Most Cornbelt farmers have had a lot of tractor seat time this spring, during which the question of ACRE may have been mentally debated. Sign-up for the Average Crop Revenue Election program will begin June 1, and many farmers are either still trying to decide or have given up and plan to wait until the next rainy day when they can study a bit more about it. If you are among either group, we have some insight from the experts to share with you.

While most farmers are well along with planting, there are tens of thousands in Illinois, Indiana, and other parts of the Eastern Cornbelt who have yet to get into the field, and many others who have not even gotten a good start on planting. That will cause those to wonder if the ACRE program participation will be a plus or a minus if some acres don’t get planted or if their own prevented planting crop insurance claim will have an impact. Good question, says Kansas State ag economist Art Barnaby. His latest advice indicates that acreage which was considered planted but failed, will count against the state ACRE payment, which is the first threshold that must be crossed. Barnaby says the crop may be reduced because of failed acreage, but it would be less than 2% and that would not be sufficient to have much of an impact, unless they were all in one state.

Barnaby says FSA considers prevented planted acreage a farm level statistic, and not a state level statistic. If corn acreages shift to soybeans, bean acres will increase nationally as the result of prevented planting for corn, but he thinks acres that were never planted into anything will have a small impact.

The Kansas State economist says the FSA definition for failed acres will impact ACRE payments and in many cases may be the difference between a large ACRE payment and none in some states. However, failed acreage does not include prevented planting. He says late planting will cut corn yields and that would increase ACRE payments, which will also be determined by the average price for the Marketing Year.

On a related issue, Iowa State University ag economist Bruce Babcock writes in a recent newsletter that ACRE payments will be based on historical prices but crop insurance is based on market conditions at sign up time. He says today’s ACRE safety net uses a moving average of prices over the past two years, but not the current year. He estimates ACRE prices at $4.20 for corn, $9.88 for soybeans, and $6.67 for wheat; and if prices fall 10% below those levels ACRE payments will begin, provided state yields are close to their five year average.

What is that chance? Iowa State’s Babcock says there is a 50% chance that corn payments will exceed $7 per acre, a 50% chance that soybean payments will exceed $9 per acre, and a 50% chance that wheat payments will exceed $12 per acre. Since direct payments, which are reduced 20% upon ACRE sign-up, are much lower than those amounts, Babcock says, “The chance is much better than 50-50 that average ACRE payments will exceed the average loss in direct payments. This suggests that many corn, soybean, and wheat farmers will find it advantageous to enroll in ACRE.”

Babcock says ACRE’s backward look for prices and its 10% limit on year to year change, there is a chance that 2010 ACRE guarantees will be much greater than what producers can get for their crop when sold into the marketplace. If that is the case, the ACRE program will be dictating cropping patterns in 2010 and not the marketplace.

Could that have been avoided? Babcock says it could have, if the writers of the ACRE program would have used futures prices, rather than historic prices.

Summary:
The ACRE program will offer the opportunity for payments higher than what would be lost from the direct payment program, under expected scenarios. The ACRE program, which holds its sign-up from June 1 through August 14, will be impacted by the delays in corn planting this year. That will reduce the yield, which would benefit those who would sign up. Additionally, the potential for acres that are failed, will make ACRE payments more likely, due to the lower yield. Acres that are prevented planting, will count against the farm yield, but only have a small impact.