The Average Crop Revenue Election Program is being implemented by the U.S. Department of Agriculture for the 2009 crop year, as part of the Food, Conservation and Energy Act of 2008.
Beginning in 2009, eligible farmers will have the option to enroll in the ACRE program, as an alternative to the current Counter-Cyclical Payment program that was initiated in 2003 as part of the last farm bill. The ACRE program will offer the potential of “revenue-based” payments, based on yield and price, as compared with current “price-only” CCP calculations. The USDA Farm Service Agency has now released most of the “official” rules and regulations for the ACRE program.
Following are some common questions and answers regarding the ACRE program.
Q: When does sign-up for the ACRE program begin and end for 2009?
A: Sign-up for the ACRE program starts April 27 at county FSA offices and will continue until Aug. 14. Producers may sign up for the 2009 Direct and Counter-Cyclical Payment farm program at any time at their county FSA office, and wait until a later date to decide on enrollment in the ACRE program. Producers who have already enrolled in the DCP program may now sign up for the ACRE program (until Aug. 14).
Q: Do producers have to sign up for the ACRE program in 2009 in order to be eligible for ACRE in subsequent years?
A: No. The decision whether or not to enroll a “farm unit” in the ACRE program for 2009 is “optional.” If the decision in 2009 is to stay with the current DCP program on a farm unit, there will be another opportunity to enroll in ACRE for the 2010 crop year.
Q: Is it permissible for a producer to sign up for the ACRE program in 2009, and the switch back to the DCP program in subsequent years?
A: No. Once a farm unit is enrolled in the ACRE program, it must continue in the ACRE program for all crops through the 2012 crop year.
Q: How will farm units be determined for the ACRE program?
A: Enrollment in ACRE will be based on “farm numbers,” as they are recorded at the county FSA office. It will be permissible to enroll some farm units in ACRE in 2009, and keep other “farm units” in the current DCP program for 2009.
Q: What crops are eligible for the ACRE program?
A: Corn, soybeans, wheat, cotton and other small grains are among the FSA farm program crops eligible for the ACRE program.
Q: How many acres in a farm unit will be eligible for the ACRE program?
A: All crop base acres on a farm unit are eligible for the ACRE program, provided that the planted crop in a given year is eligible for the ACRE program.
Example: If a 100-acre farm has a 50-acre corn base, 40-acre soybean base and 10-acre wheat base, all 100 acres would be eligible for the ACRE program. If the total of all crop base acres was only 80 acres, only those 80 acres would be eligible for ACRE, regardless if all 100 acres are planted to an eligible crop.
Q: What impact do the current crop base acres have on potential ACRE payments?
A: None. All ACRE payments are based on the crop planted in a given year. A producer may plant any program crop on a farm unit and be eligible for ACRE on all eligible acres of that crop, regardless of the existing crop base acres. Direct payments under ACRE will still be based on established crop base acres on a farm unit.
Example: If all 100 acres on a farm unit were eligible crop base acres, the producer could plant the entire farm to corn in 2009, and could plant all soybeans in 2010, and be eligible for the ACRE program on all 100 acres in both years.
Q: How will producers enroll in the ACRE program on cash rental farm units?
A: Enrollment for ACRE will require landowner signatures, meaning that all landlords in cash rental situations will have to decide on ACRE enrollment. This will require producers to understand the ACRE program and be able to explain it to their landlords, if they want to enroll a cash rental farm unit in the ACRE program.
Q: What happens if a cash rental farm unit is enrolled in ACRE in 2009, and is rented to a different producer in 2010 or after?
A: ACRE enrollment stays with a farm unit, regardless if there is a different farm operator in subsequent years. In other words, if a landlord signs up for ACRE in 2009, and rents the farm to another producer in 2010, the farm will remain in the ACRE program, and cannot be changed back to the DCP program. If the farm was not enrolled in the ACRE program in 2009, the ACRE decision would be optional in 2010.
Q: Are farm operators required to carry Federal Crop Insurance to be eligible for ACRE?
A: No. Producers enrolled in ACRE are not required to carry crop insurance coverage on those farm units; however, any crop insurance premiums paid by the producer in a given year are added to the farm level guarantee.
Q: What is the impact on direct payments with enrollment in the ACRE program?
A: Producers who enroll in the ACRE program in 2009 will give up 20 percent of direct payments from 2009-12. (Approximately $3.50 to $5.50 per crop base acre per year for most producers.) The remaining 80 percent of direct payments is guaranteed.
Q: What impact does enrollment in the ACRE program have on Commodity Credit Corp. loan rates?
A: National and county loan rates will be reduced by 30 percent on farm units that are enrolled in the ACRE program. This will affect the amount of revenue available from CCC loans, and will reduce the “posted county price” level where loan deficiency payments are earned.
Example: If the county corn loan rate is $1.84 per bushel, there is a potential LDP when the PCP drops below that level. The LDP threshold level would be reduced to $1.29/bu., if a producer enrolls in the ACRE program. Also all CCC loan disbursements would be reduced to the $1.29/bu. loan rate.
Q: How are ACRE program guarantees determined?
A: The ACRE program uses a combination of state average yields, farm-level yields and the 12-month marketing year national average prices to determine revenue guarantees, and any potential ACRE payments for a given crop year. There are two “revenue triggers” that must be met before ACRE payments will be made, one based on state average yield, and the other based on actual farm-level yields. Both state and farm level guarantees will be recalculated each year (2009-12), based on changing average yields and prices. ACRE revenue guarantees cannot vary up or down by more than 10 percent from one year to the next.
Q: How are the price guarantees for the ACRE program determined?
A: The price guarantee for all crops is the national average price for the previous two years, which is based on the 12-month marketing period for corn and soybeans from Sept. 1 in the year of harvest until Aug. 31 the following year.
The 2009 price guarantees are based on the national average price for 2007 and 2008. The USDA has announced the national average prices for the 2007 crop year at $4.20/bu. for corn and $10.10/bu. for soybeans. 2008 prices will not be finalized until Oct. 1; however, preliminary estimates are $4.10/bu. for corn and $9.35/bu. for soybeans, resulting in estimated 2009 ACRE price guarantees of $4.15/bu. for corn and $9.73/bu.
Q: How is the state yield guarantee determined?
A: The state yield guarantee is the “Olympic average” state yield for 2009 is the past five years (2004-08), with the highest and lowest yield being dropped, and the three remaining yields being averaged.
Example: Corn yields of 159, 174, 161, 146 and 164, with the 174 and 146 dropped, and the average yield is 161 bushels per acre. 2009 state yield guarantees for Minnesota are 161 bushels per acre for corn and 41 bushels per acre for soybeans.
Q: How are farm-level yield guarantees determined?
A: The farm-level revenue guarantee will be calculated based on the five-year (2008-12) “Olympic average” actual farm yield, based on yield verification by the producer. As of this writing, the USDA has not finalized the criteria for farm-level yield verification.
Q: How will the 2009 state and farm-level ACRE guarantees be determined?
A: The state guarantee will be 90 percent of the state average yield times the two-year average national price. The farm-level revenue guarantee will be 100 percent of the verified average farm-level yield times the two-year average price national price, plus the amount of crop insurance premiums for the crop year.
State revenue guarantee equals Average state yield multiplied by the Two-year average price multiplied by 0.90 farm guarantee equals Average farm yield multiplied by the Two-year average price plus 2009 crop insurance premium.
Q: How is the “actual revenue” determined?
A: The actual revenue is based on the actual 12-month average price (Sept. 1-Aug. 31 for corn and soybeans) for a crop in the year of production, times the actual state average yield for the state guarantee, and times the actual farm yield for the farm-level guarantee.
Q: When are ACRE program payments “triggered”?
A: In order for a producer to receive a payment under the ACRE program, the “actual revenue” for both the state and farm-level must be lower than the corresponding established revenue guarantees for a given year.
Example: If the state actual revenue is below the state guarantee for soybeans in Minnesota for 2009, the entire state is eligible for soybean ACRE payments for 2009. However, only “farm units” with actual revenue for 2009 that is lower than the farm-level guarantee will receive ACRE payments for 2009.
Q: Once eligibility is established, how are ACRE payments determined?
A: ACRE program payments will be the higher of difference between the state guarantee and the actual state revenue; or the state guarantee times 25 percent (0.25). That figure is multiplied times the 83.3 percent adjustment (0.833), times the producer adjustment.
Note: ACRE payments will be paid on 83.3 percent of crop base acres. (Same as for direct payments.) The total ACRE payment cannot exceed 25 percent of the state guarantee. The final ACRE payment on a farm unit can be adjusted, based on the farm-level yield guarantee compared to the state yield guarantee.
Example: Farm-level corn yield guarantee of 177 bu./acre, state yield guarantee of 161 bu./acre, would result in the ACRE payment being factored upward by 10 percent (x 1.10).
Q: What are the payment limits with the ACRE program?
A: The payment limit for direct payments is reduced from $40,000 per individual with the DCP program to $32,000 per individual with the ACRE program, reflecting the 20 percent reduction in direct payments with ACRE. However, the $8,000 is added back to the ACRE payment limit, which is $73,000 per individual, compared to $65,000 per individual for CCPs under the DCP program.
Q: What are some additional resources to help producers make a decision on the ACRE program for 2009?
A: I have prepared the “ACRE Program Worksheet” with details on ACRE payment calculations on individual farms, and with payment examples for corn and soybeans. Send me an e-mail to kent.thiesse@minnstarbank.com to receive a copy.
ACRE websites
• USDA farm bill website: www.usda.gov/farmbill
• Iowa State University CARD ACRE Calculators for Corn, Soybeans and Wheat: www.card.iastate.edu/ag_risk_tools/acre
• University of Missouri FAPRI website: www.fapri.missouri.edu
• University of Illinois Farm Management website: www.farmdoc.uiuc.edu
• Iowa State University Decision Maker website: www.extension.iastate.edu/agdm
• Kansas State University Ag Manager website: www.agmanager.info
