FSA programs explained: Average Crop Revenue Election
Some of you might have heard through the local coffee shop talk that South Dakota producers who elected to participate in the Average Crop Revenue Election, better known as ACRE, recently received payments for wheat planted in 2009. This would be correct! Additionally, sunflowers and oats also triggered a payment in 2009. I am sure that those producers that made the decision to enroll in ACRE eighteen months ago are glad they did. The producers that didn’t enroll in ACRE are probably wondering why they didn’t. The truth is the ACRE program is entwined with many variables and causes everyone involved to become a commodity speculator. However, there are a few lessons learned from the 2009 ACRE program that may help us when deciding to enroll in ACRE for the 2011 crop year.
In order to understand why wheat in South Dakota was eligible for an ACRE payment we must first understand how the program works. ACRE utilizes base acres established under the Direct and Countercyclical Program (DCP) in order to provide revenue protection for commodities planted. Producers that elect to enroll in ACRE receive a reduced direct payment under DCP and receive a lower commodity loan rate as part of the cost to enroll in ACRE.
ACRE establishes a program guarantee by crop. The program guarantee is determined by multiplying the guaranteed price times the state average yield times 90 percent. The guaranteed price is determined at the end of the marketing year (which varies by commodity) and posted by the USDA. ACRE uses the average of the past two years of prices to determine the current year guaranteed price. In 2009, the guaranteed price for wheat was $6.63 based on the average of 2007 and 2008 marketing year average price ($6.48/$6.78).
The state average yield is the result of the past five years Olympic average (drop the high and the low) as reported by the National Agricultural Statistics Service (NASS). In 2009, the state average yield for wheat was set at 42 bushels per acre. This means that the program guarantee for wheat in 2009 was $250.61 ($6.63 x 42 x 90%).
The payment rate for ACRE is based off of the difference between the program guarantee and the actual state revenue. The actual state revenue is determined by multiplying the marketing year average price by the actual state average yield. In 2009 the average price for wheat was $4.87 and the average yield was 41.1 bushels. This means that the actual state revenue for wheat was $200.16. Therefore, the payment rate for wheat in 2009 was $50.45 per acre [$250.61 (program guarantee) – $200.16 (actual state revenue)].
If you were able to follow the math, you will notice that even though yields remained on par compared to average, the marketing year average price for 2009 came in at 73 percent lower than the guarantee resulting in the actual state revenue for wheat coming in at less than the guarantee for wheat.
Individual payments are calculated utilizing several different factors. If you have questions about how individual payments are calculated, contact your local Farm Service Agency Service Center.
No one can perfectly forecast whether 2011 will bring about ACRE payments, but you can equip yourself with all of the knowledge you need in order to make a good decision. The FSA has posted the ACRE guarantee for 2010 for most crops and can be found at http://www.fsa.usda.gov/dcp. State yields should be posted around the middle of March, but prices will not be posted until the end of the marketing year. Sign up for 2011 DCP/ACRE has begun and the deadline to sign up is June 1, 2011. For further questions about ACRE, please contact your local FSA Service Center.
james r. neill is the county executive director for the farm service agency of meade county, sd and can be contacted at email@example.com. questions about the sure program or any other program administered by the farm service agency should be directed to your local farm service agency service center.