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EMPOWERMENT THROUGH EDUCATION
Assisting Producers with the Average Crop Revenue Election (ACRE) Decision
Chris Bruynis, PhDAssistant Professor & Extension EducatorErie Basin EERA & Wyandot County
Program Objectives
• Explain the difference between ACRE and DCP program elections.
• Use a case study farm to demonstrate potential payments under different revenue scenarios.
• Create discussion around the ACRE/DCP election to build understanding.
Trying to Predict Which Program Suite Will Pay More is Impossible
1. Predicting payments from the marketing loan, counter cyclical, and ACRE state revenue requires that you can predict prices and yields for 2009, 2010, 2011, and 2012.
2. Better approach is trying to determine which program reduces risk exposure to the farm business (since most of us cannot predict price for this year, let alone future years)
a. To prove this….write down the 2009 average Ohio yield and the U.S. average market price for corn, beans and wheat.
Beginning with Crops Harvested in 2009Farmers and landowner have the choice between
DCP or ACRE Marketing Loan Marketing Loan
Rate (LDP)at 70%Direct Payment Direct Payment
at 80%Price Counter-Cyclical ACRE State Revenue
Program
Payment Caps
Direct Payments
$40,000 Cap
Counter Cyclical Payments
$65,000 cap
Direct Payments
$32,000 Cap
ACRE Payments
$73,000 Cap
DCP Suite ACRE Suite
20% reduction in payment
Direct payment reduction added to
ACRE payment limit
Market Loans/LDP’s
DCP ACRE
Market loan rates for 2009 in Wyandot County
$1.94/bu Corn$5.12/bu Soybeans$1.96/bu Wheat (SRW)
70% of market loan rate from DCP
$1.36 Corn$3.58 Soybeans$1.37 Wheat (SRW)
Direct Payments
DCP ACREDirect Payment -
$18.55/acre(83.3*payment rate*direct
yield*base acres)
2009 Payment Rates$0.28/bu Corn$0.44/bu Soybeans$0.52/bu Wheat
Direct Payment – $14.84/acre
80% of direct payment from DCP
2009 Payment Rates$0.22/bu Corn$0.35/bu Soybeans$0.42/bu Wheat
Counter Cyclical and ACRE
Counter Cyclical ACREPayment received when the
average U.S. average cash price for the marketing year falls below the following prices (target price minus the direct payment rate)
$2.35/bu Corn
$5.36/bu Soybeans
$3.40/bu All Wheat
Payment received when the 2009 average Ohio crop yield times the average U.S. cash price falls below the State ACRE Revenue Guarantee
$558/acre Corn
$416/acre Soybeans
$393/acre All Wheat
ACRE Revenue Payment Flow ChartIS STATE REVENUE LESS THAN STATE
ACRE REVENUE GUARANTEE?ACRE revenue guarantee is 90% of (2 year moving average of U.S. price times 5 year
Olympic average of state yield.9($4.20*150) = $567
IS FARM REVENUE LESS THAN FARM ACRE BENCHMARK REVENUE?
Farm benchmark revenue is 100% of ((2 year moving average of U.S. price times 5 year Olympic average of farm yield) plus
insurance premium paid by the farmer for the crop.)
($4.20*147)+$20 = $637
Both must be met!
STATE PER ACRE REVENUE PAYMENT FOR CROP83.3% (becomes 85% in 2012) times the smaller of
State ACRE Revenue Guarantee minus actual state revenueor 25% of State ACRE Revenue Guarantee
.833(.25*567) = $118
Adjusted to farm payment rate
INDIVIDUAL FARM PER ACRE PAYMENT FOR CROPState Per Acre Payment times (farm 5 year Olympic average divided by state 5
year Olympic average)118(147/150) = $116
Benefit of Electing ACRE:Revenue Coverage, adjusted for payment rate, is Higher for ACRE than
Counter-Cyclical Program, Ohio, Jan.2009
Revenue coverage for counter-cyclical program equals [.833 times counter-cyclical yield times effective target price] For corn [.85 x 119.8 x $2.35 = $239]
ACRE state revenue [.833 x .90 x 150.0 x $4.15 = $466] .833 will become .85 in 2012
Crop Ohio Olympic Average
Planted Yield2004-08
U.SAverage
Cash Price 2007-08
ACRERevenue
Guarantee 2009
Counter-Cyclical
Yield2003
EffectiveTarget Price2009
Counter-CyclicalRevenueCoverage
2009
Corn 150.0/acre $4.20/bu $567 119.8/acre $2.35/bu $282
Beans 46.0/acre $10.05/bu $416 36.8/acre $5.36/bu $197
Wheat 65.8/acre $6.63/bu $393 53.2/acre $3.40/bu $181
Calculating a Wyandot County Example
Assumptions100 acres with 100% base acres
42 corn 47 beans 11 wheat
Cropping intentions for 2009 (three examples) 1 – all corn 2 – all beans 3 – all wheat
Yield assumptions 147 bu/acre corn 44 bu/acre beans 63 bu/acre wheat
Calculating a Wyandot County Example
Assumptions100 acres with 100% base acres
42 corn 47 beans 11 wheat
Cropping intentions for 2009 (three examples) 1 – all corn 2 – all beans 3 – all wheat
Yield assumptions 147 bu/acre corn 44 bu/acre beans 63 bu/acre wheat
ACRE vs Traditional: Corn
Price $4.50 $4.30 $4.10 $3.90 $3.70 $3.50 $3.30 $3.10 $2.90 $2.70$0
$20
$40
$60
$80
$100
$120
$140
$160
ACRE and Tradiiton DCP-CC Payments
ACRE Traditional
ACRE vs DCP: Income/Acre
$4.5
0
$4.3
0
$4.1
0
$3.9
0
$3.7
0
$3.5
0
$3.3
0
$3.1
0
$2.9
0
$2.7
0
$375.00
$425.00
$475.00
$525.00
$575.00
$625.00
$675.00
$725.00
Income ACRE vs DCP-CC
Income/ACRE Income/DCP
Expected Price/Bushel
Dol
lars
per
Acr
e
2009 Price Sensitivity to Yield
U.S. average cash price to equal
revenue guarantee; 5% reduced yields
U.S. average cash price to equal
revenue guarantee; average yields
U.S. average cash price to equal
revenue guarantee; 5% increased
yields
Corn 142.5 bu $3.90 150.0 bu $3.72 157.5 bu $3.53
Soybeans 43.7 bu $9.50 46.0 bu $9.05 48.3 bu $8.59
Wheat 62.5 bu $6.27 65.8 bu $5.97 69.1 bu $5.67
SummaryThe objective of this educational program was to explain
ACRE as simply as possible. There were 32 meetings reaching 1527 farmers, factsheet distributed at FSA offices, and articles written for farm magazines.
It was apparent that most farmers did not understand DCP and both programs needed to be explained.
Approximately 6% of the farms representing 10% of the farmland were enrolled in ACRE in 2009. 2010 ACRE elections are minimal and will not effect percentages significantly.
Chris’ predictionThe largest sign-up for ACRE will happen the year after it
pays!
For More Information
Chris Bruynis, Ph.D.109 S Sandusky Ave, Rm 16Upper Sandusky, OH [email protected]
