By TIM THORNBERRY
Kentucky Correspondent

LEXINGTON, Ky. — Last year farmers were introduced to a new program that would “provide revenue support … as an alternative to the price support that farmers are used to receiving from commodity programs,” according to information from the Center for Agricultural and Rural Development (CARD) at Iowa State University.

The Average Crop Revenue Election (ACRE) program was part of the 2008 farm bill and while it was a bit complicated to begin with, some states’ producers may already reap benefits of it. Wheat producers who signed up will likely see big payments, said Cory Walters and Greg Halich, agricultural economists in the University of Kentucky (UK) College of Agriculture.

“In Kentucky, a perfect storm hit the 2009 wheat crop,” Walters said. “State yields were below average and the national average marketing price is significantly below the commodity guarantee.
“For both corn and soybeans, Kentucky yields were well above average and marketing year prices were not far from their respective program guarantees. Therefore, right now it looks like no payments for corn or soybeans will be made.”

The ACRE program pays when state revenue is below a threshold, added Walters. According to information from UK, “Payments are determined by taking the state revenue guarantee and subtracting the product of state average yield and the national average marketing price. When this value is positive, a potential payment is available, but that doesn’t necessarily guarantee payment for every producer in the state.

“Individual growers must show that their 2009 farm revenue, which is their actual yield multiplied by the national average price, was less than their farm revenue benchmark – which is calculated by their yields from the past five years, minus highest and lowest yielding years, multiplied by the previous two years’ national average marketing prices, plus crop insurance premium.”

Wheat producers could see as much as $95 per acre in payments, but should remember that is an estimate and final payments will likely change based on final marketing year prices once the marketing year ends on Aug. 31, said the economists.

“Kentucky had some problems with wheat production last year with all the rain,” said Walters. “The actual Kentucky yield was lower than average and more importantly, the national average price was significantly lower the program guarantee price, which was $6.63 a bushel, and right now the average price is around $4.90.

“What that has done, when you figure out the potential payments, it pushes the ACRE payment to the maximum possible amount. The maximum amount is 25 percent of the program guarantee, and for wheat that’s around $95 an acre,” he added.

Since ACRE was in its first year, farmers appeared hesitant to sign up for the program, especially since one of its requirements is producers give up 20 percent of their direct counter-cyclical payment (DCP) and 30 percent of their marketing assistance loan rates.
“On average, the 20 percent reduction in direct payments costs Kentucky producers $5 per base acre for corn, $2 per base acre for soybeans and $4 per base acre for wheat,” Halich said. “Also, producers using Commodity Credit Corporation loans will have to put up more bushels to get the same amount of money under ACRE, since loan rates are reduced by 30 percent.”

USDA figures noted that nationally, 8 percent of the total number of farms enrolled in the 2009 DCP and ACRE programs elected to participate in ACRE, representing nearly 13 percent of the base acres.

In Kentucky, 4.08 percent of eligible farms (1,715) signed up, equating to 15.68 percent of base acres. What that is saying, according to Walters, is that larger farmers signed on to the program.

“Once you are in the program, you are in,” he said. “But you have the choice to sign up every year and you want to reevaluate that decision every year. I think more people will sign up now that (they) have seen the outcome and what it did.”
Any producer expecting ACRE payments will receive those in the fall, Walters added. June 1 is the deadline for farmers to enroll in the ACRE program for the 2010-11 crop-year.

Walters and Halich will be conducting workshops in May for those interested in signing up. For more information, contact your local office of the UK Cooperative Extension Service.