ACRE vs. DCP
Dr. Jody Campiche
Oklahoma State University
May 16, 2013
ACRE vs. DCP
 American Taxpayer Relief Act extended the ACRE program for
the 2013 crop year
 Deadline for ACRE enrollment: June 3, 2013
 Deadline for DCP enrollment: August 2, 2013
 Can enroll in ACRE or DCP (regardless of what you were
previously enrolled in)
 Must re-enroll in either ACRE or DCP (even if you were in
ACRE last year)
2008 Commodity Programs - Reminder
 Direct Payments
 Paid on historical base acreage – not tied to current prices or production
 Average $15/acre payment for wheat
 CCP
 Paid on historical base acreage and current prices
 Target price program
 No CCP payments on wheat
 ACRE
 Based on a state and farm level trigger
 Payment based on state benchmark yield (not individual or county)
ACRE Details
• Alternative to the DCP program
• Designed to protect against short-term revenue loss (from a
decrease in yield, price, or combination of both)
• Paid on planted acres (up to # of base acres)
• Enroll by FSA farm #
• Do not have to enroll all farms in ACRE
• State level revenue guarantee
• Based on the five-year state Olympic average yield and the
two-year national average price
DCP vs. ACRE
DCP
ACRE
Direct Payments
20% reduction in Direct
Payments
ACRE Payments
Counter-Cyclical Payments
Marketing Assistance Loan
30% reduction in Marketing
Assistance Loan Rates
What is the ACRE Program?
 Two triggers must be met for an ACRE
payment
 1) State Trigger
 Actual State Revenue < State ACRE Guarantee
 2) Farm Trigger
 Actual Farm Revenue < Farm ACRE Guarantee
State Trigger
State ACRE Guarantee
90%
times
Benchmark State Yield
times
ACRE Guarantee Price
Actual State Revenue
Actual State Yield
times
2013 MYA Price
(not final until June/July 2014)
Farm Trigger
Farm ACRE Guarantee
Benchmark Farm Yield
times
ACRE Guarantee Price
plus
Crop Insurance Premium (per acre)
Actual Farm Revenue
Actual Farm Yield
times
2013 MYA Price
(not final until mid to late 2014)
Benchmark Farm Yield
 Olympic average of 2008-2012 farm yields
 Drop the highest and lowest and average the remaining
three
 Example:
 2008
 2009
 2010
 2011
 2012
40
36
45 (highest)
20 (lowest)
39
 Farm Benchmark Yield = average (40,36,39) = 38.3
Benchmark Farm Yield
 Several options:
 Certify your own yield data
 If you certify yield data and it is higher than the
county average, your yield will be used to
calculate the benchmark farm yield
 Use 95% of the ACRE county plug yield
 Use a combination of both
Benchmark Farm Yield
 Can only prove yields back to the 1st “break in
continuity”
 What is a “break in continuity”
 Any year when yield evidence is not
available excluding years when the crop was
not produced on the farm
 For any years preceding the “break in
continuity”, 95% of the ACRE plug yield will
be used
Benchmark Farm Yield
 It is in the producer’s best interest to certify
yields and establish a high benchmark yield
 Higher benchmark yield
Higher farm revenue guarantee
More likely to meet the farm trigger
Higher ACRE payment if the farm
benchmark yield > state benchmark yield
Sequestration – Automatic Cuts
8.5% cut to 2013 direct payments
2013 ACRE vs. DCP
2009/10 Average U.S. Direct Payments
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Corn
Grain
Wheat
Sorghum
Upland
Cotton
Rice
Peanuts Soybeans
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
$ per Base Acre
2009/10 Average CCP Payments for Cotton
80
70
60
50
40
30
20
10
0
What do you lose in DP due to sequestration?
Average
payment
Wheat
Sorghum
Soybeans
I Corn
NI Corn
I Cotton
NI Cotton
Peanuts
$15.00
$17.00
$10.00
$32.67
$16.33
$50.00
$23.34
$40.60
8.5%
sequestration
Loss
$1.27
$1.45
$0.85
$2.78
$1.39
$4.25
$1.98
$3.45
DP
$13.72
$15.55
$9.15
$29.89
$14.94
$45.75
$21.36
$37.15
What do you lose in DP if you enroll in ACRE?
Average 20% Loss (ACRE Remaining
payment payment needed to
DP
break even)
Wheat
$13.72
$2.72
$11.00
Sorghum
$15.55
$3.11
$12.44
Soybeans
$9.15
$1.83
$7.32
I Corn
$29.89
$5.98
$23.91
NI Corn
$14.94
$2.99
$11.96
I Cotton
$45.75
$9.15
$36.60
NI Cotton $21.36
$4.27
$17.09
Peanuts
$37.15
$7.43
$29.72
2013 Maximum ACRE payments
Crop
Max base ACRE Payment (may be
higher/lower if bench farm yield is
higher/lower than state)
Wheat
$37
Oats
$20
Sorghum
$42
Irrigated Cotton
$177
Non Irrigated Cotton
$72
Irrigated Corn
$162
Non Irrigated Corn
$74
Peanuts
$159
Soybeans
$47
Canola
$37
ACRE for Wheat
OK State
Wheat Yield
2009
21.9
ACRE
Payment (per
acre)
$46.84
Benchmark Revenue
Guarantee
2010
31.0
$0.00
$168.62
2011
18.3
$19.27
$151.76
2012
36.0*
Probably $0.00
$156.64
2013
30 or 25.4
?
$172.30
$187.36
2013 Wheat Estimates
Total
production
Yield per acre
NASS
114,000,000
30
OK Wheat Tour
85,000,000
24.5
ACRE vs. DCP for Wheat
ACRE Payment - $7.80 MYA Price
$/acre
45
40
35
30
25
20
15
10
$2.72 5
0
ACRE Payment
Breakeven Point (21.8 bu/acre)
17
18 19 20 21
State Wheat Yield
22
ACRE vs. DCP for Wheat
ACRE Payment - $8.20 MYA Price
35
30
$/acre
25
20
15
ACRE Payment
10
$2.72
5
Breakeven Point (20.7 bu/acre)
0
17
18
19
20
21
State Wheat Yield
22
ACRE vs. DCP for Wheat
ACRE Payment
22 bu/acre State Wheat Yield
$/acre
20
18
16
14
12
10
8
6
4
$2.72 2
0
2013/14 MYA Price
$7.80
$7.60
$7.40
$7.20
$7.00
ACRE Payment
Breakeven Point ($7.72)
2013 Wheat
2013/14 MYA Price
State Yield Needed to Trigger
ACRE and make at least $2.72
$8.20
20.70 or lower
$7.80
21.75 or lower
$7.50
22.60 or lower
$7.10
23.90 or lower
ACRE vs. DCP for Irrigated Cotton
OK State Yield
ACRE Payment
(per acre)
Benchmark Revenue
Guarantee
2009
1232
$0.00
$472.27
2010
1097
$0.00
$517.55
2011
85
$142.33
$569.31
2012
?
?
$626.24
2013
?
?
$699.60 (not final)
ACRE: Irrigated Cotton
MYA Price $0.701
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$9.15 $0
$/acre
Max ACRE payment $171/acre
ACRE payment
Breakeven Point (968 lbs/acre)
610
700
750
775
State Yield
800
ACRE: Irrigated Cotton
MYA Price $0.85
200
175
$/acre
150
125
100
ACRE payment
75
Breakeven Point (800 lbs/acre)
50
$9.15
25
0
610
700
750
775
State Yield
800
ACRE vs. DCP for Non-Irrigated Cotton
OK State Yield
ACRE Payment
(per acre)
Benchmark Revenue
Guarantee
2009
367
$0.00
$221.42
2010
503
$0.00
$209.91
2011
21
$57.33
$230.90
2012
?
?
$253.99
2013
?
?
$278.30 (not final)
ACRE vs. DCP for Non-Irrigated Cotton
MYA Price $0.701
$/acre
$80
$70
$60
$50
$40
$30
$20
$10
$4.17 $0
ACRE payment
Breakeven Point (390 lbs/acre)
300
350
375
State Yield
395
ACRE vs. DCP for Non-Irrigated Cotton
MYA Price $0.85
$80
$70
$/acre
$60
$50
$40
ACRE payment
$30
$20
$4.17
Breakeven Point (325 lbs/acre)
$10
$0
250
275
300
State Yield
325
Enrolling in ACRE: Things to Consider
• Are you willing to give up 20% of your direct
payments to potentially get an ACRE payment for the
2013 crop year
• Get the 2013 DP in October 2013
• Get the 2013 ACRE payment in Oct/Nov 2014
• Wheat producers will have a better idea of the state
wheat yield after May 10
Enrolling in ACRE: Things to Consider
• When you put a farm in ACRE, every crop on the
farm is enrolled in ACRE
Even if wheat may receive a 2013 ACRE
payment, need to consider loss in DP for all
crops on the farm
Enrolling in ACRE: Things to Consider
• For each FSA farm #, how many acres are you
planting compared to your base?
• ACRE is only paid on planted acres
• May not want to enroll a farm in ACRE if
you are planting much less than your base
ACRE Decision Tool
• http://agecon.okstate.edu/agpolicy/decisionTool_comm.asp
ACRE Decision Tool
Benchmark Yield
ACRE Decision Tool
ACRE Decision Tool
2013 House vs. Senate Farm Bill
House vs. Senate Commodity, Crop Insurance, and
Livestock Programs
Component
Senate
House
Direct Payments
No
No
CCP Payments
No
No
ACRE
No
No
SURE
No
No
County Revenue Protection
Yes
Yes
Farm Revenue Protection
Yes
No
Price Protection
Yes
Yes
STAX
Yes
Yes
SCO
Yes
Yes
Marketing Loans
Yes
Yes
Livestock Disaster Programs
Yes
Yes
2013 Senate vs. House Farm Bill
 No CCP payments, ACRE payments, or DP payments after
2013 (with the exception of cotton in the House bill)
 House phases out direct payments for cotton in 2014 and
2015
 New revenue and price protection commodity programs
 Livestock Disaster Assistance – would cover 2012 and 2013
losses
 Senate bill combines Livestock Disaster Program and NAP
2013 Senate vs. House Farm Bill
 New county based average yield insurance to supplement
individual policy (SCO & STAX)
2013 Senate vs. House Farm Bill
 Supplemental Coverage Option (SCO)
 Government subsidy – 65% (reduced from 70% in 2012
drafts)
 Stacked Income Protection Plan (STAX) for cotton
 Government subsidy -80%
 Coverage of revenue loss between 10%-30%
 House removed reference price that was included in 2012
draft
2013 Senate Farm Bill
Agriculture, Reform, Food and Jobs Act of 2013
 Similar to 2012 draft – but added back in counter-cyclical
payment program
 Choose between 2 commodity programs:
(1) Agriculture Risk Coverage - ARC (revenue
coverage)
-individual (65% of planted acres)
-county coverage (85% of planted acres)
(2) Adverse Market Payments (price coverage)
2013 Senate Farm Bill
Agriculture, Reform, Food and Jobs Act of 2013
 Adverse Market Payments
 Actual price = higher of national
average marketing year price or
loan rate
 Reference Price = target prices in
2008 farm bill (except rice and
peanuts)
 Payment rate = reference price –
actual price
 Payment amount = payment rate *
payment acres * payment yield
Crop
Reference Price
Wheat
$4.17
Corn
$2.63
Sorghum
$2.63
Barley
$2.63
Oats
$1.79
Soybeans
$6.00
Peanuts
$523.77
Rice
$13.30
2013 Senate Farm Bill
Agriculture, Reform, Food and Jobs Act of 2013
 Agriculture Risk Coverage (ARC)
 Actual crop revenue < ARC guarantee
 Actual crop revenue = average yield (individual or
county) * higher of (MYA price or reference price)
 Guarantee = 88% of benchmark revenue
 Benchmark revenue = Olympic average yield *
Olympic average MYA price
2013 Senate Farm Bill
Agriculture, Reform, Food and Jobs Act of 2013
 Agriculture Risk Coverage (ARC)
 Payment rate = lesser of:
 10% of benchmark revenue
 ARC guarantee – actual crop revenue
2013 Senate Farm Bill
Agriculture, Reform, Food and Jobs Act of 2013
 SCO
 If enrolled in ARC – deductible 22%
 Not enrolled in ARC – deductible 10%
2013 House Farm Bill Draft
 Similar to 2012 farm bill draft – but dropped the reference
price in STAX
 Choose between two commodity programs
 (1) Revenue Loss Coverage – RLC (revenue coverage)
 Not eligible for SCO
 (2) Price Loss Coverage – PLC (revenue coverage)
 Eligible for SCO
2013 House Farm Bill Draft
 Price Loss Coverage (PLC)
 Payment when the effective price <
reference price
 Effective price = higher of
midseason price or loan rate
 Payment rate = reference price –
effective price
 Payment amount = payment rate &
payment yield * payment acres
Crop
Reference Price
Wheat
$5.50
Corn
$3.70
Sorghum
$3.95
Barley
$4.95
Oats
$2.40
Soybeans
$8.40
Peanuts
$535
Comparison of House vs. Senate Reference Prices
Crop
Senate
House
Wheat
$4.17
$5.50
Corn
$2.63
$3.70
Sorghum
$2.63
$3.95
Barley
$2.63
$4.95
Oats
$1.79
$2.40
Soybeans
$6.00
$8.40
Peanuts
$523.77
$535.00
Rice
$13.30
$14.00
2013 House Farm Bill Draft
 Revenue Loss Coverage (RLC)
 Payment when the actual county revenue < county revenue
loss coverage trigger
 Actual county revenue = actual county yield * higher of
midseason price or loan rate
 County revenue loss coverage trigger = 85% of
benchmark county revenue
 Benchmark county revenue = Olympic average
county yield * Olympic average MYA price (use
reference price if MYA < reference price)
2013 House Farm Bill Draft
 Payment rate = lesser of:
•
•
10% of benchmark county revenue
County revenue loss coverage trigger – actual county
revenue
 Payment amount = payment rate * payment acres
Questions from Webinar
 Q) What % of planted acres are ACRE payments paid on?
 A) ACRE payments are paid on 85% of planted + considered
planted (up to the # of base acres).
 Prevented planted acres are counted as considered planted.
 Q) Are prevented planted acres included in the failed acre
calculation?
 A) No, prevented planted acres are not included in the failed
acre calculation.
 Q) Is the June 3 ACRE deadline for all crops?
 A) Yes.
Questions from Webinar
 Q) Are payment limitations for each program per
individual/farm?
 A) No, payment limits are basically by individual (or ID #).
Beginning in 2009, the 2008 Farm Bill established a system of “direct
attribution” to match program payments with a natural person i.e., the
total amount of payments must be attributed (linked) to an individual
by taking into account the individual’s direct and indirect ownership
interest in a legal entity while retaining the payment limits that
applied to the entities themselves.
Therefore, every payment made directly to a person is combined with
that person’s pro rata interest in payments received by a legal entity in
which the person has an ownership interest, and every payment made
to a legal entity is attributed to those persons with an ownership
interest in the entity.
Jody Campiche
528 Ag Hall
405-744-9811
jody.campiche@okstate.edu
http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters