If you have been to the FSA office to report your 2008 acreage, were you asked if you wanted to sign up for the 2009 ACRE program? The ink is barely dry on the 2008 farm program and FSA is already recruiting farmers to participate in the support program for next year. No, they are probably not working on commission, but are just so efficient they are working ahead. And you need to respond like you know the program as well as they know it. So, what is your answer about ACRE?

The Average Crop Revenue Election has nothing to do with the Presidential candidates and their campaigns, but the choice you have the option to make at the FSA office to determine the type of farm program you want for your operation. There will be the same old, same old, same old, direct and counter-cyclical payments with a marketing loan to protect your interests. But by sacrificing 20-30% of those, you will have the chance to sign up for ACRE, and according to Iowa State University ag economist Bruce Babcock, “Almost all price scenarios favor enrollment in ACRE. ACRE payments will be double the level of traditional programs even if commodity prices drop back to levels last seen in 2005."

Before you make any rush to sign up for ACRE, remember the program does not start until the 2009 crop. Kansas State ag economist Art Barnaby says, “The ACRE program is a “put option” on expected state revenue. The strike price for 2009 ACRE is the two year average of 2008 and 2007 Marketing Year Average price. Because of weather combined with demand, this strike price is likely to be very “high” and there is no limit on the price in the first year.”

While the downside is not being able to switch away from ACRE once you are there, Barnaby says, “In 2010 the ACRE guarantee can not decline by more than 10% from 2009. Therefore, if the current weather market of 2008 sets a very “high” ACRE guarantee for 2009. Barnaby also says it is likely ACRE will be attractive to corn and bean producers, and the later one signs up for the program, the clearer the picture will be on the value of the 2009 Marketing Year Average price that will settle ACRE claims. And he warns, “If farmers only signup for ACRE when it is in the money and increase the odds of a payment, ACRE can still expire worthless, like a Board traded option.”

To assist you in making a decision, whether it is tomorrow or a year from tomorrow, the folks at Iowa State have created several decision aids that offer a picture of your farm program benefits from corn, soybeans, and wheat. Users of the Excel-based spread sheets will enter specific data about their state, expected commodity price for the new market year, the 2008 marketing year price, and the average yield per planted acre. The outputs of the spreadsheets are estimated ACRE payments and ACRE revenue guarantees.

The 10% limit on going up or down from one year to the next, will save many farmers from grief, according to Ohio state ag economist Carl Zulauf, “The 10% cup/cap is important. It limited changes in the revenue guarantee around half of the time in an analysis that calculated the breakeven price at which expected payments were the same from the ACRE programs and traditional farm programs.

As farm programs change over time, farmers initially will grumble about the changes being unfair and not be of any benefit to them. Then they get quiet about the farm program because they have figured it out and how they can benefit from it. It is always evolutionary, and farmers will soon be finding ways to benefit.

Summary:
ACRE will be the farm program du jour beginning next year for many farmers, who have figured out how the Average Crop Revenue Election program will be of greater benefit than staying with the old programs in full force. ACRE utilizes a myriad of calculations, and decision aids are available to assist farmers in making the best decision. While some folks will sign up now, the program will not take effect until after the 2009 crop is harvested, so later participants will be able to see more clearly how they will benefit.