FAQ: Landlord Doesn’t Object To ACRE - So What’s The Downside of Tenant Enrolling The Farm In ACRE?

Penciling out the figures shows the potential benefits of the program.

FAQ: None of my landlords care at all about sealing grain (non-recourse loans), and they don’t really care about giving up $5 per acre in Direct Payments annually. So what would be the downside, if any, of enrolling the farms in ACRE?

Answer: Provided by Steve Johnson, ISU Extension farm management specialist.

There is very little downside for being in ACRE in this situation. The party at risk on an ACRE farm also gains revenue protection multi-year. Once enrolled, the revenue guarantee can’t drop by more than 10% year-to-year for both the state and farm revenue guarantees.

For example, in Iowa say you enroll in ACRE in 2009. If the 2009 Iowa corn revenue guarantee is $635 per acre, the 2010 state revenue guarantee can’t fall below $571 per acre ($635 times 90%). That’s because the revenue guarantee can’t decrease by more than 10% from one year to the next.

The farms not enrolled in ACRE in 2009 might not have this same state revenue guarantee. However, the national cash price for the 2009-10 marketing year would have to drop by more than 20% from the 2007-08 marketing year. That’s because the 2010 potential ACRE revenue guarantee will reflect the simple average of the 2008 and 2009 national cash prices. This assumes that the Iowa 5-year benchmark yield does not change from 2009 to 2010. Larger 2009 state yields would impact the state revenue guarantee, overcoming a portion of the drop in national cash prices.

If you have a question you'd like answered regarding the new USDA farm program, please send it to [email protected]. We will pass it on to the ISU Extension specialists or to the program specialists at USDA's Farm Service Agency office in Des Moines and they will send you the answer.

Also, ISU Extension farm management specialist Steve Johnson keeps Iowa farmers and landowners updated using his ACRE Answers web page at www.extension.iastate.edu/polk/farmmanagement.htm

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