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 to current price-only CCP calculations.

The USDA Farm Service Agency has now released most of the “official” rules and regulations for the ACRE program. The ACRE program information is available at county FSA offices and on the USDA FSA website at www.usda.gov/farmbill.

Sign-up for the ACRE program started 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 anytime until Aug. 14. Given that the USDA has not yet finalized how farm-level yield guarantees will be determined, and the fact that final 2009 price guarantees will not be finalized until Oct. 1, there is no hurry to enroll in the ACRE program at this time. It may be best to wait awhile to enroll in the ACRE program, when all details are finalized.

Producers are encouraged to enroll now in the 2009 DCP farm program at county FSA offices, and delay only the ACRE program decision until later.

Direct payment and CCC loan rates with ACRE

Direct payments will be reduced by 20 percent, and national and county Commodity Credit Corp. loan rates will be reduced by 30 percent on farms enrolled in the ACRE program. The table above shows target prices, direct payments, “CCP trigger price,” national loan rates, and maximum CCP levels in the traditional DCP program that were established in the farm bill for 2009, and the adjustments with the ACRE program.

Price guarantees with ACRE

The ACRE price guarantee for all crops is the national average price for the average of 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, and June 1 to May 31 for wheat and other small grain crops.

The 2009 price guarantees will be based on the national average price for 2007 and 2008. The USDA has announced the national average prices for the 2007 crop year, and the preliminary estimates (through April 2009) for the 2008 crop year (shown in the table at left). The 2008 prices for corn and soybeans will not be finalized until Oct. 1; however, preliminary estimates are $4.20/bu. for corn and $9.65/bu. for soybeans.

State yield guarantees with ACRE

The state yield guarantee will be the “Olympic average” state yield for 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 are dropped, and the average yield is 161 bushels per acre.

The average state yields for a given year are based on the National Agriculture Statistics Service. The 2009 state yield guarantees for Minnesota are 161 bushels per acre for corn, 41 bu./acre for soybeans and 49.9 bu./acre for wheat.

Farm-level yield guarantees with ACRE

The farm-level yield guarantee will be the “Olympic average” actual or “proven” farm yield for the past five years (2004-08), with the highest and lowest yield being dropped, and the three remaining yields being averaged.

Official FSA details on how the “proven yields” will be established at the farm level are still a bit sketchy; however, it appears that yields may be verified by the possible methods:
• Crop insurance APH information
• Warehouse receipts and settlement documents
• CCC loan and LDP documents
• Official bin measurements
• Certified scale tickets

Check with county FSA offices for specific details. For each year that the program crop was not raised (2004-08), or that the yield cannot be proven, a “plug yield” equal to 95 percent of the county average yield (from NASS) will be used.

Example: County average corn yield of 165 bu./acre x 0.95 = 156.75 bu./acre)

The state and county average yield data for given years can be accessed through the NASS website at www.nass.usda.gov.

Revenue guarantees with ACRE

State revenue guarantee = “Olympic Average” state yield x two-year average price x 0.90

Corn example: 161 bu./acre x $4.20/bu. x 0.90 = $608.58/acre

Farm-level guarantee = Average farm yield x Two-year average price + 2009 crop insurance premium

Corn example: 177 bu./acre x $4.20/bu. + $25/acre = $768.40/acre )

Future yield, price, and revenue guarantees with ACRE

Both state and farm level guarantees will be recalculated each year (2009-12), based on changing average yields and prices. This is an important factor in determining your ACRE program decision for 2009 and beyond.

ACRE revenue guarantees cannot vary up or down by more than 10 percent from one year to the next.

Revenue guarantees with ACRE

There are two “revenue triggers” that must be met before ACRE payments will be made, one based on actual state revenue for a given crop in a particular year and the other based on actual farm-level revenue for that crop in the same year.

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. 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, and actual farm yield, respectively.

If both “revenue triggers” are reached, the ACRE payment will be made for that crop on that FSA farm number for the given year.

Calculating ACRE payments

ACRE program payments will be the higher of difference between the state guarantee and the actual state revenue, or the “state guarantee revenue” times 25 percent (0.25), times 83.3 percent (0.833), times the producer adjustment.

The total ACRE payment cannot exceed 25 percent of the state guarantee. ACRE payment will be paid on 83.3 percent of crop base acres (same as for direct payments). The state revenue guarantee can be adjusted up or down, based on farm-level yields.

Example: Farm-level 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).

ACRE decision summary

Remember that farm owners and operators have until Aug. 14 to finalize their decision on enrollment in the ACRE program for 2009.

In future columns, I will look at situations and scenarios that are more favorable for ACRE enrollment for 2009, as well as situations where the best option may be continuing with the traditional DCP farm program for 2009.

To receive copies of other ACRE program information and a listing of web sites with good ACRE information, contact me.