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A tipping point for ACRE signup?

Agriculture.com Staff 07/17/2009 @ 4:17pm

Farmers sat elbow-to-elbow typing into computer calculators in a crowded classroom Thursday evening at the Des Moines Area Community College in Ankeny, Iowa.

It was one of the last chances to get advice on a new farm program, ACRE, or Average Crop Revenue Election, before the August 14 deadline to enroll for 2009 crops.

"If I'd had this workshop a month ago, it would have been cancelled," Iowa State University farm management specialist Steve Johnson said as some in the room printed out the results of using the calculators to estimate possible ACRE payments on their farms.

In fact, two of Johnson's workshops were cancelled early in the week. But with December futures prices for corn closing at $3.25 1/4 a bushel Thursday, the chance of getting an ACRE payment next year seemed more plausible. The session was sold out.

A bonus for those who gave up a dry, cool summer evening to crunch numbers indoors was the presence of William Edwards, the Iowa State University ag economist who designed the calculator.

Neither Johnson nor Edwards said you should sign up. ACRE is similar to revenue-based crop insurance. It will pay you next year on 2009 crops if both your state and your own farm have lower revenue than a benchmark based on five-year Olympic averages of yields and average prices for 2007 and 2008. The bottom line: You're not going to know whether it will pay anything before August 14. And there's a cost, about $4 to $5 an acre in lost direct payments for a typical Iowa corn and soybean farm. So it would be irresponsible to guarantee that ACRE is a good deal.

Nevertheless, Edwards and Johnson were dropping heavy hints.

Edwards said he's already been to his Farm Service Agency office to sign up his mother’s three farms, a process that took about 20 minutes.

Farmers sat elbow-to-elbow typing into computer calculators in a crowded classroom Thursday evening at the Des Moines Area Community College in Ankeny, Iowa.

One farmer asked Edwards if he would be better off taking the $5 an acre in direct payments that he keeps if he stays out of ACRE and using it to buy up to a higher level of crop insurance.

I tried sticking with the trendline yields and the steady prices that are kept the same for all four years. I also dropped the 2008 average price a nickel on corn to $4. When I clicked the down arrow, the "price trend % of 2008 prices" dropped from 90% to 85%.

Steve Johnson took a look at Kimberley's calculator results and reminded him that following two years of relatively high prices, ACRE offers much higher levels of protection than the old counter cyclical program payments. Those wouldn't kick in until corn prices fall below $2.35 a bushel.

If you want a more realistic projection of what ACRE could do in Iowa, set the ISU calculator to random prices and yields. Edwards estimates that there are at least 1,000 to the fourth power possibilities in the program. So each time you toggle prices up or down, you'll see a different result. It's a little bit like playing a slot machine. You'll see a bar and line graph summarizing the payments for ACRE and the old program. No two were alike when I tried it.

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