ACRE Payments: Will there be any for 2009?

On August 14, 2009, farmers either had signed up for the average crop revenue election (ACRE) or remained in the tradition DCP program. In Ohio, approximately 6% of the farms representing 10% of the farm acres were enrolled in ACRE. Farmers who signed up for ACRE now want to know if it will make a payment for the 2009 crop.

Although this is a legitimate question, I am not sure it is the correct question to ask. I am more inclined to want to know if it was a good decision. However, I will answer the previous question first. Payments will be made if the actual state revenue per crop is less that the state revenue guarantee for that crop. The actual state revenue per crop is determined by multiplying the actual state yield times the average U.S. cash price for each crop. The average U.S. cash price for each crop is the average terminal price starting at harvest and going forward 12 months. For wheat the year starts July 1 and for corn and soybeans it starts September 1. Currently, many of the numbers needed to determine the actual state revenue are either estimated or predicted. If these hold the actual state revenue estimates along with the Ohio state revenue guarantee are listed in the table below.

In examining the state trigger, a payment for corn and soybeans does not appear likely at this time. For corn, the average U.S. cash price would need to average $3.36 or less for the year meaning the next 8 months would need to be lower yet to offset the four months of $3.50 plus corn we have already had. Soybeans are in the same position with a yearly average needing to fall below $8.67 to release the state trigger.

Wheat is the one crop that appears likely to make a payment. However, depending on the proven yields of the farm, there may not be a payment even with the state trigger looking like it might be met. In an example I calculated, the farm had an average yield of 67 bushels and would still receive a payment providing the 2009 wheat yield was below 94 bushels per acre. Each farm would need to calculate their own scenario to determine if they might qualify for an ACRE payment for their wheat acres. Again with my example, the payment would be in the $40 – $50 range per acre not the $90 – $100 range that was possible for this farmer.

Now that we have answered the first question, I will let you determine for yourself if the decision was the correct one. If a farmer was farming 1,000 acres and had 100 acres of wheat, he would have given up approximately $4,000 in direct payments and should receive approximately $4,000 – $5,000 in ACRE payments. Financially it is about a wash, but from a risk management perspective, it was a good decision. What if crop yields were low like in 2008? What if prices had fallen to 2005 levels?

Farmers who did not enroll in ACRE have the opportunity to re-examine the decision in 2010. Study the program parameters and make sure to sign up for the program of your choice by June 1, 2010.