1. MANAGING Tough Times 2008 Farm Bill Education: Using the Early Adopter Model March 2009 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/farmmanagement.htm

2. MANAGING Tough Times Keys to Program Delivery Success Team Approach –State and Field Specialists working together –Early recognition of the problems, solutions and clientele –Segment the Farm Bill: SURE and ACRE, DCP Enrollment –Traditional meetings, mass media (print and radio) Electronic Dissemination Efforts –Web-based E-mail Conference Calls Dedicated Web Sites –Publications and Decision Tools –Legal Issues –Research –Training Shared Power Point Slides (updated regularly) Webinars Webcasts

3. MANAGING Tough Times Delivery Methods and Outcomes Traditional Delivery –Publications: Farm Bill, ACRE, SURE, DCP Sign-up –SURE and ACRE Decision Tools (Online Excel Spreadsheets) –20 Late Summer Meetings on SURE (prior to deadline for CAT/NAP “buy-in” of Sept. 16 th –Statewide dissemination of articles, radio interviews –100s of phone calls and e-mail responses –50 General Information Meetings Statewide –66 County Farm Bill Meetings (to-date) New Information and Education Deliveries –7 Webinars Statewide with the Iowa Farm Bureau – February 2 nd Partnership with UNL (Nebraska) Extension – March 9 th Nationally with DTN – March 6 th Nationally with the ASFMRA – September 8 th –12 recorded Webcasts (over 2,500 downloads) –ACRE Decision Tool (over 3,000 downloads) – FAQs (Frequently Asked Questions) Disseminated by Weekly/Monthly publications and their web site links

4. MANAGING Tough Times Lessons Learned Prioritize Efforts and Delivery Efforts Early Create Consistent Look and Feel to Training Material Improve the Use of Graphics (move beyond text) Difficult to “Out Guess” FSA’s Timelines Identify Potential for Extension-FSA Partnerships Sequence Meetings (multiple interfaces likely required) Explore New Electronic Delivery Methods –Dedicated Websites –Electronic Publications and Decisions Tools –Webinars –Webcasts –Frequently Asked Questions –Discussion Groups –DVDs –Use Webcasts/DVD presentations followed by Conference Calls

5. MANAGING Tough Times Building the Revenue Bridge JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC

6. MANAGING Tough Times YearCornSoybeansWheat Grain Sorghum 2007 Crop4.2010.106.484.08 2008 Crop4.10*9.35*6.80*3.20* 2007 & 2008 National Avg. Cash Price for ACRE Program $4.15$9.73$6.64$3.64 Source: *USDA WASDE Report, March 11 th, 2009 2-Year National Marketing Year Average (MYA) Cash Price Use for 2009 ACRE Revenue Guarantees

7. MANAGING Tough Times Comparing CCP to ACRE Payments Source: FAPRI U of MO, Feb. 2009

8. MANAGING Tough Times Direct & Counter Cyclical Program (DCP) vs. ACRE Enrollment Traditional DCPACRE Election Direct Payments Certain 80% of Direct Payments Certain Loan Payments at Full Loan Rates Likely No LDP or Marketing Loan Gain Loan Program at 70% of Loan Rate More Bushels Required *$1.36 ½ per bu. Corn *$3.50 per bu. Soybeans (*70% of National Loan Rates) Counter-Cyclical Payment (CCP) Little Chance of Collecting ACRE Program No CCP Payments ACRE payments likely in 2009* Odds of a Payment: Corn at 30% Soybeans at 52%* Source: *Babcock, ISU CARD, Feb. 2009

9. MANAGING Tough Times ACRE vs. CCP Payments ACRE pays out No ACRE payments CCP pays out No CCP payments $2.35 $5.36/bu Soybeans ($5.56 in ’10-’12)

10. MANAGING Tough Times Additional ACRE Enrollment Ideas Compare loss of CCPs to ACRE Enrollment –ACRE is revenue-based; CCP uses a fixed price, national prices must be below $2.35/bu corn and $5.36/bu soybeans to trigger –ACRE uses a moving average yield times price guarantee, rather than a just a “fixed price” –ACRE payment requires both state and farm triggers be met Need to Prove 5-year Olympic Average Farm Yields –FSA has stated the use of Crop Insurance APH data will be allowed to prove farm yields* (no clarification as to how) –No indication of what yield data will be allowed for missing years (2004 through 2008 for enrolling in 2009 ACRE program) * Assumes Farm-level yields will have to be provided to FSA at ACRE sign-up.

11. MANAGING Tough Times State Revenue Trigger State GuaranteeState Revenue 5-year Olympic Avg. State Yield (Planted Acre) X 2-year National Market Year Average (MYA) Cash Price X 90% Actual State Yield (Planted Acre) X Actual National Market Year Average (MYA) Cash Price Capped at +/- 10% from previous year Must Exceed 171 bu/A C & 50.5 bu/A Sb $4.15 C & $9.73 Sb $639/A C & $442/A Sb January 2010 September 2010 Source: ISU Extension Economics, March 2009 2009 Iowa Example

12. MANAGING Tough Times Farm Revenue Trigger Farm GuaranteeFarm Revenue 5-year Olympic Avg. Farm Yield * x 2-year National Market Year Average (MYA) Cash Price + Crop Insurance Premium (Farmer paid portion) Actual Farm Yield x Actual National Market Year Average (MYA) Cash Price Must Exceed *Assumes Farm-level yields will have to be provided to FSA at ACRE sign-up. Favors higher yielding farms 2009 RMA Data: About $20/A C and $10/A Sb $4.15/bu C/$9.73/bu Sb Post-Harvest September 2010

13. MANAGING Tough Times ACRE Set-up for Iowa Corn YearYield per Planted Acre (bu./acre) 2004181.0 2005173.0 2006166.0 2007171.0 2008169.0 Olympic Average171.0 YearMarketing Year Average Cash Price ($/bu.) 20074.20 20084.10 Average$4.15 The 2008 yield and price are USDA’s March 2009 estimates. So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $4.15 per bushel. State Corn Revenue for 2009: 171 X $4.15 X 90% = $639/A

14. MANAGING Tough Times State Revenue Guarantee ◊ 2009 Actual State Revenue* ◊ - Estimated * - Forecast Potential ACRE Payment for Corn Iowa Revenue Guarantee ◊ = $639/A 2009 Iowa Actual Revenue* = $599/A Potential ACRE Payment* = $40/A 2009 Actual Revenue Forecast: $599/A = 171 bu. yield/planted A X $3.50/bu National MYA Cash Price for 2009-10 Source: ISU Extension Economics, March 2009

15. MANAGING Tough Times ACRE Set-up for Iowa Soybeans YearYield per Planted Acre (bu./acre) 200449.0 200552.0 200650.5 200752.0 200845.5 Olympic Average50.5 YearMarketing Year Average Cash Price ($/bu.) 200710.10 20089.35 Average$9.73 The 2008 yield and price are USDA’s March 2009 estimates. So the expected state yield would be 50.5 bushels per acre and the ACRE price guarantee would be $9.73 per bushel. State Soybean Revenue for 2009: 50.5 X $9.73 X 90% = $442/A

16. MANAGING Tough Times Determining 2009 ACRE Payment (Considers Both Triggers are Met) Lesser of State ACRE Revenue Guarantee Minus Actual State Revenue or State ACRE Revenue Guarantee Times25% ACRE Payments are issued after October 1 st of the year following harvest. Payment Limits: Traditional DCP; $40,000 for DPs and $65,000 for CCPs. ACRE Payment Limits: $32,000 for DPs and $73,000 for ACRE Payments. Both payment limits total $105,000 per Individual using Direct Attribution. $639/A C & $442/A Sb

17. MANAGING Tough Times Iowa ACRE Revenue Guarantees Beyond 2009  Revenue Guarantee is updated each year through 2012 using the same rules: 5-year Olympic Average Yields (most recent years) 2-years of National (MYA) Cash Prices  Revenue Guarantees can not change by more than 10% (up or down) from year to year: So for example the 2009 State Revenue Guarantee for Corn is $639, then the 2010 ACRE Revenue Guarantee must be between $575 and $703. For Soybeans, the State Revenue Guarantee is $442, then the 2010 ACRE Revenue Guarantee must be between $398 and $486.

18. MANAGING Tough Times 2009 ACRE Enrollment Considerations If you expect steady to rising prices in 2009 through 2012, and no yield disasters Neither ACRE nor CCP will pay Stay with CCP and collect 100% of direct payments If you expect very low prices and high yields CCPs may pay more often than ACRE But ACRE payments will be large in 2009 and maybe in 2010 If you think we’ll see falling prices and/or a yield disaster ACRE payments are still more likely than CCP Consider Enrollment in ACRE in 2009 because… You’ll be starting with high 2007 and 2008 Prices, thus Large Revenue Guarantees for 2009 You might capture large enough ACRE Payments in 2009 to cover all Direct Payments over 4 years

19. MANAGING Tough Times Consider ACRE Enrollment for 2009 Likelihood of Landowners Signing Election Form Compare Traditional DCP to ACRE Enrollment Need FSA Regulations for Proving Farm Yields Reconcile Production Data: by farm, by crop and by year 5 Strategies for ACRE Enrollment

20. MANAGING Tough Times Farm Program Web Sites Ag Decision Maker (AgDM) (Spreadsheets - Decision Tools: ACRE Calculator) www.extension.iastate.edu/agdm Center for Agricultural Law and Taxation (CALT) www.calt.iastate.edu Center for Agricultural and Rural Development (CARD) www.card.iastate.edu USDA Farm Service Agency (FSA) www.fsa.usda.gov ISU Polk County Extension Farm Program Updates, Newsletters and Webcasts www.extension.iastate.edu/polk/farmmanagement