/bu., and the 12-month soybean price below $8.60/bu. in order to earn the entire four-year (2009-2012) expected loss of direct payments from the anticipated ACRE payment on the 2009 corn or soybean crop.
- How do I adjust for the 30 percent reduction in the CCC loan rate with ACRE enrollment?
The 30% CCC national loan rate reduction for 2009 is 58¢ for corn ($1.95/bu. to $1.37/bu.), and is $1.50/bu. for soybeans ($5/bu. to $3.50/bu.). County loan rates in Minnesota are slightly lower than the national CCC loan rates, but the 30% reduction will be comparable (53-56¢/bu. for corn and $1.40-$1.48/bu. for soybeans). While the likelihood of earning LDPs for 2009 and beyond is probably fairly slim, many producers use the CCC loan program to meet short-term cash flow needs following harvest. For example, signing up for the ACRE Program in 2009 would likely result in a reduction of $50,000.00 or more in available loan funds through a CCC corn loan on 100,000 bu. of corn. There is no lost income on CCC loans, but some adjustments in financial management may be necessary with ACRE.
The county FSA office is the best resource to find out details on sign-up for the ACRE Program, farm-level yield verification, reporting requirements, landlord requirements, etc. Kent Thiesse has developed an ACRE information sheet, an ACRE calculation worksheet and has links to several electronic ACRE spreadsheets. To receive any of this information, contact Kent Thiesse via e-mail at [email protected].
There are also many excellent Web sites with ACRE information and calculation spreadsheets. Here are some of the best ACRE Web sites:
- USDA Farm Bill Web Site – www.usda.gov/farmbill
- University of Minnesota – www.extension.umn.edu/agbusinessmanagement/
- U of Missouri FAPRI Web Site – http://www.fapri.missouri.edu/
- U of Illinois Farm Management Web Site – www.farmdoc.uiuc.edu
- Iowa State U Decision Maker Web Site – www.extension.iastate.edu/agdm/
- Kansas State U Ag Manager Web Site – http://www.agmanager.info/
- National Corn Growers Assn. – www.ncga.com/acre-resource-center
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]