FSA programs explained: 2012 ACRE guarantee
February 2, 2012
The Average Crop Revenue Election (ACRE) is now entering its fourth and final year as authorized in the 2008 farm bill. The ACRE election is an option within the Direct and Countercyclical Program (DCP) by which producers can elect to receive revenue protection on eligible crops planted by utilizing base acres established.
If someone elects ACRE, they accept a 20 percent reduction in direct payments, a 30 percent reduction in the marketing loan rate, and ineligibility to receive a countercyclical payment. Each year, the ACRE guarantee is established per crop in each state using the past two year’s national average market price and past five years Olympic average yield. The 2011 ACRE guarantees have been posted for most crops and can be found at http://www.fsa.usda.gov/dcp.
Unfortunately, due to the marketing year in which prices are calculated, 2012 ACRE guarantees will not be available until after the election deadline which falls on June 1, 2012. However, since high commodity prices have remained prevalent in the 2011 marketing year, producers may be able to know the ACRE guarantee before the enrollment deadline.
The DCP program sets a 10 percent limit on the amount that the State ACRE guarantee can increase or decrease from the preceding crop year. This limitation provides an advantage and disadvantage to producers in that the guarantee won’t crash along with prices, but won’t rise as quickly either. This may be the case in 2012.
For example, the 2011 State ACRE guarantee for wheat in South Dakota is $203 per acre. The guarantee is calculated by multiplying the Olympic average yield (42.6) by the guaranteed price ($5.29) and multiplying that number by 90 percent.
Since the State ACRE guarantee cannot increase by more than 10 percent, the maximum State ACRE guarantee in 2012 would be $223.30. If we assume that the average yield does not change drastically in 2011, the national average market price for 2011 would only have to reach $5.95 in order for the State ACRE guarantee to be limited by the 10 percent rule. Since the current projected national average market price for wheat is listed at $7.30 as of Dec. 11, 2011, the outlook is very good that the 2012 ACRE guarantee for wheat will be $223.30 per acre.
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Assuming that yields remain relatively constant, many crops would see 10 percent increases in the State ACRE guarantees in 2012 if current projected 2011 national average market prices were finalized today. Some crops that would have a high probability of reaching this cap are: wheat, barley, corn, soybeans, grain sorghum and sunflowers. Therefore, producers enrolled in ACRE or are contemplating an enrollment in ACRE will have a good idea of what to expect for a State ACRE guarantee going in to 2012.
The Farm Service Agency posts the ACRE program guarantees, yields, price guarantees and projected national average market prices at http://www.fsa.usda.gov/dcp. I recommend that anyone enrolled in ACRE or are contemplating enrolling their farm in ACRE should visit this Web site or speak with their local Farm Service Agency representatives for additional information about ACRE.
James Neill is the County Executive Director for the Farm Service Agency in Meade County (SD) and can be contacted at email@example.com. Questions about the ACRE program or any other Farm Service Agency program should be directed to your local Farm Service Agency Service Center.