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USDA study analyzes benefits of new revenue program vs. traditional payment program

WILLMAR -- Authorized by the 2008 farm bill, the Average Crop Revenue Election program is the first federal income-support program to be based on revenue and planted acres. This is a radical departure from previous income-support programs, including the current Direct and Counter-cyclical Payment program, which provides payments based on national average market prices and a farm's historical planting of specified crops, known as base acres.

Since the Average Crop Revenue Election program is a revenue program, farmers participating in the program have income protection from losses caused by low prices, poor yields or a combination of both. And since the program is based on a farm's planted acres rather than a historical average, farmers are afforded protection that more closely reflects their current mix of planted crops.

The added income protection does not come without a cost. By participating, an agricultural producer does not qualify for counter-cyclical payments. In addition, participants will see a 20 percent reduction in their direct or "guaranteed" payments, and a 30 percent reduction in marketing loan rates.

While participation in the revenue-based program is optional, the decision-making process is not easy for farmers. In addition to the known reductions in traditional farm program benefits, farmers need to make assumptions about farm and state average yields, and commodity prices before deciding if participation would be best for them.

Adding to the difficulty of the decision-making process is that once the decision to participate is made, the decision becomes irrevocable for the remainder of the 2008 farm bill, which continues through the 2012 crop year.

Researchers from the U.S. Department of Agriculture recently completed a study where they applied the Average Crop Revenue Election requirements to program-eligible crops from 1996 to 2008. The purpose of their study was to determine whether farmers would have benefited more by participating in Average Crop Revenue Election than the Direct and Counter-cyclical Payment programs of the past.

Their analysis found that total payments under the Direct and Counter-cyclical Payment programs exceeded the estimated total Average Crop Revenue Election payments every year except 1996 and 1997.

The researchers also caution that while most producers might have been better off participating in Direct and Counter-cyclical Payment during the years 1996-2008, this may not be the case during crop years 2009-2012.

Since the prices used to calculate the initial guarantees of the new revenue program include the historically high commodity prices of 2007 and 2008, participants could potentially earn payments much higher than those participating in the Direct and Counter-cyclical Payment program.

The 2009 crop year was the first year that farmers could participate in the optional revenue-based program. Initial enrollment data indicate that about 8 percent of U.S. farms, representing nearly 13 percent of the nation's base acreage, decided to participate in Average Crop Revenue Election beginning with the 2009 crop year.

As expected, enrollment was highest in regions that typically grow wheat, corn and soybeans. Those three crops comprise about 96 percent of the crops planted on participating farms.

Farmers who did not enroll in 2009 can still enroll during any of the next three years. The deadline to enroll for the 2010 crop year is June 1.

Wool and mohair deadline is Feb. 1

The 2008 farm bill authorizes marketing assistance loans and loan deficiency payments for wool and mohair producers who shear wool or mohair from live sheep and goats, or who sell unshorn lambs for slaughter.

Producers have the option of either placing their wool and mohair under a nine-month commodity loan or requesting a loan deficiency payment. Unshorn pelts qualify only for a loan deficiency payment.

For producers who wish to put their wool under loan, the loan rate for graded wool is $1.15 per pound and $0.40 per pound for ungraded wool. The loan rate for mohair is $4.20 per pound.

The deadline to request a loan or loan deficiency payment on 2009 wool or mohair is Feb. 1.

If producers previously signed a form for 2009 production, the deadline to submit all sales receipts for sheared wool, mohair or unshorn pelts is also Feb. 1.

Minnesota corn production sets new record high

According to the annual crop summary released by USDA's National Agricultural Statistics Service, Minnesota corn production in 2009 totaled 1.25 billion bushels, breaking the previous record of 1.19 billion bushels set in 2005. The 2009 production total is up 6 percent from 2008.

Minnesota farmers harvested 7.15 million acres of corn for grain, down less than 1 percent from 2008.

Minnesota's average corn yield was estimated at 175 bushels per acre, up 11 bushels from 2008.

Minnesota soybean production in 2009 totaled 285 million bushels, up 8 percent from 2008.

Minnesota's average soybean yield was estimated at 40 bushels per acre, up 2 bushels from 2008.

Sugar beet production in Minnesota totaled 10.5 million tons, up 7 percent from 2008.

Minnesota sugar beet producers had an average yield of 23.5 tons per acre, down 1.2 tons per acre from 2008.

Sugar beet harvested acreage totaled 448,000 acres, down from the 399,000 acres harvested in 2008.

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