Roman Keeney, Assistant ProfessorLearning Tuesday—April 13, 2010

Policy Web Address: http://www.ag.purdue.edu/agecon/Pages/agpolicy.aspx

Overview the ACRE payment calculation Identify public access decision-aids

USDA’s Farm Service Agency Information http://www.fsa.usda.gov/FSA/webapp?

area=home&subject=dccp&topic=landing

Texas A&M/AFPC National ACRE decision aid http://www.afpc.tamu.edu/models/acre/

index.php

ACRE enrollment is by FSA farm number

Deadline is June 1 Payment basis is the actual planted

crops on the farm in a given year Number of program base acres still limit

payment base for ACRE ACRE payment is crop specific

E.g. you could receive a wheat ACRE payment but have no other crop eligible on the FSA farm

Item State Farm Definition

1 ACRE Yield 160 170 5 Year Olympic Average

2 ACRE Price $4.15 $4.15 2 Year Average

3 (Adjustments)

4 Pct. 90%

5 Ins. Premium $15.00

6 ACRE REVENUE $597.60 $720.50 = 1 x 2 x 4 + 5

7

8 Actual Yield 155 185 Bu/Ac on Planted and Considered Planted

9 Actual Price $3.78 $3.78 National Price

10 ACTUAL REVENUE $585.90 $699.30 = 8 x 9

11 Trigger Met? YES YES = YES if 6 > 10

ACRE payment basis BPMT = State guarantee – State actual

▪ Limit of 25% of the state guaranteeAdjustments

Base acre reduction (same as DP)▪ R = 83.3 % of base receives payments (85%

in 2012) Farm yield factor based on 5 year

olympic averages▪ F = Farm yield/State yield

Payment = F*R*BPMT

Link to FSA ACRE Site Background information, Fact Sheets Program parameter updates (prices,

yields)▪ Finalized at completion of 2008/2009 crop

market yr.Calculator

Useful for learning/explaining ACRE Less than ideal as a risk decision aid

InputsFarm: Acreage, Fixed Payment Yields and Acreage (DP,CCP), Current PlantingHistorical Yields: (Five years worth for farm and state)

Expectations: Yields for farm and state, national market prices

Operator

FSN/County

Crop Year: 2009 0.833

0 1025.0 125 137 0.0 1025.0 -$ 0.00

936.0 37 44 0.0 936.0 -$ 0.00

39.0 54 63 0.0 39.0 -$ 0.00

FSA Use Only: CI

Premium

Wheat

Corn

DCP Program Yields (if applicable)

Planted Acreage

Prev. Acreage

2009 Crop Insurance Premiums (enter only

one, if applicable)

Total or Per Acre

Table 1: Basic Farm Data

Counter-Cyclical

Direct

FSN Base Acreage (if appli-cable)

2009 Farm Data

Soybeans

Enter ALL crops w ith Base Acres

and Planted/PP Covered

Commodity Crops and Peanuts

(Use Drop Down Box)

2004 2005 2006 2007 2008 Average*172.30 159.70 161.30 166.10 166.00 164 164

52.60 51.90 51.10 49.70 47.50 51 51

59.90 73.30 66.30 53.70 65.00 64 64

Corn

Soybeans

2009 Actual Farm Yield *

FSA Use Only: BFY *

Actual Farm Yields (Production/Planted Acres)

Enter 5 previous years (2004 - 2008) OR Average (not both)2009 Benchmark Farm Yield (BFY) *

Table 2: Farm Yield Data

* Preliminary or Estimated

Wheat

Example price expectations

Corn not eligible for ACRESoybeans and Wheat are eligible for

ACRE

2009 Loan Rate

DCP Direct Rate

2009 Target Price

$ 4.0000 $ 3.7400 $ 1.9500 $ 0.2800 $ 2.6300 -

$ 10.5000 $ 8.7600 $ 5.0000 $ 0.4400 $ 5.8000 -

$ 6.2500 $ 5.3000 $ 2.7500 $ 0.5200 $ 3.9200 -

ACRE Guarantee

Price *

See Table 5 Information2009

Projected CC Rate

2009 Nat. Avg.

Market Price *

Corn

Soybeans

Wheat

Table 4: National

Data* Preliminary or Estimated

State Guarantee = $554.40State Actual = $561.00

Farm Guarantee = $656.00Farm Actual = $613.36

Loss on the farm but no payment due to the state guarantee

Just a scenarioUsefulness for making my decision

depends on how well I can forecast prices

Total

Corn $ 23,858 Soybeans $ 58,465 Wheat $ 900

ACRE Program

$ - $ 48,338 $ 167

Direct (80%) ACRE $ 23,858 $ 10,127 $ 733

$ 29,822

$ 916 $ 12,659

Counter-cyclical

Payment Comparison Direct

DCPTotal

$ 916

$ 29,822 $ 12,659

$ - $ - $ -

2000.01 2 3 4 5 6 7 8 9 10

State Trigger

Farm Trigger

Payment Acreage

%

Planted & PP Acres

Est. ACRE per acre

Potential Payment

Acres

Payment Acres

Farm Prod. Index Factor

SAG minus ASR

SAG x 25%

Corn no yes 83.3% 1025.0 $ - 853.8 $ - Soybeans yes yes 83.3% 936.0 $ 62.00 779.7 779.7 1.0200 $ 60.78 $ 118.13 $ 48,338 Wheat yes yes 83.3% 39.0 $ 5.15 32.5 32.5 0.9846 $ 5.23 $ 91.41 $ 167

Projected ACRE

Payment

Payment = Item 7 times Item 8 times (lessor of Item 9 or 10)

ACRE Payments

Max. Farm Eligible Acreage for ACRE (total base acres):

Link to CalculatorAccounting for uncertainty

Takes your forecast price and yield Uses historical estimates and your forecast

to generate a range of possible prices and yields

Randomly draws 500 yield and price combinations

Calculates payments 500 times and reports:▪ ACRE and DCP program payments

▪ Average, standard deviation, maximum, and minimum

Accounting for uncertainty means decision is less sensitive to our skill at forecasting

Easy to use interface Web-driven stepwise input sheets Calculations done in background (4 years

worth) Save farm data and consider alternative

scenarios▪ Prices, yields, acreage allocations

Extensive set of results for comparing DCP and ACRE

60 times out of 500, ACRE has lower payments. 440 times out of 500, ACRE has higher payments.