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Factors to consider regarding enrollment in ACRE program

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news Willmar, 56201
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR — Authorized by the 2008 farm bill, the Average Crop Revenue Election program is a new and innovative alternative to the traditional counter-cyclical payments provided under the Direct and Counter-cyclical Program. However, producers will need to carefully consider their options before deciding if the program is right for their farming operation.

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By Wes Nelson

USDA Farm Service Agency

WILLMAR — Authorized by the 2008 farm bill, the Average Crop Revenue Election program is a new and innovative alternative to the traditional counter-cyclical payments provided under the Direct and Counter-cyclical Program. However, producers will need to carefully consider their options before deciding if the program is right for their farming operation.

Unlike the counter-cyclical payments under the Direct and Counter-cyclical Program, which are solely based on price, Average Crop Revenue Election program payments are revenue-based payments that take into account both the farm’s actual production, and the national average market price of the commodity. Therefore, even if prices remain high, the program could provide producers with added financial protection in the event of major crop losses from widespread weather disaster conditions, such as drought.

One requirement of the program that seems to have discouraged participation was that the enrollment decision was irrevocable for the remainder of the 2008 farm bill, which continued through the 2012 crop year. Now that Congress extended the 2008 farm bill through the 2013 crop year, farmers will again have the opportunity to enroll for the first time. But in addition, farmers who previously enrolled will have the option of either continuing their enrollment for an additional year, or withdrawing and participating instead in the Direct and Counter-cyclical Program.

With the start of the spring planting season only a few weeks away, farmers seem especially concerned about the weather — and rightfully so. A recent update to the U.S. drought monitor indicated that 87 percent of Minnesota was in a “severe” to “extreme” drought, with a large portion of southwestern and west central Minnesota in the extreme drought category.

Farmers are also concerned about what summer and fall may bring in terms of grain prices. With an anticipated increase in planted acreage and given favorable weather conditions, the potential exists for a record breaking year for crop production and the possibility of significant price declines due to oversupplies.

For those reasons, the added revenue protection afforded by the Average Crop Revenue Election program is definitely worth considering in 2013. However, there are some costs associated with participating. In addition, there are a number of key factors that farmers need to fully understand before making an informed decision.

* By participating, producers agree to forgo counter-cyclical payments, accept a 20 percent reduction in direct payments, and receive a 30 percent reduction in their commodity loan rates for all commodities produced on farms enrolled.

* Producers can elect the Average Crop Revenue Election program on a farm-by-farm basis, which is defined as the farm number assigned by the local Farm Service Agency office. Therefore, farmers who operate multiple farm numbers can choose which farm or farms to enroll in 2013.

* To qualify for a payment, the actual crop-specific revenue for both the state and the farm must be less than the state and farm program Average Crop Revenue Election guarantees for a crop. Therefore, no Minnesota farmers will qualify for a payment unless the crop-specific revenue for all of Minnesota is less than the state-revenue guarantee.

n While the revenue of a specific crop must be below the state and farm guarantee, the farm payment rate will be determined by the amount of revenue loss for the state, not the individual farm.

* All program payments are based on the planted and considered planted acres of eligible commodities, without regard to whether the farm has base acres for a specific crop. Commodities eligible for payments include wheat, corn, soybeans, oats, barley, grain sorghum and a number of minor oilseed crops. Therefore, farmers planting non-covered commodities, such as peas, sweet corn, alfalfa and sugar beets, will need to consider where these crops will be produced in 2013 when deciding which farms to enroll in Average Crop Revenue Election.

* The 2013 marketing year used to determine if a crop-specific payment is earned begins Sept. 1 and continues through Aug. 31, 2014. Therefore, any earned 2013 payments will not be issued until the fall of 2014.

To make an informed decision regarding participation in the Average Crop Revenue Election program, farmers need to know the benchmark yields and the price guarantees that will be used to determine if a state and farm qualifies for a payment.

The 2013 preliminary benchmark yields for Minnesota are 164 bushels per acre for corn and 40 bushels per acre for soybeans.

Since the 2013 marketing year for corn and soybeans does not begin until Sept. 1, the price guarantees being provided by USDA can only be estimated, using what price data is currently available for the 2012 marketing year. As of March 8, the estimated 2013 price guarantee for corn was $6.66 and $13.40 for soybeans.

* One feature of the Average Crop Revenue Election program that is often overlooked are the “cup” and “cap” provisions, which limit the year-to-year change in a crop’s per-acre revenue guarantee by 10 percent. Therefore, due to the rapid rise in corn and soybean prices, Minnesota’s 2013 per-acre revenue guarantees will be limited to $757.61 for corn, and $471.24 for soybeans.  

* Producers may enroll into the 2013 Average Crop Revenue Election program even if they’ve already enrolled in the Direct and Counter-cyclical Program. However, the deadline to enroll in ACRE is June 3, while the deadline to enroll in the Direct and Counter-cyclical Program is Aug. 2.

If farmers have more questions regarding the ACRE program, they should contact their local Farm Service Agency office. Additional information is also available by visiting www.fsa.usda.gov.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.

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