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Moneywise September 2008

August 1, 2008

Is ACRE for you?

The Average Crop Revenue Election (ACRE) is arguably the most important commodity program change in the 2008 farm bill, says Pat Westhoff, Food and Agricultural Policy Research Institute economist at the University of Missouri. "Instead of traditional payments, ACRE makes payments when per-acre revenues for a given crop in a given state fall below a trigger level, which is based on moving averages of national average prices and state yields.”

Beginning in 2009, you can stick with the regular program or choose ACRE, but once you enter ACRE, you have to stay in it through 2012. You must enroll all your crops.

Because of ACRE's "cost,” it is by no means a slam dunk from a farmer's point of view. There are three cost components:

• You give up 20% of your direct payments, or about $3/acre for wheat and $4/corn.

• You give up all countercyclical payments, if there are any.

• Your marketing loan rates are reduced 30%—although, given that the $1.90 corn loan bears little relation to today's prices, "30% of nothing is irrelevant,” Kansas State University Extension Economist Art Barnaby comments.

"It isn't until market prices top that it starts to get interesting,” Barnaby says. "As long as prices are headed up, you are better off not signing up. It will be a better deal once prices have topped.” However, there is a much greater chance that ACRE will pay than either the loan or the countercyclical program, he adds.

For complete details about ACRE and links to a calculator, visit www.ToProducer.com Web Extra. —Linda H. Smith

Big variations in land rent

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FEATURED IN: Top Producer - Summer 2008

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