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Ag economists prepare to explain farm bill

Agriculture.com Staff 07/09/2008 @ 8:00am

Less than a month after Congress passed a new farm bill, the nation's leading agricultural economists and farm management specialists are meeting in Kansas City to talk over the best ways to explain what may be the most complicated farm program yet.

It continues the old safety net of loan deficiency payments, counter-cyclical payments and direct payments, but it also offers a new average crop revenue election that farmers can sign up for, beginning with the 2009 crop.

With the ink on the twice-vetoed bill still barely dry, the USDA hasn't written rules for the new programs.

"Just because it's there in black and white, that doesn't mean that's how it's going to end up," cautioned Joe Outlaw of Texas A&M University.

Nor do the economists agree that ACRE is necessarily a good idea for everyone.

"I think every farmer is going to have to make an individual decision," said Mike Dicks of Oklahoma State University.

Carl Zulauf of The Ohio State University, who designed a farm program that, with some modifications by Congress, became ACRE, agreed that "there are no thumb rules" for deciding whether to enroll in ACRE or not.

In a nutshell, ACRE makes payments to farmers if their farm has a loss and if state-wide revenue falls below 90% of that state's guarantee. The guarantee is set by multiplying the average of the two previous years' national average market price and a five-year Olympic average of state yields (which throws out the high and low years).

Whether you're likely to get an ACRE payment depends in part on how variable crop yields are in your state, and on average price levels. If they're close to historic low levels, ACRE may not perform as well as LDPs and CCPs. If prices are high, it looks better.

"I'm looking at this as a put option and when I'm in the money, that's when I want to buy," said Art Barnaby of Kansas State University. The cost for that put? Giving up 20% of your direct payments. There would also be a 30% cut in LDPs, but Barnaby thinks it's unlikely prices will fall to loan rates soon, anyway.

"I think there's a very good chance we're going to be in the money on corn and wheat," he said.

Unlike the direct and counter-cyclical payment program, ACRE is not a floor. It may protect you a lot sooner if market prices crash from today's high levels, but Zulauf said he could envision yields and prices that would put ACRE payments at or near zero in five years.

"ACRE follows the market," he said. "It also presumes there is no floor. You have to adjust."

Land grant universities will be holding workshops this winter on ACRE, and posting calculators on Web sites that may help you decide whether to sign up.

In the meantime, there are key dates you'll need to remember for several programs in the farm bill, says Brad Lubben, a University of Nebraska ag economist who helped organize the meeting.

There is no ACRE program for 2008 crops, just the direct and counter-cyclical payment program. USDA has already begun issuing advance direct payments and signup for this program ends September 30.

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