Should I Enroll In ACRE For 2011?

Should I Enroll In ACRE For 2011?

Producers have another chance to enroll in USDA's Average Crop Revenue Election or ACRE program in 2011. The sign-up deadline for the Direct and Counter-Cyclical Payment program or DCP and the ACRE option are both June 1 at your local Farm Service Agency office.

FAQ: I'm still trying to make up my mind about enrolling in the USDA farm program's Average Crop Revenue Election option for 2011? Do you think very many Iowa farmers will enroll in the ACRE program this year? The deadline is fast approaching.

Answer: Provided by Steve Johnson, an Iowa State University Extension farm management specialist.

With high prices for corn and soybeans, this is a common question. The probability of collecting a 2011 ACRE payment in Iowa seems remote based on current price forecasts for the 2011-12 marketing year that begins September 1.

First, a little review on ACRE. Farmers nationwide have until June 1, 2011, to sign up at their USDA Farm Service Agency office for the annual Direct and Counter-Cyclical Payment or DCP program. This is the same deadline to also enroll in the Average Crop Revenue Election or ACRE program.

ACRE enrollment is optional by FSA farm number with payments triggered by state revenue-based losses. ACRE acts in place of the price-only based Counter-Cyclical Payment or CCP. The ACRE program is a much better revenue safety net than the price-only CCP if you have a combination of yield and price that results in low state and farm revenue.

This will be the third year to sign up farms for ACRE. Once a farm is enrolled in ACRE, that farm stays in the program through the 2012 crop year and the farmer gives up 20% of the annual direct payment.

Question: Will Iowa farmers enroll in the 2011 ACRE program?

Here's why the probability of collecting a 2011 ACRE payment in Iowa seems remote based on current price forecasts for the 2011-12 marketing year that will begin September 1, 2011.

In February 2011, USDA projected the national average cash price for corn would be $5.60 per bushel and $13 per bushel for soybeans. These numbers could be updated in the May 11, 2011 USDA World Ag Supply and Demand Estimates report. With continued tight U.S. ending stocks forecast for both 2011 corn and soybean crops, ACRE payments in Iowa will be hard to trigger.

The 2011 ACRE projected revenue guarantee for corn in Iowa is expected to be $645 per acre. This uses a 169 bushel per acre average for the 5-year Olympic average yield times the 2-year average cash price of $4.48 per bushel times 90%. However, the state trigger can't change by more than 10% from the 2010 guarantee which was $586.36 per acre. Thus, the 2011 projected guarantee is limited to no more than $58.64 per acre more than the $586.36 per acre 2010 revenue guarantee.

Using the 2011 ACRE revenue projected guarantee of $645 per acre, a combination of a low state yield and a low national average cash price would be needed to trigger a 2011 ACRE payment at the state level. Since Iowa is the largest corn producing state, the chance of this occurring isn't likely.

Example for corn:  Suppose in 2011 Iowa produces a final state corn yield equal to the 5-year Olympic average yield of 169 bushel per acre. The national average cash price for the 2011 crop would have to drop below $3.81 per bushel ($645/A divided by 169 bu/A) to trigger an ACRE payment at the state level. In February 2011 USDA forecast a national average cash price of $5.60 per bushel for the 2011-12 marketing year.

Question: What are the chances of collecting a 2011 ACRE payment for soybeans?

Collecting a 2011 ACRE payment for soybeans is possible but not likely. The 2011 Iowa revenue guarantee increases to $479.50 per acre for beans using a 50.5 bushel per acre average for the 5-year Olympic average yield times a 2-year simple average cash price of $10.55 per bushel times 90%.

Example for soybeans: Suppose in 2011 Iowa produces a final state soybean yield equal to the 5-year Olympic average state bean yield of 50.5 bushel per acre. The national average cash price for the 2011 marketing year would have to drop below $9.49 per bushel ($479.50/A divided by 50.5 bu/A). In February 2011 USDA forecast a national average cash price of $13 per bushel for the 2011-12 marketing year.

The potential for 2011 ACRE payments seems limited, especially in Iowa which leads the nation in both corn and soybean production. Should Iowa have a 2011 final state yield that is below the 5-year Olympic average yield, the likelihood is national prices would be higher. Thus, with tight U.S. ending stocks forecast for the 2011-12 crop marketing year, the probability of triggering 2011 ACRE payments seems quite low.

For ACRE analysis go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm/crops/html/a1-45.html and use the decision tool. An update on grain marketing guidelines and farm program information is available on ISU Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.

In summary, keep these three points in mind:

1) The deadline for farmers to sign up for USDA's 2011 DCP and ACRE programs is June 1.

2) ACRE enrollment is optional and is triggered by state revenue-based losses.

3) With tight grain supplies, the likelihood of 2011 ACRE payments seems very low.

If you have specific questions or need details regarding USDA farm programs, contact your local USDA Farm Service Agency office. You can also get news and information about DCP, ACRE and other USDA programs at www.fsa.usda.gov.

Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm.

And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com

 

TAGS: Soybean USDA
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish