An analysis by economists at the Center for Agricultural and Rural Development at Iowa State University suggests that most U.S. farmers will find the Average Crop Revenue Election much more attractive than current commodity programs.
ACRE is a new commodity program included in the Food, Conservation and Energy Act of 2008 - the 2008 Farm Bill that was recently passed by Congress. This new program presents farmers with a choice of covering their eligible crops over the period of the new legislation, 2009-2012. Farmers can continue to enroll in traditional commodity programs or they can participate in ACRE.
The CARD researchers created the tools to show farmers how they would fare under new and old programs using different price and yield scenarios. Three calculators are offered--for corn, soybeans and wheat. The calculators are embedded in Microsoft Excel spreadsheets posted on the CARD Web site at www.card.iastate.edu/ag_risk_tools.
Farmers find new calculators very useful
Users of the calculators are instructed to enter specific data about their state, along with their expected commodity price for the 2009-10 marketing year, their 2008 marketing year price and their 2008 average yield per planted acre. They also can enter their USDA program yields used to calculate direct and countercyclical payments.
The calculator then provides the 2009 ACRE price, ACRE yield and ACRE revenue guarantee. Further results show users the estimated payments they will receive under ACRE and under older farm programs given their calculator inputs.
A "what if" option allows the users of this online program to check the results of different combinations of expected price and yield outcomes. According to CARD director Bruce Babcock, almost all price scenarios favor enrollment in ACRE. "ACRE payments will be double the level of traditional programs even if commodity prices drop back to levels last seen in 2005," he says. He notes that traditional commodity programs generate slightly more payments only if market prices in 2009 through 2012 remain above 2007 and 2008 average levels.
ACRE program begins with 2009 crops
Starting with the 2009 crop year, farmers growing USDA program crops can sign up to participate in ACRE. Once they do, they can't go back to the more traditional farm programs like direct and counter cyclical payments.
The ACRE program provides a guaranteed level of revenue based on state average yields and prices for program crops. With prices today at or near record highs, ISU's Babcock says choosing ACRE clearly makes the most sense for most farmers. That's especially true because ACRE never allows the revenue guarantee to plummet as far as prices could during the life of the program.
"If farmers jump into ACRE and the price drops and they get a pretty good payment, the guarantee won't drop the following year by more than 10% so they'll still get a guarantee the following year. So ACRE really is not a very difficult decision, regarding whether to get into it or not."
Farmers will be interested in ACRE
That means the revenue guarantee can never fall more than 40% from the levels USDA establishes for the 2009 crop year. But will USDA implement ACRE in time for the 2009 winter wheat crop? Babcock says wheat grower associations may have to prod the Bush Administration to make it happen in time.
"It is going to take some push by wheat producers and their organizations to get USDA to actually implement the program by the time winter wheat farmers plant their crop this fall," he says. ACRE is part of the USDA Farm Bill and it looks like ACRE is something Midwest farmers will be very interested in getting into. USDA is now trying to iron out details and get the program started.