2011 ACRE Program Decisions

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Producers who previously enrolled in ACRE for the 2009 or 2010 crop year will be enrolled in ACRE for 2011 and 2012, provided they annually sign up for the farm program at county Farm Service Agency (FSA) offices and meet all other program criteria. Other producers can enroll in ACRE for 2011 when they sign up for the 2011 farm program at anytime until June 1, 2011, at county FSA offices, provided they meet all criteria for 2011 farm program enrollment. ACRE enrollment was quite limited during the first two years of existence, with only about 8% of crop producers nationwide, and about 13% of the total eligible acres enrolled in ACRE for the 2009 crop year, with a few more farms and acres being added to the ACRE program for 2010.

 

Direct Payment and CCC Loan Rates With ACRE

Direct payments will be reduced by 20% (approx. $3-5/acre), and national and county CCC loan Rates will be reduced by 30% on farms enrolled in the ACRE program for 2011.The national loan rates will drop from $1.95/bu. to $1.37 for corn, from $5/bu. to $3.50 for soybeans and from $2.94/bu. to $2.06 for wheat.

 

Price Guarantees with ACRE

The ACRE price guarantee for all crops is the national average price for the 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 2010 price guarantees were based on the national average price for 2008 and 2009, while the 2011 price guarantees will be based on the national average price for 2009 and 2010. The final ACRE price guarantees for 2009 were $4.13 for corn and $10.04 for soybeans, and for 2010 were $3.81 for corn and $9.78 for soybeans. The preliminary USDA guarantee price estimate (as of April 1, 2011) for the 2011 crop year were $4.48 for corn and $10.55 for soybeans; however, 2011 prices for corn and soybeans will not be finalized until Oct. 1, 2011.

 

Yield Guarantees With ACRE

The state yield guarantee for 2011 is the Olympic average state yield for the past five years (2006-2010), with the highest and lowest yield being dropped, and the three remaining yields being averaged (example: Minnesota corn yields of 161, 146, 164, 174 and 177, with the 177 and 146 being dropped, and a resulting average yield of 166 bu./acre for 2011, which is the same as 2010). The average state yields for a given year are based on the National Ag Statistics Service (NASS) yields.

The farm-level yield guarantee will be the Olympic average actual or provenfarm yield for the past five years (2006-2010), with the highest and lowest yield being dropped, and the three remaining yields being averaged. For each year that the program crop was not raised (2006-2010), or that the yield cannot be proven, a plug yieldequal to 95% of the county average yield (from NASS) will be used (example: county average corn yield of 170 bu./acre x 0.95 = 161.5 bu./acre).

 

Future Yield, Price and Revenue Guarantees With ACRE

Both state and farm level guarantees will be recalculated each year (2011-2012), based on changing average yields and prices. ACRE revenue guarantees cannot vary up or down by more than 10% from one year to the next.

Revenue Guarantees With ACRE

State revenue guarantee:Olympic average state yield x 2-year average price x 0.90; Minnesota corn example (2011): 166 bu./acre x $4.48/bu. x 0.90 = $669.31/acre, however, state revenue guarantee will be reduced $626.13/acre (10% max. increase)

Farm-level guarantee: Average farm yield x 2-year Average price + 2011 crop insurance premium; corn example (2011): 178 bu./acre x $4.48/bu. + $30/acre = $827.44/acre

 

Revenue Triggers 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. For a producer to receive a payment under the ACRE program, the actual revenuefor 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 to 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. Acre payments for corn and soybeans will be made after Oct. 1 in the year following production.

 

Calculating ACRE Payments

ACRE program payments will be the difference between the state guarantee and the actual state revenue, times 83.3% (0.833), times the producer adjustment.Thetotal ACRE payment can not exceed 25% of the state revenue guarantee for a given crop. The ACRE payment will be paid on 83.3% of crop base acres (same as for direct payments). The final ACRE payment to producers can be adjusted upward, if farm-level yields that are higher than the state yield guarantee.

 

ACRE Decision Summary For 2011

Remember: Farm owners and operators have until June 1, 2011 to finalize their decision on enrollment in the ACRE program for 2011. ACRE enrollment does require a signature from landlords on cash rental farm units. Producers are encouraged to analyze situations and scenarios that are more favorable for ACRE enrollment for 2011, as well as situations where the best option may be continuing with the traditional DCP farm program. The national average corn price needs drop to approximately $3.77/bu. (from Sept. 1, 2011 to Aug. 31, 2012) to reach the threshold for 2011 ACRE payments in Minnesota for corn in 2011 at the 166-bu./acre average yield for 2011; however, the ACRE price threshold increasing to approximately $4.20/bu. at a statewide 2011 average yield of 149 bu./acre (10% yield reduction).

Even though the ACRE program did not pay out in 2009 for corn and soybeans in Minnesota, and will likely not result in an ACRE payment in 2010, producers should not automatically write-off ACRE program enrollment for the 2011 crop year. The likely increase in the ACRE price guarantees for 2011 will lead to higher revenue guarantees for the 2011 ACRE program. This increases the likelihood of ACRE payments for the 2011 and 2012 crop years for corn and soybeans, as compared to the 2009 and 2010 crop years. However, current Chicago Board of Trade futures prices for corn and soybeans suggest that the potential for an ACRE payment in corn and soybeans in 2011 may be limited – unless there are reduced statewide yields in 2011 along with reduced crop prices after Sept. 1, 2011.

 

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 kent.thiesse@minnstarbank.com.

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