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Farm program deadline approaching

STEVE JOHNSON 04/26/2011 @ 11:32am Farm Management Specialist with ISU Extension housed in Polk County, Iowa. Areas of expertise include crop marketing, grain contracts, government farm programs, crop insurance, farmland leasing and other crop risk management strategies. Reach Steve by e-mail at sdjohns@iastate.edu.

Farmers nationwide have until June 1st, 2011, to sign up at their local Farm Service Agency (FSA) office for the annual Direct and Counter-Cyclical Payment (DCP) program. This is the same deadline to also enroll in the Average Crop Revenue Election (ACRE) program. ACRE enrollment is optional by FSA farm number and is triggered by state revenue-based losses. ACRE acts in place of the price-only Counter-Cyclical Payment (CCP) which has not been paid since 2005. The ACRE program is a much better revenue safety net than the price-only CCP. This will be the 3rd year to sign up farms for the ACRE program. Once a farm is enrolled in ACRE, the farm stays in the program through the 2012 crop year and a farmer gives up 20% of their annual direct payment.

Will Iowa Farmers Enroll in the 2011 ACRE Program?

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 1st. In February 2011, the USDA Agricultural Outlook Forum projected that the national average cash price for corn would be $5.60 per bushel and $13 per bushel for soybeans, respectively. These numbers could be updated in the May 11th, 2011, USDA World Agricultural Supply and Demand Estimates (WASDE) 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 the state of Iowa is expected to be $645 per acre. This projection uses a 169 bu/A average for the 5-year Olympic average yield times the 2-year average national cash price of $4.48/bu times 90%. However, the state trigger cannot 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. Each state will have a different yield, but use the same average cash price.

Using the 2011 ACRE projected revenue guarantee of $645 per acre in Iowa, then 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 likelihood of both of these events occurring simultaneously is not likely.

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

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

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