ACRE in 2013: Making Your Decision

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The Average Crop Revenue Election (ACRE) was part of the 2008 Farm Bill and offers an alternative to the Direct and Counter-cyclical Program (DCP). The deadline for signup this year is June 3.

Participation in ACRE has climbed since its 2009 launch, when just 131,448 or 7.8% of program farms enrolled nationally, led by Illinois, Iowa, Nebraska and Oklahoma.

In 2012, nationally, 1.67 million farms enrolled in ACRE, with 1.23 million growing corn; 986,961, soybeans; 870,302, wheat; 285,276, grain sorghum; and 184,246, cotton. This represented 8.4% of USDA program farms.

Based on percentage of farms enrolled, the state with most participation in 2012 was Washington, at nearly 31%, followed by Oklahoma (26%), Nebraska and South Dakota (21%) and Illinois (17%).

Acreage enrolled also has grown, from 33.89 million in 2009 to 253.04 million in 2012.

 

Tradeoffs

The decision whether to participate is a complicated one and is based on your estimates of your own yield, state yield and market price will be. You need to weigh potential payouts under ACRE versus the trade-off in direct payments, potential counter-cyclical payments and reduced marketing loan rates.

Producers who elect and enroll a farm in ACRE agree to:

  • Forgo counter-cyclical payments
  • 20% reduction in direct payments
  • 30% reduction in marketing loan rates (and hence loan deficiency payments) for all commodities produced on the farm

In addition, the maximum ACRE payment acreage is limited to 85% of the total planted and considered planted acreage, not to exceed the total number of base acres on the farm. If the planted and considered planted acreage exceeds 118% of the base acreage and there is more than one eligible crop, producers must designate payment acreage for each crop by Sept. 30, 2013.

The price guarantee is not allowed to change more than 10% from the prior year. USDA’s estimated 2013 guarantee price is $7.52 for wheat; $6.56 for corn; $6.42 for grain sorghum; $13.40 for soybeans; 80.2¢ for cotton; $13.95/cwt. for long grain rice; and $16.50 for medium/short grain rice.

The final 2012-2013 marketing year average price and 2013 ACRE guarantee price won’t be released until June 27 for wheat and Sept. 27 for corn, grain sorghum and soybeans. Cotton prices are released Oct. 11 and rice, Jan. 31, 2014.

Two triggers are involved in determining whether a payment will occur: State revenues must fall below a threshold and your farm must fall below a threshold.

Fortunately, the University of Illinois has developed a calculator that helps make the decision. It also provides estimates the likelihood of a payment and the average payment. For instance, earlier this week, ag economist Gary Schnitkey found a 27% chance of an ACRE payment for corn in Illinois this year, and the average payment is $13/acre, while the tradeoff for most farmers would be passing up $3.50-5/acre in direct payments. Our run on calculator today showed an even higher likelihood and higher payment amount (see page 4, The Brock Report).

 

Download the spreadsheet.

USDA’s central information for the program.

 

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

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