ACRE Webcast May 13 2010 Chad Hart Assistant
ACRE Webcast May 13, 2010 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate. edu 515 -294 -9911 University Extension/Department of Economics
Average Crop Revenue Election (ACRE) Ø ACRE is a revenue-based counter-cyclical payment program Ø Based on state and farm-level yields per planted acre and national prices Ø Producers choosing ACRE agree to 20% decline in direct payments, 30% decline in loan rates, and no CCP payments University Extension/Department of Economics
Farmer Choice Ø Starting in 2009, producers will be given the option of choosing ACRE or not Ø Can choose to start ACRE in 2009, 2010, or beyond Ø Once you’re in ACRE, you stay in ACRE until the next farm bill Ø If you sign up for ACRE, you must do so for all eligible crops Ø Deadline for sign-up, June 1 University Extension/Department of Economics
ACRE Settings Ø ACRE is based on planted acres Ø Total acres eligible for ACRE payments limited to total number of base acres on the farm Ø Farmers may choose which planted acres are enrolled in ACRE when total base area is exceeded Ø Choice needs to be made by Sept. 30 University Extension/Department of Economics
ACRE Set-up for 2009 Iowa Corn Year Yield per Planted Acre (bu. /acre) Year Season-average Price ($/bu. ) 2004 181. 0 2007 4. 20 2005 173. 0 2008 4. 06 2006 166. 0 2007 171. 0 Averag e 4. 13 2008 169. 0 Olympic Average 171. 0 So the expected state yield is 171. 0 bushels per acre and the ACRE price guarantee is $4. 13 per bushel. University Extension/Department of Economics
ACRE Set-up for 2009 Iowa Soybeans Year Yield per Planted Acre (bu. /acre) Year Season-average Price ($/bu. ) 2004 49. 0 2007 10. 10 2005 52. 0 2008 9. 97 2006 50. 5 2007 52. 0 Averag e 10. 04 2008 46. 5 Olympic Average 50. 5 So the expected state yield is 50. 5 bushels per acre and the ACRE price guarantee is $10. 04 per bushel. University Extension/Department of Economics
ACRE Guarantees Ø ACRE revenue guarantee ØIs the state-level guarantee National 2 -year average = 90% * ACRE price guarantee * Expected state yield ØFor 2009: Corn $635. 61/acre Soy $456. 32/acre University Extension/Department of Economics State 5 -year Olympic average
ACRE Guarantees Ø ACRE Farm revenue trigger ØIs the farm-level guarantee ØChecked once the state triggers Farm 5 -year Olympic average National 2 -year average = Expected farm yield * ACRE price guarantee + Producer-paid crop insurance premium Current premium for farm University Extension/Department of Economics
ACRE Payment Triggers Ø State trigger: Ø When state computed revenue is below ACRE Revenue Guarantee Ø Farm trigger: Ø When farm computed revenue is below ACRE Farm revenue trigger Ø Need both triggers to receive an ACRE payment University Extension/Department of Economics
ACRE Computed Revenues Ø ACRE actual revenue = Max(Season-average price, ACRE Loan rate) * Actual state yield per planted acre Ø ACRE actual farm revenue = Max(Season-average price, ACRE Loan rate) * Actual farm yield per planted acre University Extension/Department of Economics
ACRE Payments Ø Payment rate Set at the state level = Min(25% * ACRE revenue guarantee, ACRE revenue guarantee – ACRE actual revenue) Ø Payments made on 83. 3% of planted acres in 2009 -11, 85% in 2012 (up to total base acres) Ø ACRE payment adjustment: Payment multiplied by ratio of Expected farm yield to Expected state yield University Extension/Department of Economics
Using Latest USDA Corn Projections Ø 2009 ACRE revenue guarantee = $635. 61/acre Ø $4. 13/bu. * 171. 0 bu. /acre * 90% Ø 2009 Proj. ACRE actual revenue = $655. 20/acre Ø $3. 60/bu. * 182. 0 bu. /acre Ø No payments under this scenario Ø Would need price to fall to $3. 49 to trigger payments Ø Current futures (5/12/10) point to a season-average price of $3. 55 University Extension/Department of Economics
Using Latest USDA Soy Projections Ø 2009 ACRE revenue guarantee = $456. 32/acre Ø $10. 04/bu. * 50. 5 bu. /acre * 90% Ø 2009 Proj. ACRE actual revenue = $479. 75/acre Ø $9. 50/bu. * 50. 5 bu. /acre Ø No payments under this scenario Ø Would need price to fall to $9. 03 to trigger payments Ø Current futures (5/12/10) point to a season-average price of $9. 46 University Extension/Department of Economics
Looking Beyond 2009 Ø The ACRE revenue guarantee is updated each year using the same rules Ø 5 year Olympic average for yields Ø 2 year average for prices Ø But the ACRE revenue guarantee can not change by more than 10 percent (up or down) from year to year University Extension/Department of Economics
ACRE Set-up for 2010 Iowa Corn Year Yield per Planted Acre (bu. /acre) Year Season-average Price ($/bu. ) 2005 173. 0 2008 4. 06 2006 166. 0 2009 3. 60 2007 171. 0 2008 169. 0 Averag e 3. 83 2009 182. 0 Olympic Average 171. 0 The 2009 yields and prices are USDA’s May 2010 estimates. So the expected state yield would be 171. 0 bushels per acre and the ACRE price guarantee would be $3. 83 per bushel. University Extension/Department of Economics
2010 Iowa Corn ACRE Guarantee Ø By formula, the ACRE revenue guarantee would be $589. 44/acre Ø 90% * $3. 83/bu. * 171. 0 bu. /acre Ø But the ACRE revenue guarantee can not change by more than 10% Ø 2009 guarantee = $635. 61/acre ØAllowed range is $572. 05 to $699. 17 Ø So 2010 proj. guarantee is $589. 44/acre University Extension/Department of Economics
ACRE Set-up for 2010 Iowa Soybeans Year Yield per Planted Acre (bu. /acre) Year Season-average Price ($/bu. ) 2005 52. 0 2008 9. 97 2006 50. 5 2009 9. 50 2007 52. 0 2008 46. 5 Averag e 9. 74 2009 50. 5 Olympic Average 51. 0 The 2009 yields and prices are USDA’s May 2010 estimates. So the expected state yield would be 51. 0 bushels per acre and the ACRE price guarantee would be $9. 74 per bushel. University Extension/Department of Economics
2010 Iowa Soybean ACRE Guarantee Ø By formula, the ACRE revenue guarantee would be $447. 07/acre Ø 90% * $9. 74/bu. * 51. 0 bu. /acre Ø But the ACRE revenue guarantee can not change by more than 10% Ø 2009 guarantee = $456. 32/acre ØAllowed range is $410. 69 to $501. 95 Ø So 2010 proj. guarantee is $447. 07/acre University Extension/Department of Economics
ACRE Payment Rate Matrix ($/acre) Price $2. 70 Yield $2. 90 $3. 10 $3. 30 $3. 50 $3. 70 $3. 90 $4. 10 $4. 30 155 147. 36 139. 94 108. 94 77. 94 46. 94 15. 94 0. 00 159 147. 36 128. 34 96. 54 64. 74 32. 94 1. 14 0. 00 163 147. 36 116. 74 84. 14 51. 54 18. 94 0. 00 167 138. 54 105. 14 71. 74 38. 34 4. 94 0. 00 171 127. 74 93. 54 59. 34 25. 14 0. 00 175 116. 94 81. 94 46. 94 11. 94 0. 00 179 106. 14 70. 34 34. 54 0. 00 183 95. 34 58. 74 22. 14 0. 00 187 84. 54 47. 14 9. 74 0. 00 For Iowa corn in 2010, based on May 2010 price and yield projections University Extension/Department of Economics
ACRE Payment Rate Matrix ($/acre) Price $7. 95 Yield $8. 15 $8. 35 $8. 55 $8. 75 $8. 95 $9. 15 $9. 35 $9. 55 47. 0 73. 42 64. 02 54. 62 45. 22 35. 82 26. 42 17. 02 7. 62 0. 00 48. 0 65. 47 55. 87 46. 27 36. 67 27. 07 17. 47 7. 87 0. 00 49. 0 57. 52 47. 72 37. 92 28. 12 18. 32 8. 52 0. 00 50. 0 49. 57 39. 57 29. 57 19. 57 0. 00 51. 0 41. 62 31. 42 21. 22 11. 02 0. 82 0. 00 52. 0 33. 67 23. 27 12. 87 2. 47 0. 00 53. 0 25. 72 15. 12 4. 52 0. 00 54. 0 17. 77 6. 97 0. 00 0. 00 55. 0 9. 82 0. 00 0. 00 For Iowa soybeans in 2010, based on May 2010 price and yield projections University Extension/Department of Economics
Information and Decision Tools Ø DCP and ACRE signup going on right now Ø So whether you are staying with CCP or moving to ACRE, you have a form to fill out by June 1 Ø ACRE information and tools are available at: USDA – Farm Service Agency: http: //www. fsa. usda. gov/FSA/webapp? area=home&subject=dccp&topic=landing Iowa State: http: //www. extension. iastate. edu/agdm/info/farmbill. html Illinois: http: //www. farmdoc. illinois. edu/policy/index. asp Missouri: http: //www. fapri. missouri. edu/farmers_corner/tools/acre. asp University Extension/Department of Economics
Forms and Records Ø Forms Ø Election: CCC-509 ACRE (fill out once) Ø Enrollment: CCC-509 (fill out each year) Ø If you do not fill out the enrollment paperwork, you are not in the program Ø All producers, including landowners, must sign the election form Ø Records Ø Must annually report acreage and production to FSA Ø In proving historical farm yields, producers must present production records for continuous years (no gaps are allowed) University Extension/Department of Economics
Forms and Records Ø The farm yields will be the higher of the proven farm yield or 95% of the county average yield determined by FSA (NASS county production/FSA county acreage) Ø Zero production reports are allowed Ø Crop insurance and NAP production reports will work Ø Commercial receipts, settlement sheets, warehouse ledger sheets that are reliable and/or verifiable will work Ø Loan and LDP records will work Ø Production data for 2009 needs to turned in by June 30, 2010 University Extension/Department of Economics
Example of Production Records University Extension/Department of Economics
Final Notes Ø Signup deadline is June 1 ØHolds whether you are staying with CCP or moving to ACRE Ø Current projections have smaller 2010 ACRE guarantees ØBut these guarantees are still way above historical averages ØAnd given trend yields and current price estimates for 2010, ACRE would be close to triggering payments for Iowa crops University Extension/Department of Economics
Thanks for your time! My web site: http: //www. econ. iastate. edu/faculty/hart/ Iowa Farm Outlook: http: //www. econ. iastate. edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ University Extension/Department of Economics
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