ACRE Program Update and Decision Aids
This article is not intended to be an overview of ACRE, rather, this article will focus directly on issues that affect decision-making process with regard to whether farmers should enroll in ACRE. For review of the ACRE program and how it compares to traditional programs, I suggest reviewing the ACRE Factsheet at http://ohioagmanager.osu.edu/resources/acre.pdf
So now that you have review how the traditional programs work and you are aware of the mechanics of the ACRE program, we can discuss trade offs. Basically, farmers are looking at a trade off of guaranteed money in direct payments for uncertain ACRE payments. For the traditional program option, an Ohio producer can expect to receive nearly $4 more per acre in direct payments relative to the ACRE option ($3.71/acre loss per Dr. Carl Zulauf). However, at current price levels there isn’t much of a chance for loan deficiency payments or counter cyclical payments. If the ACRE option is selected, the producer will receive $4 less in direct payment but will be eligible for potentially large ACRE payments in any given year. In some years ACRE payments could be very large and would exceed the maximum amount that a producer could receive from a counter cyclical program. Furthermore, the revenue guarantee in the ACRE program will adjust with changes in the market. The counter cyclical program is based on a fixed price level. Because farm-level yields must be proven, the ACRE program will likely require additional documentation.
Since the ACRE election is based on planted acres instead of base acres, farmers might want to plant the farms that they are considering on enrolling in ACRE to the crop that they believe has the highest probability of receiving an ACRE payment. For instance if corn prices remain strong (above $3.80 average US cash price for 2009 crop year) then an ACRE payment will probably not occur. If on the other hand soybean prices are weak (below $8.75 average US cash price for 2009 crop year) then and ACRE payment is probable. If this is the scenario that one expects then the farms that might be enrolled in ACRE should be planted to soybeans. These prices are for illustrative purposes only and should not be considered accurate. Every farmer should access the ACRE program software at http://www.farmdoc.uiuc.edu/ to determine the numbers for their farm using their own assumptions.
Finally, farmers now have more time to make the decision concerning their farm program choice and the new ACRE election. The deadline has been extended to August 14, 2009. This extension will allow farmers the opportunity to learn more about the different options, as well as have a more accurate estimate of the state revenue guarantee for corn and soybeans.