You can't afford to ignore ACRE

February 27, 2009 06:00 PM
 
You can't afford to ignore ACRE
 
Don't write off signing up for the new ACRE program because you don't want to bother comparing it to traditional programs, urges Carl Zulauf, Ohio State University Extension economist. Compare the two program suites:
 
1) Traditional Suite         2) ACRE Suite
Marketing loan                    Marketging Loan at 70%
Direct pymt                          Direct Payment at 80%:
Countercyclical pymt          ACRE state revenue prog
 
"ACRE is a deficiency payment like the countercyclical payment and marketing loan,” says Zulauf. "But it is based on revenue, not price.” You should approach the decision as risk management. Ask yourself "Does ACRE improve the management of systemic (outside my farm's control) revenue risk enough to override the loss of 20% of direct payments and 30% of the marketing loan rate?
 
Possibly favoring ACRE are: Countercyclical yields are based on older (perhaps lower) yield history; ACRE is a five-year Olympic average (drop highest and lowest years). Prices are higher now than historically and ACRE is based on average cash price the previous two years.
 
ACRE will benefit states with higher yield variation, crops with prices well above the loan rate, and states and crops that have had a large increase in yield, Zulauf sums up.
 
Keep in mind crop insurance and ACRE have very different risk profiles, he says. "They don't necessarily overlap. Crop insurance uses futures prices; ACRE uses cash prices, for example, and crop insurance isn't based on your state, while ACRE is.”
 
For Zulauf's full analysis, see: /files/Zulauf.pdf
For additional information, see: www.choicesmagazine.org/magazine/issue.php
aede.osu.edu/people/zulauf.1  Click Public
www.farmdoc.uiuc.edu   Click Fast Tools for a comparison calculator
 
 

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