EMPOWERMENT THROUGH EDUCATION Assisting Producers with the Average Crop Revenue Election (ACRE) Decision Chris Bruynis, PhD Assistant Professor & Extension Educator Erie 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 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 2009 Farmers and landowner have the choice between DCPorACREMarketing Loan Rate (LDP)at 70%Direct Payment at 80% Price Counter-CyclicalACRE 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 SuiteACRE Suite 20% reduction in payment Direct payment reduction added to ACRE payment limit

Market Loans/LDP’s DCPACRE 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 DCPACRE Direct 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 CyclicalACRE Payment 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 Chart IS 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! S TATE P ER A CRE R EVENUE P AYMENT FOR C ROP 83.3% (becomes 85% in 2012) times the smaller of State ACRE Revenue Guarantee minus actual state revenue or 25% of State ACRE Revenue Guarantee.833(.25*567) = $118 Adjusted to farm payment rate I NDIVIDUAL F ARM P ER A CRE P AYMENT FOR C ROP State 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 x $2.35 = $239] ACRE state revenue [.833 x.90 x x $4.15 = $466].833 will become.85 in 2012 CropOhio Olympic Average Planted Yield U.S Average Cash Price ACRE Revenue Guarantee 2009 Counter- Cyclical Yield 2003 Effective Target Price 2009 Counter- Cyclical Revenue Coverage 2009 Corn150.0/acre$4.20/bu$ /acre$2.35/bu$282 Beans46.0/acre$10.05/bu$ /acre$5.36/bu$197 Wheat65.8/acre$6.63/bu$ /acre$3.40/bu$181

Calculating a Wyandot County Example Assumptions 100 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 Assumptions 100 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

ACRE vs DCP: Income/Acre

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 Corn142.5 bu$ bu$ bu$3.53 Soybeans43.7 bu$ bu$ bu$8.59 Wheat62.5 bu$ bu$ bu$5.67

Summary The 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 ACRE elections are minimal and will not effect percentages significantly. Chris’ prediction The largest sign-up for ACRE will happen the year after it pays!

For More Information Chris Bruynis, Ph.D. 109 S Sandusky Ave, Rm 16 Upper Sandusky, OH