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46427

Report sheds light on why more farmers didn't sign up for ACRE program

Some not-so-attractive trade-offs, a lot of uncertainty and the program's overall complexity are the major reasons why only a small percentage of farmers signed up for USDA's ACRE program last year, a recent report indicates.

Payments in the ACRE program are crop-specific and based on program crop acres and a 2-year "moving" average market prices, according to USDA-ERS economists Andrea Woolverton and Edwin Young. These bases for payment are in lieu of countercyclical and direct payments before the 2008 farm bill authorized ACRE, or the Average Crop Revenue Election program.

As of last October, 8% of farms with 13% of the eligible base acres had signed up for ACRE, ERS officials say. Much of that, Woolverton and Young report, is because of initial costs incurred.

"Enrolled producers must incur initial learning and negotiation costs and must forgo 20% of direct payments," the economists say in a recent report. "These costs may be larger than the expected ACRE benefits for some producers in 2009 and beyond."

Other factors influencing low farmer participation, according to University of Illinois Extension's Stu Ellis, include:

  • ACRE is a new and complicated program. Some producers may lack a full understanding of the program details needed to assess the variables that cause both state- and farm-level triggers for a farm to be eligible for a payment.
  • It takes time to learn how the new ACRE program will affect individual farm operations relative to State-level triggers. Many farmers are not accustomed to thinking about how their revenue per planted acre compares to State-level revenue per planted acre. They are more familiar with actual revenue and national-level prices and harvested yields.
  • All landowners and operators must agree to participate. If one landowner or operator associated with a farm operation was unwilling to elect ACRE, the farm was not eligible.
  • Detailed records are needed to verify production of all ACRE-eligible crops on the farm for the previous 5 years or an ACRE county yield may be used. The ACRE county yield is 95% of the county average yield, which may have been significantly lower than the average yield for the farm.
  • Electing to participate in ACRE is an irreversible decision. Once a farm is enrolled in ACRE, it must remain in the program through 2012.
  • ACRE may be attractive for some crops, but not for all crops.
  • Direct payments on ACRE farms are reduced 20% and the marketing assistance loan rates for crops produced on ACRE farms are reduced 30%. They are no longer eligible for countercyclical payments, a fact that likely limited participation by upland cotton producers.
  • ACRE payments are not paid until the end of the marketing year. This timing of the receipt of payments could affect cash flow and producers' ability to pay bills in the short run.
  • Producers may not have valued the risk management benefits of ACRE highly.
  • Finally, producers who have not yet enrolled in ACRE will have an option to elect ACRE in a subsequent year. Some may have decided to see how the program performs this year before committing.

Some not-so-attractive trade-offs, a lot of uncertainty and the program's overall complexity are the major reasons why only a small percentage of farmers signed up for USDA's ACRE program last year, a recent report indicates.

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