WILLMAR -- Local Farm Service Agency offices continue to accept requests to participate in either the Direct and Counter-cyclical Payment program or the Average Crop Revenue Election program. Application requests will continue to be accepted through the sign-up deadline of June1.
Under the Direct and Counter-cyclical Payment program, participants can qualify for two types of payments, both of which are computed using a farm's base acres and payment yields.
The first type of payment is called a direct payment. The direct payment rates are specified in the 2008 farm bill and are earned without regard to market prices. For that reason, the direct payment is sometimes referred to as the "guaranteed" payment.
The per bushel direct payment rates are as follows: barley - $0.24; corn - $0.28; oats - $0.024; soybeans - $0.44; and wheat - $0.52.
The second type of payment is a counter-cyclical payment. Unlike the direct payments, counter-cyclical payments are not guaranteed since the payment rates will vary depending on market prices. Therefore, counter-cyclical payments can be sizable during years when prices are low, with little or no payment when prices are high.
ADVERTISEMENT
The program provisions also allow participants to request and receive a portion of their direct payment in advance. During sign-up, eligible producers may request an advance payment equal to 22 percent of the total direct payment for each commodity associated with the farm. Local Farm Service Agency offices will issue the advance direct payment as soon as practical after enrollment.
Participants also have the option of requesting an advance counter-cyclical payment. However, at current price levels, it is unlikely that participants will qualify for an advance counter-cyclical payment.
Authorized by the 2008 farm bill, Average Crop Revenue Election is a new and innovative alternative to the traditional counter-cyclical payments provided under Direct and Counter-cyclical Payment. However, producers will need to carefully consider their options before deciding if the optional Average Crop Revenue Election program will provide them with better financial protection than what Direct and Counter-cyclical Payment currently affords.
Producers may elect and enroll in Average Crop Revenue Election for the 2010 crop year, even if they've already enrolled in Direct and Counter-cyclical Payment and received an advance direct payment.
While the decision to elect the new revenue election program can be made for any of the crop years 2010-2012, once the decision to elect is made, the decision is irrevocable and binds the farm to the program for the remainder of the 2008 farm bill, which continues through the 2012 crop year. Therefore, the decision to elect the revenue program is especially important to all current and future farm owners and operators.
Producers may elect the alternative on a farm-by-farm basis, with "farm" being defined by the farm number that has been assigned by the local FSA office.
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 the farm.
Unlike the counter-cyclical payments under Direct and Counter-cyclical Payment, which are solely based on price, revenue election payments are revenue-based payments that take into account both the farm's actual production or yield, and the national average market price of the commodity. However, to qualify for a revenue election payment, the actual crop-specific revenue for both the farm and the state must be less than the farm and state Average Crop Revenue Election guarantee for that crop.
ADVERTISEMENT
While the revenue of a specific crop must be below its guarantee, for both the state and the farm to qualify for a payment, the payment rates for an individual farm will be based on the amount of revenue loss for the state.
To make an informed decision regarding Average Crop Revenue Election participation, farmers and landowners 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 2010 benchmark yields for Minnesota will be as follows: corn - 166; soybeans - 42; wheat - 49; barley - 58; and oats - 63.
Since the 2010 marketing year has not concluded, the price guarantees being provided by USDA are only estimates using what data is available from the 2009 and 2010 marketing years. As of April 9, the estimated price guarantees were as follows: corn - $3.83; soybeans - $9.71; wheat - $5.84; barley - $3.21; and oats - $2.58.
All Average Crop Revenue Election 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.
Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.
