Department of Economics ACRE ACRE Program Details Meeting Janesville, Arlington, and Rosendale,...
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Transcript of Department of Economics ACRE ACRE Program Details Meeting Janesville, Arlington, and Rosendale,...
Department of Economics
ACRE
ACRE Program Details MeetingJanesville, Arlington, and Rosendale, Wisconsin
August 4, 2009
Chad HartAssistant Professor/Grain Markets Specialist
Department of Economics
Average Crop Revenue Election (ACRE)
ACRE is a revenue-based counter-cyclical payment programBased on state and farm-level yields per planted acre
and national prices
Producers choose between the current price-based counter-cyclical payment (CCP) program and ACRE
Program has state and farm trigger levels, both must be met before payments are made
Department of Economics
Farmer Choice Starting in 2009, producers will be given the
option of choosing ACRE or notCan choose to start ACRE in 2009, 2010, or beyondOnce you’re in ACRE, you stay in ACRE until the next
farm bill If you sign up for ACRE, you must do so for all eligible
cropsDeadline for sign-up, Aug. 14 (this year)
Producers choosing ACRE agree to 20% decline in direct payments and 30% decline in loan rates
Department of Economics
ACRE Settings
ACRE is based on planted acres
Total acres eligible for ACRE payments limited to total number of base acres on the farm
Farmers may choose which planted acres are enrolled in ACRE when total base area is exceeded
Department of Economics
ACRE Set-up for Wisconsin CornYear Yield per Planted Acre
(bu./acre)
2004 135.0
2005 148.0
2006 142.0
2007 135.0
2008 136.0
Olympic Average 138.0
Year Season-average Price ($/bu.)
2007 4.20
2008 4.05
Average 4.13
The 2008 yield and price are USDA’s July 2009 estimates.
So the expected state yield would be 138.0 bushels per acre and the ACRE price guarantee would be $4.13 per bushel.
Department of Economics
ACRE StructureACRE revenue guarantee = 90% *
ACRE price guarantee * Expected state yield
For our example, the ACRE revenue guarantee is 90% * $4.13/bu. * 138.0 bu./acre
$512.95/acre
Department of Economics
Wisconsin Preliminary ACRE GuaranteesCrop Price Yield ACRE Guarantee
Wheat $6.63 61.9 $369.36
Soybeans $10.05 39.0 $352.76
Oats $2.89 64.0 $166.46
Barley $4.09 54.0 $198.77
Canola $0.1853 1,050.0 $175.11
Dry Peas $0.1325 1,270.0 $151.45
Flaxseed $13.00 16.5 $193.05
Sorghum $3.64 60.0 $196.56
Mustard $0.2788 670.0 $168.12
Rapeseed $0.1823 1,280.0 $210.01
Safflower $0.1965 650.0 $114.95
Sunflower $0.2215 1,108.0 $220.88
Department of Economics
ACRE StructureACRE Farm revenue trigger =
Expected farm yield * ACRE price guarantee + Producer-paid crop insurance premiumLet’s assume farm yields equal to state yields
and use the average producer-paid crop insurance premium for 2008
138.0 bu./acre * $4.13/bu. + $26.86/acre
$596.80/acre
Department of Economics
ACRE Payment TriggersACRE actual state/farm revenue =
Max(Season-average price, ACRE Loan rate) * Actual state/farm yield per planted acre
Given our example, ACRE payments are triggered when ACRE actual revenue is below $512.95/acre and ACRE actual farm revenue is below $596.80/acre
Department of Economics
ACRE PaymentsPayment rate = Min(ACRE revenue
guarantee – ACRE actual revenue, 25% * ACRE revenue guarantee)
ACRE payment adjustment: Payment multiplied by ratio of Expected farm yield to Expected state yield
Payments made on 83.3% of planted acres in 2009-11, 85% in 2012 (up to total base acres)
Department of Economics
ACRE Payment TimingPayments can begin as soon as practicable
possible after the end of the marketing yearSo 2009 ACRE payments could start to be paid
out in October 2010There are no provisions for advance payments
Department of Economics
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$ per bushel
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ACRE vs. CCP
ACRE pays out
No ACRE payments
CCP pays
No CCP payments
If price = $3.75, yields below 136.8 bushels per acre will trigger a payment.
If price = $3.25, yields below 157.8 bushels per acre will trigger a payment.
Department of Economics
Looking Beyond 2009The ACRE revenue guarantee is updated each
year using the same rules5 year Olympic average for yields2 year average for prices
But the ACRE revenue guarantee can not change by more than 10 percent (up or down) from year to yearSo if the 2009 ACRE revenue guarantee is $512.95, then
the 2010 ACRE revenue guarantee must be between $461.65 and $564.25
Department of Economics
An Example for 2009 To start, we need the expected state and farm
yields and the ACRE price guarantee
Expected state yield 138 bu/acre Expected farm yield 145 bu/acre
2004-08 Olympic average of yields per planted acre
ACRE price guarantee $4.13/buAverage of 2007 and 2008 season-average prices
ACRE Revenue Guarantee $512.9590% * $4.13/bu * 138 bu/acre
ACRE Farm Revenue Guarantee $618.85$4.13 * 145 bu/acre + $20/acre
Department of Economics
Example (continued) For 2009, we need the actual state yield, the
actual farm yield , and the season-average price
Actual state yield 140 bu/acre Actual farm yield 155 bu/acre Season-Average Price $3.50/bu
ACRE Actual Revenue $490.00$3.50/bu * 140 bu/acre
ACRE Farm Actual Revenue $542.50$3.50/bu * 155 bu/acre
Department of Economics
Example (continued)State Trigger
ACRE Revenue Guarantee $512.95ACRE Actual Revenue $490.00
So we’ve met the state trigger
Farm TriggerACRE Farm Revenue Guarantee $618.85ACRE Farm Actual Revenue $542.50
So we’ve met the farm trigger
Department of Economics
Example (continued)
ACRE Payment $20.09Min(25%*$512.95, $512.95 – $490.00)
* (145 bu/acre / 138 bu/acre)
* 83.3%
Department of Economics
Farmer’s ChoiceIn deciding about ACRE, farmers must
weigh:
The loss of 20% of their direct payments, a 30% drop in the marketing loan rate, and no access to CCP payments versus
The potential for payments under ACRE
Department of Economics
Comparing Program ParametersFor Wisconsin Corn
Under the current CCP programCCP Yield Average = 109.8 bushels per acreCCP Effective Target Price = $2.35/bushel
In our example, for ACREACRE Yield Guarantee = 138.0 bushels per acreACRE Price Guarantee = $4.13/bushel
20% of average WI corn direct payment = $4.83 per acre
Department of Economics
Factors to Consider ACRE looks more attractive if:
You think prices will fall in the future, but stay above the current loan rates
Markets continue to show higher price volatilities
Current programs look more attractive if:You think prices will rise in the future
Potentially no ACRE payments combined with cut in direct payments
Department of Economics
Quick Comparison(Your results may vary)
$0
$25
$50
$75
$100
$125
$150
$175
$200
$1.00 $2.50
$1.50 $3.75
$2.00 $5.00
$2.50 $6.25
$3.00 $7.50
$3.50 $8.75
$4.00 $10.00
$4.50 $11.75
$5.00 $12.50
Corn and soybean marketing year prices
DP + ACREDP + CCP
Source: William Edwards, ISU Extension
Department of Economics
ACRE Signup Ends Soon
ACRE signup started in April, will end August 14th
Can signup for 2010 crop next year
ACRE information and tools are available at: http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landinghttp://www.aae.wisc.edu/mitchell/extension.htm http://www.extension.iastate.edu/agdm/crops/html/a1-45.htmlhttp://www.farmdoc.uiuc.edu/fasttools/index.asp
Department of Economics
Forms and Records Forms
Election: CCC-509 ACRE (fill out once) Enrollment: CCC-509 (fill out each year) If you do not fill out the enrollment paperwork, you are not in the
program All producers, including landowners, must sign the election form
Records Must annually report acreage and production to FSA In proving historical farm yields, producers must present
production records for continuous years (no gaps are allowed)
Department of Economics
Forms and RecordsRecords
The farm yields will be the higher of the proven farm yield or 95% of the county average yield determined by FSA (NASS county production/FSA county acreage)Future farm yields (2009 and beyond) will be proven
Zero production reports are allowedCrop insurance and NAP production reports will workCommercial receipts, settlement sheets, warehouse
ledger sheets that are reliable and/or verifiable will workLoan and LDP records will workProduction data for 2009 needs to turned in by June 30,
2010
Department of Economics
Thanks for your time!
Any questions?
My web site:http://www.econ.iastate.edu/faculty/hart/