Time To Finalize Your 2013 ACRE Decisions

Time To Finalize Your 2013 ACRE Decisions

Deadline to enroll in USDA's ACRE program is June 3, but there are good reasons to do it now.

Farmers and crop-share landowners are being encouraged to finalize their ACRE enrollment decision soon. Whether or not to enroll in USDA's Average Crop Revenue Election program for 2013 is an option. And the deadline to enroll in ACRE isn't until June 3. "However, you are encouraged to enroll now so you can avoid the rush at county FSA offices later this month," says Steve Johnson, Iowa State University Extension farm management specialist in central Iowa. "FSA offices will also be busy with other programs, such as CRP and 2013 acreage certification."

Johnson provides the following information and explanation to help people make decisions regarding enrolling in ACRE for 2013.

BEAT THE RUSH: Farmers and crop-share landowners have until June 3 to enroll their farm or farms in USDA's ACRE program. But you are encouraged to do it now, to avoid long lines at county FSA offices the last week in May. Besides ACRE and DCP enrollment, many FSA offices will be very busy with sign-up for Conservation Reserve Program starting May 20 and acreage reporting, too.

Farmers and crop-share landowners have until June 3 to enroll their farm or farms in the 2013 ACRE program. It's expected that most farms will enroll in the traditional Direct and Counter-cyclical Payment program, although ACRE is an option to the DCP.

Some advisers recommend enrolling all farms in the ACRE program for 2013 because potential large payments could be made if crop prices drop significantly. In addition, ACRE payments could provide crop revenue risk similar to crop insurance revenue products.

Determining potential ACRE payments; it depends on yield and price
In Iowa, potential ACRE payments are limited to 25% of the state revenue triggers. For 2013, these are projected to be $781 per acre for corn and $574 per acre for soybeans, respectively. Thus, potential payments could be as large as $195 per acre for corn and $144 per acre for soybeans.

ACRE payments are dependent upon both a state's final 2013 yields and the marketing year average (MYA) national cash price. These two numbers multiplied together must fall below the state's revenue trigger level. If so, then 85% of that difference is provided as an ACRE payment based on the farm's 2013 planted acres for each crop. That payment will be granted in October 2014 when the 2013-14 MYA national cash price is known.

State revenue trigger and payment limits; here's how they work
The ACRE program doesn't allow for the state revenue triggers to change by more than 10% from one year to the next. The past few years, while national cash prices have moved higher, the increase in both the corn and soybean revenue trigger levels in Iowa were limited by the 10% cap.

Let's look at some examples of what it would take to trigger an ACRE payment in Iowa for 2013. Let's say the state's final average corn yield reaches the trendline yield of 170 bushels per acre. The MYA national cash price for the 2013-14 marketing year would have to average less than $4.59 per bushel to trigger an ACRE payment. On the other hand, if the 2013 state yield matches last year's level of 137 bushels per acre, the marketing year price would still need to average less than $5.70 per bushel.

 

Iowa's 2013 Corn Yield

Nat'l Avg. Cash Price

Actual Revenue Projected

170 bu/A

$4.59/bu

$780.30/A

137 bu/A

$5.70/bu

$780.90/A

~~~PAGE_BREAK_HERE~~~

The past two years this MYA national cash corn price was $6.22 per bushel and is forecast at $6.90 for the 2012-13 marketing year.

If Iowa has a final 2013 soybean yield of 50 bushels per acre, it would require a MYA national cash price below $11.48 per bushel to trigger an ACRE payment. If the state's final yield falls to the 2012 level of 44½ bushels per acre, the marketing year price would still have to average below $12.90 per bushel.

 

Iowa's 2013 Soybean Yield

Nat'l Avg. Cash Price

Actual Revenue Projected

50 bu/A

$11.48/bu

$574/A

44 ½ bu/A

$12.89/bu

$573,61/A

The ACRE program has two gross revenue triggers: one at the farm level and the other at the state level. Potential ACRE payments are determined at the state level. Actual revenues must be below both of the corresponding trigger levels for a payment to be made. Revenue triggers are based on recent MYA national cash prices and either farm level or state level yields. Each farm level trigger is different, but the state level trigger is the same for all farms in that state.

The farm revenue trigger is usually met when the state revenue trigger is met, particularly if low prices are causing low revenues. So before July 15, 2013, farmers and crop-share landowners enrolling a farm in ACRE will need to provide the last five years of final farm yields to their county FSA office.

What are the chances of collecting an ACRE payment for 2013?
Using the University of Illinois' 2013 ACRE Payment Estimator, for corn in Iowa, assuming current December 2013 corn futures price is at $5.30 per bushel, the probability an ACRE payment will be made is 22%.

For soybeans in Iowa, assuming currently current November 2013 soybean futures price is at $12 per bushel, the chance of an ACRE payment is 37%.

The average state ACRE payments using these corn and soybean expected prices would be roughly $13 per acre for both corn and soybeans in Iowa.

Conclusion: Forecasting 2013 final state yields and the marketing year national prices this far ahead is difficult
Forecasting both 2013 final state yields in addition to the MYA national cash prices for the 2013-14 marketing year now is difficult. In states like Iowa, the final state yield tends to be inverse to the MYA national cash price. In other words, as a state would have lower yields, the national cash price will likely increase.

What if Iowa has a large corn or soybean yield in 2013? Let's say final yields are above trendline of 178-bushel-per-acre corn and 50-bushel-per-acre soybeans. This would tend to reduce the MYA national cash price and decrease the chance of triggering an ACRE payment.

Also, the MYA national cash price reflects the weighted average of every bushel sold from Sept. 1, 2013 to Aug. 31, 2014. With large yields and lower prices, will those bushels be sold to contribute to the lower national cash prices? A large number of bushels might be stored into the spring and summer months of 2014 when other factors might influence these MYA national cash prices.

Sources who Steve Johnson relied on for information to write this article are William Edwards and Gary Schnitkey, Economists & Extension Farm Management Specialists; Iowa State University and the University of Illinois.

For farm management information and analysis visit Ag Decision Maker at www.extension.iastate.edu/agdm; ISU farm management specialist Steve Johnson's site is at www.extension.iastate.edu/polk/farm-management.

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