Lubben says, “The ACRE guarantees move every year based on updated yield and prices, so they reflect current revenue expectations and provide protection from revenue losses much better than does the DCP program.” But any gain has a 10 percent cap from the prior year, reducing effective protection. At Illinois, Schnitkey says, “ACRE will provide protection against low prices given average or above yields.”
In his analysis for the prospects for an ACRE payment for the 2013 crop, Lubben says early in the year, crop prices would have negated any ACRE payment and producers would have been better off remaining with the direct payment program.
But with the lack of soil moisture in Nebraska to diminish yields and the decline in commodity prices, the potential for an ACRE payment has increased. And he says revenue losses would not need to be so severe to trigger an ACRE payment.
Lubben says, “Coupled with uncertainty about 2013 yields and prices, the ACRE guarantees, although still far below revenue projections, could be very valuable to producers and well worth the 20 percent of DPs given up to sign up for ACRE.”
Schnitkey has developed a web-based decision aid for any state, built on a large database of yields and prices.
He says, “The ACRE Payment Estimator then provides a table of state ACRE payments times .85 for different state yields and marketing year average prices. Farms with higher yields than the state average will receive higher payments and vice versa.”
Currently, he says there is only a 27 percent chance of an ACRE payment in 2013 (in Illinois), but if one were received, it would be about $13 per acre.
Based on Schnitkey’s decision aid, he says, “The 2013 ACRE Payment Estimator will provide an evaluation of the likelihood and size of ACRE payments. In most Midwest cases, expected ACRE payments are near what is given up in terms of direct payments. If protection is desired for low revenues, which may be caused by low prices, ACRE will be a suitable alternative.”
Corn Belt farmers have the opportunity to sign up for ACRE in 2013 as part of the safety net offered in the extension of the 2008 Farm Bill. A payment is not guaranteed, but given the wide variety of soil moisture situations and production expectations, ACRE provides an option for financial risk management.
A decision aid can assist in making the choice to forego a portion of direct payment for the ACRE program.
Source: FarmGate blog