Sign-up for the new Average Crop Revenue Election program for 2009 ended in mid-August; however, some farmers who enrolled in the ACRE program have one final decision to make by Sept. 30.
Any producers who have total crop acreage enrolled in ACRE for 2009 that exceeds 120 percent of the total 2009 crop base acres on any farm unit will need to prioritize their base acres for order of ACRE payment by Sept. 30 at their county Farm Service Agency office.
Otherwise, the FSA will prorate the crop acreage eligible for ACRE payments, based on the percentage of crop base acres for each crop. The crop acreage priority decision at the FSA office is for the 2009 crop year only. Producers will have an opportunity to re-prioritize their crop acreage for ACRE for the 2010 crop year.
Producers who have less than 120 percent of total crop base acres as planted crop acres in 2009, do not have to make any decisions on ACRE acreage priority, or contact the county FSA office by Sept. 30. In this situation, the total crop acreage on the farm unit would be eligible for the 2009 ACRE program, depending on the crop that was planted for 2009.
Of course, farmers who did not enroll in ACRE for 2009 do not have to worry about this decision. However, it probably is a good idea to understand the ACRE crop priority process at FSA offices, in case they decide to enroll in ACRE for the 2010 or 2011 crop years.
The first question is probably “how is the 120 percent of total crop base acres on a farm unit calculated as being the threshold level for prioritizing 2009 crop acreage for ACRE payment eligibility?”
Following are some key basics to remember regarding ACRE enrollment and the potential prioritization of crop acres for ACRE payments for 2009.
• Farm unit: Enrollment in ACRE is based on “farm numbers” (farm units), as they are recorded at the county FSA office.
• Eligible crops: Corn, soybeans, wheat, cotton, other small grains and other program crops are eligible for ACRE. ACRE payments for a given year are based on the crop or crops planted on a given farm unit during a specific crop year. This will likely change from year to year.
• Payment acres: ACRE payments are made on 83.3 percent (0.833) of planted crop acres in a given crop year. Total ACRE payment acres in a given crop year cannot exceed the total of all crop base acres on a farm unit. So, if you multiply the total crop base acres on a farm unit times 120 percent (1.20), it will give you the maximum planted acres on that farm unit that are eligible for ACRE payments for the 2009 crop year.
Example: A farm unit, with a 50-acre corn base, 40-acre soybean base and 10-acre wheat base, could have up to 120 acres of crop land planted to crops eligible for ACRE payments in 2009, and have ACRE eligibility on all crop acres. If the farm unit had greater than 120 acres of eligible crops in 2009, some prioritization would be required.
ACRE acreage prioritization
If the total crop acres planted to ACRE-eligible crops on a farm unit enrolled in ACRE for 2009 exceeds 120 percent of the total crop base acres on that farm unit, then the crop acreage will need to be prioritized for potential 2009 ACRE payments. Following are the two methods of acreage prioritization for ACRE payments.
• The FSA office determines ACRE payment eligibility on a prorated basis, based on the percentage of crop base acres that each eligible crop has. (This is the “defaul” option.)
Example: Farm unit has 200 total planted crop acres, which are planted to 100 acres of corn and 100 acres of soybeans in 2009. Crop base acres are 70 acres of corn base and 70 acres of soybean base, or 150 total base acres. Total crop acres eligible for ACRE payments in 2009 would be 168 acres (140 acres x 1.20). So, in this example, 32 planted acres would not be eligible for ACRE payments in 2009.
Since no prior designation was made, and 50 percent of the crop base acres are corn base acres and 50 percent are soybean base acres, the FSA would set 84 acres of both the 2009 corn and soybean acreage as eligible for ACRE payments for the 2009 crop year, and 16 acres of each crop as ineligible. If the ACRE “payment trigger” is met for 2009 on corn, but not on soybeans, the producer would only receive ACRE payments on 84 acres of corn, instead of the 100 planted acres, and no ACRE payment for soybeans. If the ACRE “payment trigger” for 2009 was also met for soybeans, the producer would receive an ACRE payment on the 84 acres eligible for soybean ACRE payments.
• Producer makes the decision for ACRE payment priority at the county FSA office by Sept. 30.
Example: Farm unit is the same as in the previous example, with 100 acres each of both corn and soybeans in 2009, 168 acres eligible for ACRE payments and 32 acres ineligible for payments. The producer could choose to have all corn acres paid before soybean acres. If this decision were made, and the ACRE “payment trigger” is met for 2009, the producer would receive ACRE payments on all 100 acres of planted corn in 2009.
The maximum soybean acres now eligible for ACRE payments in 2009 would now be 68 acres (168 acres – 100 acres = 68 acres). If the ACRE “payment trigger” is met for soybeans, the producer would only receive payment on 68 eligible soybean acres, and not the remaining 32 acres of soybeans.
Deciding on crop prioritization for ACRE
Once a producer decides to prioritize their planted crops on a farm unit enrolled in ACRE for 2009, they should decide on what order to rank the crops in priority. This will vary from state-to-state depending on the crop mix and the yield potential for various crops in 2009 in that state.
ACRE payments for any crop in 2009 will be paid on eligible acres on a farm unit that is enrolled in ACRE, provided that the statewide ACRE “payment trigger” is achieved for that crop and the farm-level “revenue trigger” is achieved. All 2009 ACRE payments are based on statewide revenue calculations, and not on farm-level revenue calculations.
For the statewide ACRE “payment trigger” to be achieved, the final statewide calculated revenue (2009 National Agricultural Statistics Service state yield average X the final 2009 NASS 12-month average market price) must be lower than the statewide ACRE benchmark guarantee for that crop (benchmark state yield X benchmark NASS price X 0.90). The NASS prices used for calculations are the same in every state, so the only variation for a given crop are the benchmark yields and the final 2009 state yields.
Producers also need to meet farm-level eligibility before a farm unit will qualify for ACRE payments. Farm-level eligibility is met when the final farm-level revenue for 2009 for a given crop (Actual 2009 farm yield X final 2009 NASS 12-month average market price) falls below the farm-level benchmark guarantee (Proven farm-level average yield X benchmark NASS price + 2009 crop insurance premium.)
If the farm level ACRE “revenue trigger” is not met for a given crop, no 2009 ACRE payment will occur for that crop on that farm unit, regardless if the state ACRE “payment trigger” is achieved. There will also be no 2009 ACRE payment if the farm-level ACRE “revenue trigger” is achieved, but the state ACRE “payment trigger” is not achieved, in which case there would be no ACRE payments in that state for that crop in 2009.
The main thing to look at for prioritizing ACRE payment acres among limited crop base acres is to look at the potential for the NASS “price triggers” to be achieved for the 2009 crop year thus increasing the likelihood of statewide ACRE payments for 2009.
Secondly, it is good to pay attention to the U.S. Department of Agriculture estimated yield for a given crop for 2009, and how that compares to the benchmark state yield for that crop that was used to establish the state revenue guarantee for a given crop.
Thirdly, you should consider the anticipated 2009 farm-level revenue, especially if you expected one crop to have a considerably higher percentage yield increase in 2009 above the farm-level benchmark yield. In most cases, the farm-level calculations are not likely to impact the prioritization of crop acres for potential 2009 ACRE payments on a given farm unit.
2009 ACRE crop prioritization for Minnesota
We will now specifically look at crop prioritization for the 2009 ACRE program in Minnesota, based on current USDA estimates for 2009 crop yields and average market prices. Following is a summary for 2009 corn, soybeans and wheat in Minnesota.
Corn: The 2009 ACRE benchmark state yield for corn in Minnesota is 161 bushels per acre and the estimated NASS benchmark price is $4.14 per bushel, resulting in an estimated statewide ACRE revenue guarantee for 2009 of $599.89 per acre. (161 bu./acre X $4.14/bu. X 0.90 = $599.89/acre)
Based on the most recent USDA report on Sept. 11, the USDA is estimating the 2009 statewide corn yield at 167 bu./acre and the 12-month national average corn market price for 2009 at $3.35/bu. Based on the current USDA numbers, the estimated 2009 ACRE payment would be $33.69 per eligible ACRE corn payment acre, plus any additional payment for farm-level average yields that exceeds state benchmark yields. The maximum corn ACRE payment for 2009 would be $124.93 per corn payment acre, plus any farm-level payment enhancements.
Soybeans: The 2009 ACRE benchmark state yield for soybeans in Minnesota is 41 bushels per acre and the estimated NASS benchmark price is $10.05/bu., resulting in an estimated statewide ACRE revenue guarantee of $370.85/acre. (41 bu./acre X $10.05/bu. X 0.90 = $370.85/acre)
Based on the most recent USDA report, the estimated 2009 statewide soybean yield is 40 bu./acre and the 12-month national average soybean price for 2009 is estimated at $9.10/bu. Based on the current USDA numbers, the estimated 2009 ACRE payment would be $5.71 per eligible ACRE soybean payment acre, plus any additional payment for farm-level average yields that exceed state benchmark yields. The maximum soybean ACRE payment for 2009 would be $77.27 per soybean payment acre, plus any farm-level payment enhancements.
Wheat: The 2009 ACRE benchmark state yield for wheat in Minnesota is 49.9 bu./acre and the estimated NASS benchmark price is $6.63/bu., resulting in an estimated statewide ACRE revenue guarantee of $297.75/acre. (49.9 bu./acre X $6.63/bu. X 0.90 = $297.75/acre)
The USDA did not estimate statewide wheat yields (so the state average was used), along with the USDA estimated 12-month national average soybean price for 2009 of $5.10/bu. Based on the current estimates, the estimated 2009 ACRE payment would be $35.61 per eligible ACRE wheat payment acre, plus any additional payment for farm-level average yields that exceed state benchmark yields. The maximum wheat ACRE payment for 2009 would be $62.01 per wheat payment acre, plus any farm-level payment enhancements.
Based on these calculations, and the USDA crop production and average price estimates as of Sept. 1, the recommended crop priority ACRE payments for the 2009 would be:
• Corn: The current estimated ACRE payment level of $33.69 per eligible ACRE payment acre is slightly below the projected 2009 payment level of $35.61/acre for wheat. However, the maximum payment potential for corn acres is much higher at $124.93/acre, compared to $62.01/acre for wheat, if corn market prices continue to drop in the coming months. In addition, most farms in southern and western Minnesota will more likely qualify for enhanced payments for higher farm-level corn yields, as compared to wheat or soybeans.
• Wheat: The 12-month crop marketing year for wheat started on June 1, so we are already well into the marketing year with an estimated 2009 ACRE payment for wheat at over $35/acre. The soybean ACRE “payment trigger” is basically at a break-even level, and the 2009 soybean marketing year for soybeans just began on Sept. 1, so there is a lot more potential for future price variation. Maximum potential ACRE payment levels for soybeans are slightly higher than for wheat.
• Soybeans: In some farm situations, the choice of wheat or soybeans could be debatable, depending on the level of proven soybean yields, which would enhance potential future payments, and on a person’s expectations for soybean prices in the coming months.
It is hard to imagine choosing to prioritize soybean acres over corn acres for potential 2009 ACRE payments, unless a person felt that the level of 2009 corn yields would be high enough to exclude that farm from potential ACRE payments in 2009.
There is a lot of variation from farm-to-farm, so the acreage priority for potential 2009 ACRE payments could vary quite a bit among farm units; however, make sure that the potential for 2009 corn ACRE payments is analyzed before minimizing corn acres for potential ACRE payments.
For many farm units, this is a non-issue, since all crop acres will likely be eligible for potential 2009 ACRE payments
