Average Crop Revenue Election
ACRE Program
Ron Haugen/Dwight Aakre
Farm Management Specialists
February 2010
Producers may elect to enroll in the ACRE program in
place of the counter-cyclical payment program
• Optional - sign-up deadline - Aug 14
• By farm unit
• May enroll in 2009, 2010, 2011, or 2012
• Cost to participate in ACRE – 20% of all direct
payments
• Not eligible for counter-cyclical payments
• Loan rates reduced by 30%
• ACRE payments are by individual crop
2
ACRE vs Counter-Cyclical
Payment Program
• ACRE is revenue based (yield X price)
• ACRE payments are paid on planted acres
• Counter-cyclical payments are determined by
price only
• C-C payments are paid on base acres
3
Direct Payment Rates
Commodity
Wheat
Corn
Sorghum
Barley
Oats
Soybeans
Minor Oilseeds
$/Unit
Bu.
Bu.
Bu.
Bu.
Bu.
Bu.
Cwt.
2008-2012
$0.52
$0.28
$0.35
$0.24
$0.024
$0.44
$0.80
4
Target Prices for Counter-cyclical Payments
Commodity
$ per unit
2007
2008
2009
2010-2012
Wheat
Bu.
$3.92
$3.92
$3.92
$4.17
Corn
Bu.
$2.63
$2.63
$2.63
$2.63
Sorghum
Bu.
$2.57
$2.57
$2.57
$2.63
Barley
Bu.
$2.24
$2.24
$2.24
$2.63
Oats
Bu.
$1.44
$1.44
$1.44
$1.79
Soybeans
Bu.
$5.80
$5.80
$5.80
$6.00
Other Oilseeds
Cwt.
$10.10
$10.10
$10.10
$12.68
Dry Peas
Cwt.
n/a
n/a
$8.32
$8.32
Lentils
Cwt.
n/a
n/a
$12.81
$12.81
Small Chickpeas
Cwt.
n/a
n/a
$10.36
$10.36
Large Chickpeas
Cwt.
n/a
n/a
$12.81
$12.81
5
Counter-Cyclical (C-C) Payment
Program
No payment until national average price falls below the
effective target price (target minus DP)
Crop
Wheat
Corn
Barley
Oats
Soybeans
Minor Oilseeds
Effective Target Price
2009
2010-2012
3.40
3.65
2.35
2.00
1.416
2.35
2.39
1.766
5.36
9.30
5.56
11.88
No cost (no loss of DP or reduced loan rates)
6
Counter-Cyclical (C-C) Payment
Program - 2009
7
Average Crop Revenue Election (ACRE)
• ACRE is optional; producers must elect to
participate
• Available beginning with 2009 crop
• ACRE election stays with the farm even if the
operator changes
• Must submit 5 prior years and current year
production records
8
Average Crop Revenue Election (ACRE)
Program
In general, revenue considers yields and prices
• Yields based on planted acreage of a crop
• Price based on the National Average Market Price
• Historical Prices: Simple average of 2 previous years
• Actual prices received by the producers are not used.
Other information considered: National Loan
Rates and the Crop Insurance Premiums paid for
the farm.
9
ACRE Program Parameters
• The National Office will provide most of the information
needed for the ACRE Program at:
• www.fsa.usda.gov/dcp
• State ACRE Guarantees
• Benchmark State Yields
• ACRE Guarantee Prices
• Data to calculate the Preliminary Benchmark Farm Yields
• National Average Market Prices
• Actual State Yields
10
ACRE vs DCP
• Will ACRE payments offset loss of 20% of direct
payments? (this is the pertinent question)
• Will there be any counter-cyclical payments?
(not likely)
• Will ACRE payments offset counter-cyclical
payments? (almost certain)
11
ACRE consists of:
• 20 percent reduction in direct payments
• 30 percent reduction in marketing loan rates
• ACRE revenue protection payments
• Payments are made on acres planted and
considered planted – not base acres
• Maximum payment acres cannot exceed total
base acres
12
ACRE payment to a farm equals
state revenue guarantee minus state actual revenue
x
83.3% (85%-2012) of acres planted
x
farm benchmark yield ÷ by state benchmark yield
13
ACRE state revenue guarantee equals:
state yield (5-year Olympic average)
X
price guarantee (most recent 2 year average U.S. price)
X
90 percent
Guarantee can not change more than 10 percent per year.
14
ACRE Eligibility
• Farm’s actual revenue must be less than the
farm’s benchmark revenue
• Actual revenue is farm’s yield this year times U.S.
price
• Benchmark revenue is farm’s 5-year Olympic average
yield times ACRE guarantee price plus per acre crop
insurance premium
15
Average Crop Revenue Election (ACRE)
Program Beginning in 2009
Two Triggers must be met before Payments can be Issued
1. STATE TRIGGER
State ACRE Guarantee
+/- 10%
from
preceding
year
must exceed
Actual State Revenue
90%
100%
times
times
Benchmark State Yield
Actual State Planted Yield
(5-year Olympic average planted yield)
times higher of:
times
ACRE Program Guarantee Price
(2-year national average market price)
National Average Market Price or
70% of National Loan Rate
16
Average Crop Revenue Election (ACRE)
Program Beginning in 2009 (continued)
Two Triggers must be met before Payments can be Issued
2. FARM TRIGGER
Farm ACRE Benchmark Revenue
100%
must exceed
Actual Farm Revenue
100%
times
times
Farm’s Expected Yield
Actual Farm Yield
(5-year Olympic average planted yield)
times
ACRE Program Guarantee Price
(2-year national average market price)
times higher of:
National Average Market Price or
70% of National Loan Rate
plus
Per Acre Producer-Paid Crop
Insurance Premium
17
Average Crop Revenue Election (ACRE)
Program Beginning in 2009 (continued)
Calculation of a Farm’s Payment
FARM PAYMENT = 83.3% of a farm’s planted/considered planted acres for 2009-11; 85% in 2012
times
(farm’s expected yield divided by State benchmark yield)
times
State ACRE Guarantee
minus
Actual State Revenue
State ACRE Guarantee
times
25%
Lesser of:
18
ACRE Payment Limitations
• Direct payments
$40,000 minus an amount equal to 20 percent
reduction in direct payments
• ACRE revenue payments
$65,000 plus an amount equal to 20 percent
reduction in direct payments
19
DCP vs. ACRE Program
Payment Limitation
Program
DCP
ACRE
Payment
Payment
Limitation
Adjusted Gross Income
Not eligible if the average…
Direct
$40,000
nonfarm AGI exceeds
$500,000 or the average
farm AGI exceeds $750,000
Countercyclical
$65,000
nonfarm AGI exceeds
$500,000
Direct
$40,000 minus
the 20%
reduction
nonfarm AGI exceeds
$500,000 or the average
farm AGI exceeds $750,000
ACRE
$65,000 plus the
20% reduction
nonfarm AGI exceeds
$500,000
20
Average Crop Revenue Election (ACRE)
Program
•
ACRE payments are issued if there are revenue
reductions for the State and the farm, as determined by
the State and Farm “triggers.”
•
Both triggers must be met to issue payments:


State Trigger: 90% of State’s Historical Revenue must
exceed Current year state revenue
Farm Trigger: Farm’s Historical Revenue must exceed
Current year farm Revenue
21
Wheat Example
STATE ACRE GUARANTEE
5-YR OLYMPIC AVERAGE YIELD
90% FACTOR
FARM BENCHMARK REVENUE
49.9
0.9
ACRE GUARANTEE PRICE
$6.63
STATE ACRE GUARANTEE
$297.75
ACTUAL STATE REVENUE
ACTUAL STATE PLANTED YIELD
NATIONAL AVERAGE MARKET PRICE
ACTUAL STATE REVENUE
STATE GUARANTEE LESS ACTUAL
CALCULATION OF FARM'S PAYMENT
FARM 5-YR OLYMPIC AVERAGE YIELD
ACRE GUARANTEE PRICE
PRODUCER CROP INSURANCE PREMIUM
FARM ACRE BENCHMARK REVENUE
52
$6.63
$12.00
$356.76
ACTUAL FARM REVENUE
52
$5.40
$280.80
$16.95
ACTUAL FARM YIELD
NATIONAL AVERAGE MARKET PRICE
45
$5.40
ACTUAL FARM REVENUE
$243.00
FARM BENCHMARK LESS ACTUAL
$113.76
(FARM YIELD/STATE YIELD X STATE PAY'T RATE X 83.3%)
$14.71
22
Wheat Example
STATE ACRE GUARANTEE
5-YR OLYMPIC AVERAGE YIELD
90% FACTOR
FARM BENCHMARK REVENUE
35.3
0.9
ACRE GUARANTEE PRICE
$6.64
STATE ACRE GUARANTEE
$210.95
ACTUAL STATE REVENUE
ACTUAL STATE PLANTED YIELD
NATIONAL AVERAGE MARKET PRICE
ACTUAL STATE REVENUE
STATE GUARANTEE LESS ACTUAL
FARM 5-YR OLYMPIC AVERAGE YIELD
ACRE GUARANTEE PRICE
PRODUCER CROP INSURANCE PREMIUM
FARM ACRE BENCHMARK REVENUE
38
$6.64
$12.00
$264.32
ACTUAL FARM REVENUE
35.3
$5.98
$211.09
-$0.16
ACTUAL FARM YIELD
NATIONAL AVERAGE MARKET PRICE
ACTUAL FARM REVENUE
FARM BENCHMARK LESS ACTUAL
CALCULATION OF FARM'S PAYMENT (FARM YIELD/STATE YIELD X STATE PAY'T RATE X 83.3%)
38
$5.98
$227.24
$37.08
$0.00
23
Reductions if Enrolled in ACRE
• ACRE will reduce your commodity loan rates for production off
that farm by 30%
• Loan rates for production from a farm enrolled in ACRE: Corn $1.365 / bu.
Soybeans - $3.416 / bu.
Wheat - $2.135 / bu.
Note: The PCP will not be adjusted, this means market gain and LDPs are
impacted by this decision.
24
Benchmark Farm Yield
• Benchmark Farm Yield is used for the farm trigger determination and
the payment calculation. The higher the Benchmark Farm Yield:
• the more likely the farm trigger will be met
• the higher the payment
• Each planted and considered planted covered commodity crop or
peanuts on the farm will have a preliminary Benchmark Farm Yield
equal to an “Olympic” average of 95% of each year’s ACRE County
Yield (ACY)
• “Olympic” average: Eliminate the high and low values, and average the
remaining values
25
Benchmark Farm Yield
• The farm level benchmark test will not
trigger an ACRE payment, it can only
prevent a payment
26
Benchmark Farm Yield
• Producers have two options when establishing the
Benchmark Farm Yield:
• accept the preliminary Benchmark Farm Yield which will fill
each year of the database with the 95% value
• certify farm yields for any or all of the database years (five
previous years) and have the Benchmark Farm Yield
calculated on this data
• Yields must reflect total production on the farm divided by the total
planted and prevented planted acreage
• Yields prior to a break in continuity will not be used.
27
Benchmark Farm Yield
• Benchmark Farm Yield – acceptable records if requested by
FSA to support the yields certified on form FSA-658 by the
production report date, include:
• Acceptable/verifiable production evidence for commodities sold, stored, or
disposed of commercially off the farm
•
•
•
•
•
•
Warehouse receipts
Warehouse ledgers
Load Summaries
Settlement Sheets
RMA Records – loss and APH data base actual yields.
Marketing Assistance Loan/LDP
28
Benchmark Farm Yield
• preliminary Benchmark Farm Yield is equal to an “Olympic”
average of 95% of each year’s ACRE County Yield (ACY)
Example
Ex: Corn
ACRE County Yield
95% of ACY
2004 2005 2006 2007 2008 BFY
130
80
124
76
-------
90
120
110
86
114
105
102
Calculation: (86 + 114 + 105) / 3 = 102
29
Benchmark Farm Yield
• Producers may certify yields for the five previous years to update the preliminary
Benchmark Farm Yield by the production report date
• Yields may only be used from the most recent break in continuity, excluding zero
planted years
• Missing or incomplete production years, zero planted years, or years prior to the
break in continuity will be “plugged” with the 95% yield for that year.
Ex: Corn
2004
2005
2006
2007
2008
124
76
86
114
105
Yield
90
100
140
0
Acres
125.0
600.0
160.0
200.0
95% of ACY
Producer Records
(FSA-658)
Benchmark Farm Yield
Did not certify a yield
124
90
100
140 ---0
----
100% Failed, Zero Yield
BFY
102 P
105
30
Benchmark Farm Yield
Producer yields may only be used from the most recent break in continuity,
excluding zero planted years
“Plug” yields (95% of that year’s ACRE County Yield) will be entered into the
data base for ineligible or missing years.
Example of a Break in Continuity and a Zero Planted Year:
Ex: Corn
2004
2005
2006
2007
2008
95% of ACY
160
100
112
148
137
Yield
195
?
0
182
169
Acres
60.0
100.0
0.0
80.0
40.0
Producer
Records
Benchmark Farm Yield
160
Did not certify a yield
Break in Continuity
100
----
112
182
----
169
BFY
132 P
147
Zero Planted
31
ACRE Payment Acreage Limitation
Crops have to be
prioritized if:


more than one covered
commodity crop or
peanuts crop is planted
or considered planted
Planted and
and
Planted
Considered
Considered
Planted Acres
Acres
Planted
x
Lesser
of:
x
83.3%
83.3%
(85% in
in
(85%
2012)
2012)
x
Benchmark Farm Yield
Benchmark State Yield
(Farm Productivity Index Factor)
State ACRE
Guarantee
minus
State ACRE
Guarantee
x
Actual State
Revenue
25%
the potential payment acres for all crops exceeds the total base acres (total
planted and considered planted acreage of the crops exceed 120% of the total
base acreage)
Producers must designate crop priority order for the farm by the end
of the contract period (September 30)


Designation is prior to trigger determinations
If the crop priority order is not designated, the payment acreage will be prorated
for each crop, including crops that do not “trigger.”
32
ACRE Payment Acreage Limitation
Example:
The sum of the potential
Payment Acreage for all
crops cannot exceed the
sum of the base acres on
the farm.
Crop
Triggers
Met?
Planted
and
Planted and
Considered
Considered
Planted Acres
Planted
Acres
x
Base
xx
Lesser
of:
Planted/
Prev.
Acres
Corn
Yes
600.0
800.0
Soybeans
No
50.0
100.0
650.0
900.0
Totals
Maximum Payment Acres
83.3%
83.3%
(85%
(85%inin
2012)
2012)
x
Benchmark Farm Yield
Benchmark State Yield
(Farm Productivity Index Factor)
State ACRE
Guarantee
minus
State ACRE
Guarantee
x
Potential Crop
Payment Acres
(acres x 83.3%)
666.4
83.3
Actual State
Revenue
25%
Without
regard to
trigger.
Exceeds total base
(650.0). Will be
reduced by priority.
33
ACRE Payment Acreage Limitation
Example
Example: Crop Priority



3 crops
2 eligible
Payment acres exceed
base acres
x
Planted
& Prev.
Acres
x
83.3%
83.3%
(85% in
in
(85%
2012)
2012)
Lesser
of:
Crop
Triggers
Met?
Corn
Yes
600.0
800.0
666.4
1
Soybeans
No
50.0
100.0
83.3
Wheat
Yes
50.0
100.0
83.3
2
3
700.0
1000.0
Totals
Base
Planted and
and
Planted
Considered
Considered
Planted Acres
Acres
Planted
Potential
Crop
Payment
Acres
Crop
Priority
Maximum Payment Acres
x
Benchmark Farm Yield
Benchmark State Yield
(Farm Productivity Index Factor)
State ACRE
Guarantee
minus
State ACRE
Guarantee
x
Payment
Acres
666.4
33.6
0
700.0
Actual State
Revenue
25%
Remaining
Acres
700 – 666.4 = 33.6
33.6 – 33.6 = 0
Won’t get paid
due to trigger!
34
ACRE Payment Acreage Limitation
Example
Planted and
and
Planted
Considered
Considered
Planted Acres
Acres
Planted
Same Example:
x
Acreage Proration
x
Crop
Triggers
Met?
Corn
Yes
Soybeans
Wheat
Totals
Base
Lesser
of:
83.3%
83.3%
(85% in
in
(85%
2012)
2012)
x
Benchmark Farm Yield
Benchmark State Yield
(Farm Productivity Index Factor)
State ACRE
Guarantee
minus
State ACRE
Guarantee
x
Crop
Factor
Planted
& Prev.
Acres
Potential
Crop
Payment
Acres
600.0
800.0
666.4
0.8000
x 700.0 = 560.0
No
100.0
100.0
83.3
0.1000
x 700.0 = 70.0
Yes
0
100.0
83.3
0.1000
x 700.0 = 70.0
700.0 1000.0
Payment Acres
(Crop factor x total
base)
Actual State
Revenue
25%
Won’t get
paid due
to trigger!
700.0
Crop Factor = Crop Acres (planted/prev. plt) divided by Total Crop Acres (planted/prev. plt)
35
Preliminary (P) and Final (F) ACRE
Guarantee Prices and 2009/10 Forecast
Price
2007/08
Price
2008/09
ACRE Price
for 2009
2009/10
Forecast
All Wheat
6.48
6.78
6.63 F
5.30
Feed Barley
4.35
3.82
4.09 F
3.80
Flax
13.00
12.99
13.00 P
9.42
Corn
4.20
4.05
4.125 P
3.75
Soybeans
10.10
10.00
10.05 P
9.30
All Sunflower
0.2170
0.2265
0.2218 P
0.1760
Commodity
World Agricultural Supply and Demand Estimates and Internal USDA Estimates as of
July 10, 2009.
36
ACRE Marketing Year
CROPS
Marketing Year
Wheat, Barley and Oats
June 1st - May 31st
Canola, Dry Peas, Flax,
Lentils, Chickpeas Small
and Large, Rapeseed
July 1st – June 30th
Corn, Soybean,
Sunflower, Mustard,
Rapeseed, Crambe,
Safflower
September 1st – August
31st
37
Possibility of ACRE Payments for
North Dakota Producers in 2009
• Wheat – likely, due to price
• Soybeans – possibly, will take both price and
yields to drop
• Corn – likely if below normal temps continue
• Sunflowers – likely, price projected down 15 to
20%
• Barley – possibly, price tied to corn, yield?
• Flax – likely because of price
As of conditions on July 10, 2009
38
Any Questions?
39