Why Every Farmer Should Consider ACRE

Unique protection

Current grain bids for harvest-time delivery are well above ACRE benchmark prices. In central Illinois, fall delivery bids are in the mid-$6 range for corn and mid-$13 range for soybeans. Wheat bids are in the mid-$7 range for summer delivery. This suggests that the chance of ACRE payment in 2011 are below their more typical probabilities of 33% for corn, 16% for soybeans and 26% for wheat.

While the chance is lower than average in 2011, ACRE still is worth considering. The $4.48 corn, $10.55 soybean and $5.24 wheat benchmark prices are above historical levels and well above trigger prices contained in the counter-cyclical program. While the price and revenue outlook currently is positive, events could occur that cause 2011 to be poor revenue year. While not likely, prices could fall causing ACRE payments. A low-yielding year could also result in ACRE payments.

Moreover, ACRE offers different protection from crop insurance. Crop insurance prices for determining revenue on corn and soybeans will based on futures prices in October. For corn and soybeans, ACRE revenue will be determined by MYA prices, which are averaged from September 2011 through August 2012. Because of the long period for determining prices, ACRE offers extended protection compared to crop insurance, whose protection ends after harvest prices and yields are determined.

 

Summary

ACRE offers revenue protection superior to price protection offered by the traditional counter-cyclical program. ACRE’s revenue protection differs from crop insurance. These features cause ACRE to be attractive alternative, even given the $4 or $5/acre reduction in direct payments.