Decision time has arrived for the Average Crop Revenue Election (ACRE) Program for 2010. The drop in expected 2010 corn and soybean prices this spring has encouraged more producers to consider ACRE sign-up this year. Farm operators have until June 1, 2010, to sign-up for the 2010 DCP farm program at county Farm Service Agency (FSA) offices, and to decide if they want to enroll in the ACRE Program. Farm operators who enrolled in ACRE in 2009 are automatically enrolled for 2010, 2011 and 2012.
Following are some key questions producers should ask themselves as they are deciding on enrollment in the ACRE program for 2010:
1. Do you think the 2010 12-month national average corn price (9-01-10 to 8-31-11) will be lower than $3.40/bu., or that the 12-month national average soybean price will be lower than $8.70/bu.?
If a producer answers YES to this question, there is a high likelihood that they may be able to earn an ACRE payment on the 2010 corn and soybean crop, if the 2010 actual state yield for Minnesota is close to the estimated five-year Olympic average yield for corn (166 bu./acre) and soybeans (42 bu./acre), and if that producer qualifies for ACRE at the farm-level.
2. Do you think that the statewide average corn and soybean yields for 2010 in Minnesota will exceed the estimated 2010 five-year Olympic average yields of 166 bu./acre for corn and 42 bu./acre for soybeans?
If the actual state corn yield for Minnesota in 2010 is 5% above the five-year Olympic average yield (174 bu./acre), the price threshold to earn an ACRE program payment drops to near $3.25/bu. for corn. Similarly, if the 2010 statewide soybean yield in Minnesota increases to 45 bu./acre, the ACRE price threshold drops to near $8.15/bu. for soybeans. However, if 2010 statewide corn and soybean yields are reduced by 10% for corn (149 bu./acre) or 15% for soybeans (36 bu./acre), the price thresholds to trigger ACRE payments would be about $3.80/bu. for corn and $10.10/bu. for soybeans.
3. Are my farm-level yields for 2010 likely to exceed my five-year Olympic averageyields by more than 10%?
If not, your odds are greatly increased to meet the ACRE threshold at the farm level. Crop conditions in many areas of Minnesota look good to excellent during the early growing season, and many producers are worried that the very good corn and soybean yields in 2010 could keep them from meeting the farm-level trigger for ACRE payments. If a producer is enrolled in Federal Crop Insurance for 2010, with premium of $15/acre or more, they should be able to have 2010 corn and soybean yields close to 10% above their five-year average farm yields, and still meet the farm threshold for ACRE payments, unless the final 2010 national average price far exceeds the benchmark price.
4. How do I deal with my landlords regarding ACRE Program sign-up for 2010?
This is a very difficult question. If one landlord on a farm unit refuses to sign the FSA ACRE enrollment form, the farm can not be enrolled in ACRE. Once a farm is enrolled in ACRE, it remains in ACRE through the 2012 crop year, regardless if the farm is sold or cash rented to another farm operator. As a farm operator, if you feel strongly about enrolling a cash rented farm in ACRE for 2010, you will need to work with the landowner on why enrolling in the ACRE program will be mutually beneficial.
5. Are the potential benefits from ACRE worth the 20% reduction in direct payments over the next three years (2010-2012)?
The reduction in direct payments for most Minnesota producers will likely be between $3.50 and $5.50/crop base acre, depending on the mix of base acres. Farm units in extreme southern Minnesota that are 75-100% corn base acres may be near $6/base acre, while farm units in central and northern Minnesota with a low percentage of corn base acres may be near $3 or lower/base acre reduction in direct payments. Typically, corn base acres have the highest direct payment amount per base acre, while small-grain crops, such as oats, have the lowest direct payment per acre. Assuming that actual 2010 statewide yields are close to the five-year state guarantee yields, the 12-month national average corn price for 2010 would have drop below $3.35/bu., or the 12-month soybean price below $8.50/bu., in order to earn the entire three-year (2010-2012) expected loss of direct payments from the anticipated ACRE payment on the 2010 corn or soybean crop.
6. How do I adjust for the 30% reduction in the CCC loan rate with ACRE enrollment?
The 30% CCC national loan rate reduction for 2010 is 58¢/bu. for corn ($1.95/bu. to $1.37/bu.), and is $1.50/bu. for soybeans ($5/bu. to $3.50/bu.). County loan rates in Minnesota are slightly lower than the National CCC loan rates, but the 30% reduction will be comparable (53-56¢/bu. for corn and $1.40-1.48/bu. for soybeans). While the likelihood of earning LDPs for 2010 and beyond is probably fairy slim, many producers use the CCC loan program to meet short-term cash flow needs following harvest. For example, signing up for ACRE in 2010, would likely result in a reduction of approximately $50,000.00 in available loan funds through a CCC corn loan on 100,000 bu. of corn. There is no lost income on CCC loans, but some financial management adjustments will likely be necessary when enrolling in the ACRE program. This is not a factor for producers who do not use the CCC loan program on a regular basis.
ACRE Resources
The county FSA office is the best resource to find out details on sign-up for the ACRE Program, farm-level yield verification, reporting requirements, landlord requirements, etc. The official ACRE Program information is available at County Farm Service Agency (FSA) offices, and on the USDA FSA website.
Other useful ACRE web sites include:
Iowa State U Decision Maker
Kansas State U Ag Manager
National Corn Growers Association
University of Minnesota
U of Missouri FAPRI
U of Illinois Farm Management
Bottom Line
June 1 is a short time away, so producers should use whatever time remains to look at the ACRE Program for 2010. Remember: ACRE enrollment is by farm unit, so it is not necessary to enroll all farms in the program.
In may be tempting to just wait until 2011 for possible ACRE enrollment; however, the current situation with 2010 revenue guarantees and 2010 corn and soybean price projections may mean that 2010 could offer the best potential for ACRE payments in the next three years.
Also remember that there are no guarantees with ACRE, so there is some financial risk involved. There may not be any ACRE payments during the three-year period (2010-2012), which would cost the producer the value of the 20% reduction in direct payments over the three-year period.
In the end, the final ACRE decision lies with the producers and land owners, and we will not know the results of that decision for the 2010 crop year until after Aug. 31, 2011.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.