Learn about the new farm program, says Ohio State Economist Carl Zulauf, “ACRE is a revenue (price times yield) program, not a price program. More importantly, ACRE does not presume what the market is going to be, it just follows the market. If prices or yields decline dramatically, ACRE provides support given the market conditions we are in at the time.” Read his analysis: aede.osu.edu/people/publications.php?user=zulauf.1
Among the details in the Farm Bill, Zulauf outlines the ACRE commodity program:
1) ACRE is an optional program beginning in 2009, but opting for it is permanent.
2) ACRE provides payments for individual crops, but it is applied to the whole farm.
3) ACRE provides payments, but direct payments are cut by 20%, loan rates by 30%.
4) Farmers must decide if that risk is worth the increased ACRE risk-management plan.
5) ACRE is compared to a put option on revenue, calculated with state price averages.
6) To get an ACRE payment, both farm and state revenue must be under the guarantee.
Payment scenarios should be studied by producers says Zulauf before making the decision whether to opt for the ACRE program. “If prices continue to go up, then payments under the traditional programs will be greater than under ACRE, because you are giving up 20% of the direct payments. And if prices keep going up, ACRE will never trigger a payment. But, if prices drop substantively, ACRE payments are likely to be larger. ACRE provides you protection in particular to short, steep declines in revenue,” Zulauf says.