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Potential for ACRE payments for 2013 corn

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In recent weeks, there has been a lot of discussion focusing on the implementation of the new farm bill, particularly associated with farm program options for the 2014-2018 crop years. One item that has been kind of overlooked is the fact that some producers were still enrolled in the Average Crop Revenue Election (ACRE) Program for 2013, and have the potential to receive an ACRE payment in October 2014. It appears that corn producers in Minnesota and Iowa who remained in the ACRE program for the 2013 crop year will have a good chance of receiving an ACRE payment in October of this year. Any potential 2013 ACRE payments to qualifying farm operators will be sent out by local Farm Service Agency (FSA) offices after Oct. 1, 2014.

The ACRE program was implemented by USDA for the 2009 crop year, as part of the 2008 Farm Bill, and continued for the 2010, 2011, and 2012 crop years. For 2013, producers that previously enrolled in the ACRE program for the 2009, 2010, 2011 or 2012 crop years had the choice of remaining in the ACRE program for 2013, or opting out of the ACRE program and receiving a higher level of direct payments. Farms that had not previously enrolled in the ACRE program (2009-2012) also could have opted to enroll in ACRE program for the 2013 crop year. Direct payments were be reduced by 20% for farms enrolled in the ACRE program for 2013, which was approximately $4-5 per corn base acre.

The ACRE guarantees for all crops are state specific, based on the benchmark revenue (yield x price), which were recalculated each year. The state yield guarantee for 2013 was the Olympic average state yield for the previous five years (2008-2012), with the highest and lowest yield being dropped, and the three remaining yields being averaged. The 2013 ACRE benchmark yields for Minnesota were 167 bushels per acre for corn and 40 bushels per acre for soybeans, and for Iowa were 168 bushels per acre for corn and 49 bushels per acre for soybeans. The benchmark revenues for corn in 2013 were $757.61 per acre in Minnesota and $780.45 per acre for Iowa. The 2013 benchmark revenues for soybeans were $471.24 per acre in Minnesota and $574.70 per acre in Iowa.

ACRE payments for 2013 will occur if the actual 2013 average statewide revenue for a crop (yield x price) falls below the identified benchmark revenues (listed earlier). The official USDA statewide crop yields for 2013 in Minnesota were 160 bushels per acre for corn and 41 bushels per acre for soybeans. The 2013 crop yields for Iowa were 168 bushels per acre for corn and 45 bushels per acre for soybeans. The 2013 crop price is the national average price for the 12-month marketing year for corn and soybeans, which runs from Sept. 1, 2013 until Aug. 31, 2014. The final prices will be announced in late September of this year. The current 2013-2014 national average price estimates are $4.45 per bushel for corn and $13.00 per bushel for soybeans.

To qualify for 2013 ACRE payments, farm operators must also qualify at the farm level, based on actual 2013 crop yields on a particular FSA farm unit times the final 12-month national average price. Qualification at the farm level is usually easier with declining prices, because farm-level revenue guarantees are usually higher than the statewide revenue guarantees. However, producers that had extremely high corn yields in 2013 on a particular FSA farm unit could possibly exceed the farm level benchmark revenue, and thus be disqualified from receiving a 2013 ACRE payment on corn. Eligible farm operators will need to check with their local FSA office for more details.

Based on the current $4.45 per bushel USDA price estimate for corn, and the 2013 statewide corn yields, most corn producers in Iowa and Minnesota that remained in the 2013 ACRE program and qualified at the farm level, will receive an ACRE payment on their 2013 corn acres. The estimated payment rate will be near $46.00 per acre; however, payment only occurs on 85 percent of the eligible acres, so the actual net payment rate is about $39 per acre on total acres. That payment rate can be increased, if a farm unit’s benchmark yield is higher than the statewide benchmark yield, so some producers may receive $40-45 per acre on total eligible corn acres.

Based on the current $13 per bushel price estimate for soybeans, there would not be a 2013 ACRE payment for soybeans in either Minnesota or Iowa. Given the sharp decline in corn and soybean prices in July and August, it is possible that the final 12-month average price could still drop slightly below the current estimated levels of $4.45 per bushel for corn, and $13 per bushel for soybeans. If the corn price declines, it would result in larger 2013 corn ACRE payments to eligible producers. The 12-month average soybean price would need to drop to about $12.75 per bushel for eligible Iowa soybean producers to start earning a 2013 soybean ACRE payment. There is virtually no chance for eligible Minnesota soybean producers to receive a 2013 ACRE payment.

According to USDA statistics, the total enrollment in the 2013 ACRE program was 59,110 farms for corn, and 54,364 farms for soybeans, which represents about 4.7% of the eligible farms for corn and 5.5% for soybeans. The total U.S. crop acres enrolled in the 2013 ACRE program were 6.76 million corn acres and 4.26 million soybean acres, which represents approximately 8.1% of the total U.S. corn acres and 8.6% of the total soybean acres. In Minnesota, approximately 6.3% of the total corn acres and 7.5% of the soybean acres were enrolled in ACRE in 2013. Iowa recorded just over 5.6% of the total corn acres and 6.1% of the total soybean acres in the 2013 ACRE program.

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