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2009 ACRE payments big in a few states, with few takers in most
This week USDA released its final weighted average price for 2009 crops covered by ACRE, the last piece of information the agency needs before making payments this fall.
Kansas State University ag economist Art Barnaby promptly plugged the numbers into his calculations in order to release his own estimates of per acre payments that enrolled farmers might collect in some states (if the farm itself also had a drop in revenue in 2009). Barnaby’s numbers show wheat producers getting most of the ACRE payments, with corn and grain sorghum and soybeans triggering payments in a few states.
This is the first test of how ACRE, or Average Crop Revenue Election, works in practice. The 2009 crop was the first that producers could enroll in the program. Signup was low, about 8% of eligible farmers nationwide and 13% of the base acres in commodity programs.
Barnaby’s tables show that, as expected Oklahoma wheat, Texas wheat, and Washington wheat were at the maximum. The highest payment in a major wheat producing state is $115.48 an acre in Idaho. Signup was also fairly high in the Pacific Northwest wheat states, Barnaby said. As expected there was no Colorado wheat payment. Unexpected was a “small” wheat payment for Kansas ($7.56 an acre) and Nebraska, but no wheat payment in North Dakota.
“Illinois was the only Corn Belt state that had a payment and it was pretty small, $25.17,” Barnaby told Agriculture.com.
There was no corn payment in Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Ohio, South Dakota, and Wisconsin. In the irrigated/dryland states there were no corn payments generated in Kansas and Nebraska. Irrigated Colorado corn generated an ACRE payment but no dryland payment, while Texas dryland corn generated a payment but not irrigated.
Barnaby’s tables show some states eligible for high corn payments. The highest was $149.61 an acre in Connecticut, where the state yield was only 123 bushels an acre in 2009. However, no one will collect.
“We have not had any signup for the ACRE program,” said Marsha Jette, the state’s FSA executive director. That’s for both 2009 and 2010.
And there’s a logical reason, added program specialist Marilu Soileau. “In Connecticut there’s hardly any farms that harvest corn for grain. It’s all going to silage to harvest for dairy farms.”
A few other states that grow irrigated corn did trigger payments. In Colorado, irrigated corn is eligible for $20.25 an acre, but dryland corn triggered no payments.
Barnaby said that Texas triggered payments on several crops, but there, too, FSA won’t be spending much. Only about one percent of eligible farms enrolled in ACRE there in 2009.
Several barriers may have contributed to low interest in ACRE, or the Average Crop Revenue Election program.
It has a cost -- you give up 20% of your direct payments to enroll. It’s more complicated than other commodity programs. Payments kick in only if a state has a 10% drop in revenue, a combination of each state’s yields calculated by USDA’s Farm Service Agency and average prices calculated by USDA’s National Agricultural Statistics Service. And an individual farm has to have lower revenue to collect even if a state has potential payments. Finally, there’s a long lag time for payments. That’s because the revenue calculation is based on the marketing year that starts September 1 for corn and soybeans and June 1 for wheat. A late signup in 2009, in August, gave wheat producers an advantage. They already knew their yields, corn and soybean farmers didn’t.
Barnaby believes a few changes might make the program more attractive and improve the way it works.
First, he would combine the ACRE signup deadline with crop insurance deadlines. That would put corn farmers on a level playing field with wheat producers, who already have a fair idea of yields when the normal June 1 signup deadline arrives.
Second, he would make signup annual, like crop insurance. Currently, once you’re in ACRE you can’t go back to the conventional program.
And, finally, he would eliminate the need to trigger a loss on your own farm, tying payments to the state-level trigger.
For the few farmers in the ACRE program in states that triggered payments, that’s the next step before getting payments, which FSA employees expect sometime before early November.
According to Barnaby, here’s how the process works:
Farmers will be paid based on a ratio of their 5 year Olympic average farm yield divided by the 5 year Olympic average state yield times the state ACRE payment. If their farm yield is greater than the state yield, then the ratio will be greater than 1.0 so their payment will be larger than the state ACRE. The reverse is also true for farmers with an Olympic average yield below the state Olympic average yield.
The farm level ACRE payment is then paid on the lesser of 83.3% of the planted acres or the base acre acres. Farmers who planted 20% more acres than their base will be paid on their entire base. Farmers who planted beyond 120% of their base have been asked by FSA to identify the crop(s) they wish to receive the ACRE payment on. For example, Texas irrigated corn and wheat farmers who planted over 120% of their base would pick wheat for the ACRE payment because Texas irrigated corn did not trigger payment at the state level. The other factor to consider when selecting crops for payment is the selected crop must meet the farm level loss trigger too.