Why no ACRE stampede as prices fall?
Kent Thiesse, a farm management analyst and vice president at MinnStar Bank in Lake Crystal, Minnesota is hearing a lot of reasons for not signing up for ACRE from the farmers he knows in this southern Minnesota community. Here's a summary Thiese compiled for his weekly newsletter:
- ACRE is new and is difficult to understand, especially for landlords.
- The "double-trigger" aspect of ACRE, requiring both a State revenue trigger and a farm unit revenue trigger to be met bore ACRE payments are made, is confusing to some producers.
- ACRE requires the signatures of all landlords on cash rented farm units, and some farm operators do not feel prepared to discuss ACRE with their landlords.
- ACRE sign-up is a 4-year commitment (2009-2012), and some producers are concerned about the longer term ACRE enrollment beyond 2009.
- Some producers are worried about farm-level yield verification requirements that will be required to establish 5-year average farm yields to used to calculate ACRE guarantees.
- Some producers do not want to lose 20% of the direct payments, which is a requirement for ACRE enrollment. (Approximately $3.50-$5.50 per crop base acre for most producers in Minnesota.)
- Producers are concerned about the 30% reduction in CCC loan rate required with ACRE enrollment, and the impact on the annual cash flow of their farm business. (The ACRE loan rate reduction in corn will be $.53 - $.56 per bushel in most Minnesota counties, which is a cash flow impact of well over $50,000.00 on 100,000 bushels of corn placed under CCC loan, even though there is no loss of income.)
- Some producers have decided to wait until the 2010 crop year to evaluate ACRE, due to the complexities of ACRE, and difficulty in understanding the new program.
Thiesse cautions that some ag economists and management specialists at universities think that waiting until next year to enroll in ACRE could cost you potential revenue protection.
"Some University Farm Management Specialists have suggested that the current situation with 2009 revenue guarantees, along with 2009 corn and soybean price projections, may mean that 2009 could offer the best potential for ACRE payments in the next four years," Thiesse writes.
However, there are no guarantees that ACRE will turn out to pay you more than the existing commodity program and few experts are likely to tell you to sign up. As Thiesse puts it, "In the end, the final ACRE decision lies with the producers and land owners, and we will not know the results of that decision for the 2009 crop year until after August 31, 2010."
If you want to study up on ACRE even more, here's Thiesse's list of favorite websites: