Is there a benefit to signing up for farm programs anymore? Sure, you get a small check for direct payments, if you are not in the ACRE program. But what about ACRE and SURE, the latter being the permanent disaster program? Yes, there is paperwork for both of them, but in the end, is there value in signing up? Your answer is probably “It all depends on the year,” and if that is the case, is this the year?
Chris Bruynis at Ohio State University says June 1 is the deadline for deciding whether to opt out of the Direct Payment program and sign up for ACRE, which would be effective for the 2011 crop and benefits would be paid late in 2012 after the end of the marketing year for the 2011 crop. The price guarantee for the 2011 crop will be the average of the 2009 and 2010 crops, which is forecast at $4.43 for corn, $10.65 for beans and $5.26 for wheat. Since price is half of the equation and yield is the other half, Bruynis says if crop yields are good, then the price guarantee has to be lower.
Bruynis looked at the current futures market prices, compared to the average cash price that would be needed to trigger an ACRE payment, and he says “it does not appear that ACRE will be beneficial in 2011.” That is, if you have not signed up for ACRE before and were considering it for 2011. But Bruynis says markets are fickle and can move quickly and unexpectedly, and he says there is no downside risk protection if grain prices decrease significantly. It would cost $4-5 in loss of Direct Payments to sign up for ACRE, and Bruynis says it might be a good risk strategy for some operations.
Another “what if” might be in the case of a crop failure in your region, but not widespread enough to impact national price trends. That is where the SURE disaster program comes into play, says University of Illinois Farm Management Specialist Gary Schnitkey. It will provide financial support if your whole farm revenue falls below a guarantee level, and Schnitkey says that meant a $35/acre payment in 2008 for some farms, when typical farm income was relatively high.
SURE is another program that has a great length of time between the crop and the payment, since the payment is based on the marketing year, which does not start until the crop is harvested. Add 12 months to that time, plus a couple more months for calculations and processing, and any 2011 disaster will not be compensated until late in 2012. Schnitkey says the USDA is now soliciting sign-up for the SURE program based on the 2009 crop, since the marketing year is now complete. One of the benefits – at least for those who have crop insurance, which is one of the requirements – is that crop insurance data is used to determine the eligibility for a SURE payment.
Other requirements for SURE include an adjusted gross income of less than $2.5 million, and being in or adjacent to a county where a disaster was declared for the 2009 crop. Another requirement is a minimum 10% yield loss on one economically significant crop, which would be less than 90% of your APH yield. Finally, your SURE revenue must be under a SURE guarantee, which requires multiple calculations. Those will throw out many Illinois farms, says Schnitkey, but many farms in many other states may qualify.
Remember, you are signing up for a payment based on your 2009 yield and the market prices associated with the marketing year from September 2009 to August 2010. FSA offices will have a formula for determining eligibility, and the sign-up period for the payment ends on July 29. To sign up for SURE, you are not sacrificing any other farm program benefits; however, signing up for crop insurance is required. If you typically take crop insurance, signing up for SURE may put icing on that cake. Schnitkey says, “In addition, farmers may wish to consider their coverage level choice’s impact on potential SURE payments and choose 80% or higher coverage levels to maximize potential SURE payments.”
Farm programs are more complicated than those your father signed up for, but two programs that currently may provide benefits are ACRE and SURE. Both utilize complex formulas that determine benefits, and there is no way to predict now if they will provide benefits. Both use marketing-year price averages, following the harvest of the crop. ACRE may not provide any benefits based on prospective prices for the current year, but it does provide some downside revenue risk should prices drop unexpectedly. SURE is the permanent disaster program and supplements crop insurance, which is a requirement for those who sign up.