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Is ACRE Worth the Gamble?

January 13, 2010
 
 

Operators of the 128,630 farms that signed up for the new Average Crop Revenue Election (ACRE) program this past August won't know whether their decision was a good one until payments are made—after the end of the marketing year for covered crops.

If you enrolled in ACRE and 2009 state yields were high, you may not get a payment, depending on the year-end price. But if you farm in a state where yields were marginal, you probably will come out ahead, thanks to ACRE.

"To get an ACRE payment, you want to be in a state where a short crop is unlikely to cause market prices to increase,” says Art Barnaby, Kansas State University economist.

That describes the 2009 Oklahoma wheat crop to a tee. For Barnaby, who owns wheat ground outside of Enid, Okla., the decision to enroll in ACRE was made with his tenant Rodney Jones in about "five minutes” (see "Rules of the Game” sidebar below).

"We had a freeze in April that decimated the wheat crop in the northern part of the state along the border with Kansas,” Jones says. So he and others knew state revenue from the crop was likely to be down and farm revenue would also be off, the two conditions that must be met to trigger an ACRE payment.

 

Watch State Averages. Twenty-five percent of Oklahoma's wheat producers and 37% of the state's base acres signed up for ACRE, second only to Washington, where 26% of farmers and 43% of base acres are enrolled in ACRE.

ACRE uses state data to set yields along with national prices to establish revenue targets. That worked for Oklahoma wheat growers but not for Kansans.

For the Kansas wheat farmers on the southern border of the state, who experienced the same freeze as their Oklahoma brethren, ACRE appears to be of little help. Record wheat yields in the northern part of Kansas offset freeze losses along the Oklahoma border, leading to a 42- bu.-per-acre state yield, the highest since 2003. Because the state average yield is above average, ACRE payments may not be triggered or may amount to only a few dollars per acre for Kansas farmers.

However, in an anomaly that can occur because of the use of state data, a producer in Kansas with land in both states who does business with the Farm Service Agency county office in Oklahoma is eligible to receive ACRE payments on his wheat acres at the rate paid to Oklahoma producers.

Unlike Oklahoma, only 1.5% of Kansas wheat producers and 1.8% of base acres signed up for ACRE. The low participation may be because Kansas producers figured out that ACRE wouldn't work for them or it may have been caused by some of the same hurdles faced by producers in other states.

"To participate, you had to have extensive historical data for your crops, enroll all the program crops on the farm and be able to convince your landlord to make the change,” says USDA economist Larry Salathe. Producers also had to wrap their minds around a program that deals with farm and state yields, national prices, state revenue and farm revenue.

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FEATURED IN: Top Producer - JANUARY 2010

 
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