The U.S. Department of Agriculture has released the results of the Average Crop Revenue Election Program sign-up for 2009, which ended on Aug. 14.

A total of 128,620 farms across the United States were enrolled in the ACRE Program for 2009, representing 7.70 percent of the total farms and 13 percent of the total crop base acres in the country. Total enrollment in the Direct and Counter-Cyclical Payment Program for 2009 at county Farm Service Agency offices across the United States was 1.7 million farms and 255 million crop base acres.

There were a total of 22 different program crops eligible for the ACRE program. Corn had the highest number of crop base acres enrolled in ACRE for 2009, followed by wheat and soybeans. This was largely based on the likelihood of potential ACRE payments for the 2009 crop year at the sign-up deadline, and the maximum potential ACRE payment with the various crops.

Four states accounted for 56 percent of the farms enrolled in ACRE — Illinois, Iowa, Nebraska and Oklahoma. Minnesota ranked eighth with 5,682 farms enrolled, representing 6.14 percent of the eligible farms. The top 10 states for ACRE enrollment accounted for 86 percent of all the farms enrolled in ACRE in the United States. Of course, those same states account for a large percentage of the corn, soybeans and wheat produced in the United States on an annual basis. The accompanying graphic shows the top 10 states for ACRE enrollment for 2009, based on the total number of farms enrolled, and the percentage of eligible farms that enrolled.

Given the potential for ACRE payments in many states, especially with corn and wheat, one might ask why the percentage of farmers who enrolled in ACRE was so low nationwide, and especially in Minnesota. Following are some of the main reasons that producers listed for not enrolling in the ACRE program.

• ACRE was new and was difficult to understand, and the USDA was late in getting the final rules out to county FSA offices.
• The “double-trigger” aspect of ACRE, requiring both a state revenue trigger and a farm unit revenue trigger to be met bore ACRE payments are made, was confusing to many producers.
• ACRE requires the signatures of all landlords on cash rented farm units, and many landlords did not want their farm operators to enroll in ACRE.
• ACRE sign-up for 2009 was a four-year commitment (2009-12), and some producers are concerned about the longer term ACRE enrollment beyond 2009.
• Some producers did not want to lose 20 percent of the direct payments, which is a requirement for ACRE enrollment. (Approximately $3.50 to $5.50 per crop base acre for most producers in Minnesota.)
• Producers were concerned about the 30-percent reduction in Commodity Credit Corp. loan rate required with ACRE enrollment, and the impact on the annual cash flow of their farm business. (The ACRE loan rate reduction in corn will be $0.53 to $0.56 per bushel in most Minnesota counties, which is a cash flow impact of well over $50,000 on 100,000 bushels of corn placed under CCC loan.)
• Some producers and marketing analysts are “bullish” about grain prices for the remainder of 2009 and the first half of 2010, and felt the potential for ACRE payments for 2009 was low.
• Some producers were worried about farm-level yield verification requirements that will be required to establish five-year average farm yields to used to calculate ACRE guarantees.
• Some producers decided to wait until the 2010 crop year to evaluate ACRE, due to its complexities, and their difficulty in understanding the new program.

The final results of the ACRE program for the 2009 crop year will not be known until 2009 farm level yields are verified, 2009 statewide yield averages are finalized, and the 2009 marketing year prices are finalized, which will be after Oct. 1, 2010 for corn and soybeans. The crop market prices used for ACRE calculations are the 12-month “weighted” average prices, which is from Sept. 1 to Aug. 31 for corn and soybeans, and June 1 to May 31 for wheat and other small grains.

Producers who opted for the ACRE program for 2009 in place of the DCP program, had to sacrifice 20 percent of their 2009 direct payment, and be willing to have the CCC loan rate reduced by 30 percent for corn, soybeans, wheat and other program crops, on farm units that were enrolled in ACRE. In return, ACRE enrollees benefited from state and farm revenue benchmarks that were based on five-year “Olympic” average yields, and national average crop prices for 2007 and 2008.

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 .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.

2009 ACRE crop payment potential

Following is a summary of the potential for ACRE payments 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 $4.13 per bushel, resulting in an estimated statewide ACRE revenue guarantee for 2009 of $598.44 per acre. (161 bu./acre x $4.13/bu. x .90 = $598.44/acre.)

According to the latest USDA projections, the USDA is estimating the 2009 statewide corn yield at 167 bushels per acre, and the 12-month national average corn market price for 2009 at $3.35 per bushel. Based on the current USDA numbers, the estimated 2009 ACRE payment would be $32.48 per eligible ACRE corn base acre, plus any additional payment for farm-level average yields that exceed state benchmark yields.

The maximum corn ACRE payment for 2009 would be $124.63 per corn payment acre, plus any farm-level payment enhancements. Of course, a farm must also qualify at the farm level in 2009 in order to be eligible for ACRE payments.

Corn prices have improved somewhat since the last update by USDA, which could reduce the potential for ACRE payments on the 2009 corn crop; however, the final state yield could be challenged due to the poor harvest conditions.

Soybeans

The 2009 ACRE benchmark state yield for soybeans in Minnesota is 41 bushels per acre and the estimated NASS benchmark price is $10.04 per bushel, resulting in an estimated statewide ACRE revenue guarantee of $370.48 per acre. (41 bu./acre x $10.04/bu. x .90 = $370.48/acre.)

According to the latest USDA projections, the estimated 2009 statewide soybean yield is 40 bushels per acre and the 12-month national average soybean price for 2009 is estimated at $9 per bushel. Based on the current USDA numbers, the estimated 2009 ACRE payment would be about $8.73 per eligible ACRE soybean base acre, plus any additional payment for farm-level average yields that exceed state benchmark yields.

The maximum soybean ACRE payment for 2009 would be $77.15 per soybean payment acre, plus any farm-level payment enhancements. However, soybean price prospects have also improved since the last update by USDA, thus lowering the potential for ACRE payments on the 2009 soybean crop. Again, poor harvest conditions could possibly lower the final state soybean yield.

Wheat

The 2009 ACRE benchmark state yield for wheat in Minnesota is 49.9 bushels per acre and the estimated NASS benchmark price is $6.63 per bushel, resulting in an estimated statewide ACRE revenue guarantee of $297.75 per acre. (49.9 bu./acre x $6.63/bu. x .90 = $297.75/acre.)

According to the latest USDA projections, the estimated 12-month national average wheat price for 2009 at $4.85 per bushel. Based on those projections, the estimated 2009 ACRE payment would be about $45.19 per eligible ACRE wheat base 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. Wheat prices have also improved slightly since the last USDA update.

DCP, ACRE program sign-up for 2010

The USDA announced in early October that sign-up has started for the 2010 DCP and ACRE programs at county FSA offices, and will continue until June 1, 2010.

Producers who enroll in the DCP program for 2010 can receive 22 percent of their expected direct payment shortly after sign-up, with the balance being paid after Oct. 1, 2010. Producers who enrolled in the ACRE program in 2009, or who opt for the ACRE program for 2010, will have their total direct payments reduced by 20 percent for 2010.

Producers who enrolled farms in the ACRE program for 2009 will automatically have those farms enrolled in the ACRE program for 2010. Producers may enroll additional farms in the ACRE program for 2010; however, once a farm is enrolled in ACRE, it must also remain in ACRE for the 2011 and 2012 crop years, regardless of what crop is raised in those years. Rules and regulations for the ACRE program for 2010 are not likely to change very much from 2009.

The five-year average state and farm-level yields will be updated to include 2009 crop yields, and the benchmark prices for 2010 will be based on the 2008 and 2009 average crop prices.

Producers can enroll for the 2010 DCP program at county FSA offices in the coming months in order to receive their advance direct payment, and decide later, up until June 1, 2010, on whether or not they want to enroll in the ACRE program for 2010. It is probably good advice to wait until next winter or spring to decide on ACRE for 2010, once we know the final yield figures for 2009, and have a better handle on grain price trends. If a producer signs up for the DCP program in the next couple of months, and later enrolls in ACRE for 2010, any adjustments in the direct payment will be made on the final payment after Oct. 1, 2010.

For more information on sign-up for the 2010 DCP or ACRE program, producers should contact their county FSA office.

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 Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com.