1. Wesley N. Musser Farm Management Specialist Department of Agricultural and Resource Economics University of Maryland

2.  Average Crop Revenue Election (ACRE)  Supplemental Revenue Assistance (SURE)  Farmers must make choices to participate in these programs  This presentation reviews the programs and presents Maryland Examples of the choices

3.  All programs regulations have not been developed for these programs  My presentation reflects my current level of understanding given this program development  As the program develops, this presentation may become outmoded  Keep in touch with your FSA Office for the most recent information

4.  Must Elect to participate  Sign-up in 2009 and later years  Must give up Counter-Cyclical Payments and 20% of Direct Payments and 30% of Marketing Loan Assistance or Loan Deficiency Payments  Decision is irrevocable  Applies to all crops on each FSA Farm # but not all Farm #’s

5.  ACRE is a state level gross revenue protection plan for covered commodities  ACRE payments are made if: Actual State Revenue is less than ACRE Program Guarantee for the crop Actual Farm Revenue is less than the ACRE Farm Benchmark Revenue for the crop  Farm payments are based on State Revenue  Revenue Components are illustrated with a MD example below

6.  90% of Product of:  Olympic average of state corn yields for last five years: with yields of 114, 142, 121, 128, & 89, eliminate the high and the low, and average 114, 121, & 128 to obtain 121 bushels  and  2-year national market year price of corn of $5.80  Program Guarantee is 90% of 121 x 5.8 or $632

7.  Actual State Average Corn Yield of 80 bushels  times  National Market Year Price of Corn of $6.50  Actual State Revenue is 80 x 6.5 = $520  Difference between Guarantee and Actual is $632-$520 = $112

8.  Farm’s 5-year Olympic Average Yield of 125 bushels  times  2-year national market year price of corn of $5.80  plus  Per-acre crop insurance premium for 75% CRC coverage of $32  ACRE Benchmark is 125 time 5.8 + 32 = $757

9.  Actual Farm’s Planted Acre Yield of 85 bushels  times  National Market Year Price of Corn of $6.50  Actual Farm Revenue is 85 x 6.5 = $552.5

10.  State Condition for Payment Met: Guarantee of $632 is more than Actual State Revenue of $520 Farm Condition for Payment Met: Benchmark of $757 is more than Actual of $522.5

11.  Calculated as 83.3% of:  Difference between State Guarantee and State Actual of $632-$520 or $112  times  Yield Ratio of Farm Olympic Average to State Olympic Average of 125/121 = 1.03  Payment per Planted Acre is 83.3% x 112 x 1.03 = $96  Farm Gives up 20% of Direct Payment of $26 or $5

12.  Uses same calculations  ACRE Example for Maryland handout includes a soybean example  Per-Acre Soybean Payment is $77  Farm gives up 20% of Direct Payment per acre of $12 or $2

13.  In example, farm not eligible for counter- cyclical or LDP payments because prices too high  Large ACRE payments from much lower than average yields and prices about the same  Lower prices than previous two years could also result in ACRE payments  Both situations, could have no counter- cyclical or LDP payments

14.  ACRE payments large because current prices are higher than traditional prices  With traditional price levels, farmers eligible for payments given up and ACRE payments lower  If prices or yields don’t drop, ACRE payments will not be made  At low prices, could get traditional payments but not ACRE payments

15.  At current prices and variable yields, ACRE seems to have advantages  At traditional lower prices, current program payments will be made and could be advantageous  Choice may depend on expectations of future price levels  Are we in a new pricing environment or a price bubble?

16.  Do some analysis for your farm and your expectations of future prices  See: http://www.extension.iastate.edu/agdm/ articles/babcock/BabAug08.html http://www.extension.iastate.edu/agdm/ articles/babcock/BabAug08.html  From Bruce Babcock at IA State University  Others including MD Grain Producers will have calculators

17.  Questions?

18.  Must farm in a Secretary of Agriculture declared disaster county  Or, farm in a county contiguous to a disaster county  Or, have yields 50% or lower than normal yields

19.  All land in farm must be enrolled in crop insurance  Crops without crop insurance, such as pasture and watermelons, must be enrolled in FSA’s Noninsured Crop Disaster Assistance Program or NAP  Must not miss deadlines for crop insurance  Small grains 9/30/08 for 2009 crops  Perennial crops such as hay and fruit also in the Fall  See your crop insurance agent and FSA

20.  SURE starts in 2008  Most farmers do not have all land enrolled in crop insurance or NAP for 2008  Special enrollment for non-insured crops at FSA by 9/16/08

21.  Handout for a 1000 acre corn/soybean farm  Will summarize calculations  Only present corn and total farm numbers  Example assumes no ACRE payments

22.  Crop Revenue Guarantee  Crop Revenue to Count  SURE Payment  Total Farm Calculations rather than Crop Calculations

23.  Multiply:  Planted Acres of 500  Crop Insurance Indemnity Price of $6.00  Crop Insurance APH of 125 bushels/acre  Crop Insurance Coverage of 75%  Product is Crop Insurance Revenue Guarantee of $281,250  Total Farm Guarantee is $491,250  Total Farm Guarantee times 115% is SURE Guarantee or $564,938

24.  Multiply:  Harvested Acres of 500  Actual Harvested Yield of 80 bushels  Harvest time Insurance Price of $6.00  Revenue to Count for Insurance is $240,000  Crop Insurance Indemnity is Crop Insurance Guarantee of $281,250 minus Revenue to Count of $240,000 equals $41,250  Total Farm Indemnity is $76,250

25.  Multiply Harvested Yield of 80 bushels by Marketing Year Actual Average Price of $6.50 times 500 acres = Corn Crop Sales Revenue of $260,000  Add Soybean Sales Revenue to obtain Total Farm Revenue to Count of $435, 000  Add Crop Insurance Indemnities of $76,250  Add 15% of Direct Payments of $3,000  Add ACRE and Other FSA Payments of 0  Total SURE Revenue is $514, 250

26.  From SURE Guarantee of $564,938  Subtract SURE Revenue to Count of $514,250  Equals Revenue Shortfall of $50,688  Multiply by 60% to obtain SURE Payment of $30,413

27.  http://www.extension.iastate.edu/agdm/ articles/edwards/EdwAug08.html http://www.extension.iastate.edu/agdm/ articles/edwards/EdwAug08.html  Developed by William Edwards of Iowa State University

28.  No ACRE payment in SURE Example  Relevant for 2008 with only SURE  After 2008, only small ACRE payments can be made and also a SURE payment  If ACRE (or counter-cyclical) payments $50, 688 or more, the Crop Revenue for SURE would increase to $564, 938 or more and the Revenue Shortfall would be 0 or less.  So no SURE payment

29.  SURE payments made only when ACRE payments small or zero  Farm eligible for SURE payments when its yield is low but state average yield normal  SURE protects against low farm yields not in the whole state

30.  If not enrolled in ACRE and prices stay high, SURE provides additional protection against low yields  Also provides protection against price drops if not in ACRE  If enrolled in ACRE, protects against low farm yields but normal state yields if prices stay high  Cost low--$300 per crop or $900 per county for CAT and $250 per crop and $750 per county for NAP

31.  Level of Coverage affects SURE Revenue Guarantee  Indemnities reduce SURE payment  Premium increases farm ACRE guarantee  For SURE, remember to enroll in crop insurance or NAP for all acreage  See crop insurance agent and FSA

32.  Both programs complicated  Both protect against low yields and price drops during growing season  Regulations are still being written  Examples in this presentation based on current understanding and may not be completely accurate  Crop insurance very important