FSA programs explained: Direct and Countercyclical Payments
I used to be surprised at how few farmers and landowners understand the Direct and Countercyclical Program, commonly referred to as DCP, until I sat down and tried to explain the program in this column. Hopefully, by the time you finish reading this article, you will have as good of an understanding as anyone.
The Direct and Countercyclical Program (DCP) is a program that was established in the 2002 Farm Bill and has been changed by the 2008 Farm Bill to include an Average Crop Revenue Election (ACRE) option. Participants must enroll their farm into the program on an annual basis no later than June 1 of each year. If you have not completed your 2011 DCP contract, your deadline is approaching and it would be wise to contact your local Farm Service Agency Service Center to get that accomplished.
The DCP program consists of two parts. The first part is the direct payment. Direct payments are made in October and are based upon eligible crops historically planted, known as “base acres.” These base acres were elected during the Base Acreage Election period. Base acres are separated into different types of crops elected, such as wheat, corn, oats, etc. Producers who enroll their farms into DCP sign a contract obligating themselves to the terms of the contract in return for a direct payment. Terms of the contract are itemized in the contract’s appendix and include such activities as maintaining weeds and maintain the land in an agricultural use. The DCP contract does not mandate that any specific crop be planted. However, in order to be eligible for DCP direct payments, producers must be actively farming or be a landowner with control of the base acres.
The second part of the DCP program is the countercyclical payments, also known as CC payments. Under this part, producers are eligible for additional payments on their base acres, if the national average market price of their base acreage crops falls below the established target price for that crop. For example, a producer has 100 base acres of wheat with a target price of $2.85 and the national average market price for the year for wheat is $2.75, then the producer is eligible for a CC payment as long as he/she enrolled the farm in DCP for that year. CC payments are not tied to what is currently being produced; instead, payments are based upon the base acre crops established. Some producers may receive a CC payment and may not be currently raising that specific crop.
The 2008 Farm Bill allowed producers eligible for DCP to replace their CC payments and elect an ACRE option. With the ACRE option, the process remains the same, except that direct payments are reduced by 20 percent. CC payments are replaced with the ability to use base acres to protect revenue on crops planted for that year. ACRE payments are triggered by crop revenue (yield and price) losses for the state as opposed to simply the national average market price.
Having stated all of that, I hope that clarifies the Direct and Countercyclical Program or maybe I just muddied the waters. Either way, if you get anything out of this week’s article, it should be that the deadline to complete your DCP contract is June 1. If you would like to know more about the DCP program or the ACRE option, I would recommend that you speak with outstanding men and women of the Farm Service Agency at your local FSA Service Center. I am sure that they would be more than willing to answer all of your questions.
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 dcp/acre any other farm service agency program should be directed to your local farm service agency service center.
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