2013 ACRE revenue shortfall triggers corn payment

Contributed by Steven D. JohnsonFarm Management Specialist, Iowa State University Extension, sdjohns@iastate.edu, 515-957-5790

Johnson_Steve_smThe Average Crop Revenue Election (ACRE), a counter-cyclical program created in the 2008 farm bill has had limited participation by Iowa producers. In addition to the Direct & Counter-Cyclical Payment (DCP) programs, a producer could also enroll by FSA farm number in this new ACRE program. There was a cost of participation, as a producer was required to give up 20% of their Direct Payment (DP) annually.

The ACRE program used a combination of state average yields, farm level yields and the national marketing year average (MYA) national cash price to determine levels of revenue guarantees and payments for each covered commodity on a farm enrolled. There were two revenue triggers that had to be met annually before any ACRE payments were generated, one at the state level and one at the farm level.

The price component of both of the state and farm level triggers is the average of the two most recent USDA marketing year prices. The marketing year runs from September through August each year and uses a weighted average to determine the national cash price. The marketing year average (MYA) national cash prices for the 2011 and 2012 crops were $6.22 and $6.89 per bushel, respectively. The 2013 MYA national cash price of $4.46 per bushel was released on September 29, 2014.

2013 ACRE payment is approximately $45 per base acre for corn

To trigger a payment under ACRE the “actual” revenue for both the state and the farm must be less than their corresponding guarantees. The actual revenues are the current marketing year cash price multiplied by the state average yield and the actual farm level yield, respectively. If both triggers are reached, the payment to the farm will be the difference between the state revenue guarantee and the state actual revenue.

The payment level cannot exceed 25% of the state guarantee, however. It will also be adjusted up or down by the ratio of the farm Olympic average yield to the state Olympic average yield. For example, if the farm average yield is 10% above the state average yield, the ACRE payment will be increased by 10% for that farm. Because of this 10% limit, the state revenue guarantee for 2013 was $781. The actual state revenue was approximately $736 per acre or 165 bushel per acre state corn yield times $4.46 per bushel national cash price in 2013. This leaves a shortfall in revenue of approximately $45 per base acre of corn.

The 2013 ACRE payment was made on 85% of the farm’s base acres. However, the total planted acres that receive a payment cannot exceed the total base acres for all crops established for the counter-cyclical payments. Producers who signed up for the 2013 ACRE program did receive 80% of the direct payments that have been paid in 2013, regardless of actual prices or yields each year.

Check with your local Farm Service Agency (FSA) Office

For those 6,000 Iowa farms enrolled in the 2013 ACRE program, they were required to submit 2013 actual farm’s yields to their local FSA office by mid-July. Those same farms will still need to meet both the farm and state triggers. That payment to the farm will be the difference between the state revenue guarantee and the state actual revenue, which appears likely for corn for the 2013 crop. Since the MYA national cash price was not known until September 29, 2014, the ACRE payment is not made until October 2014. Payments to those farms enrolled and appropriate yield information is expected to be made by FSA after October 10, 2014.

Using the ACRE Payment Estimator

Iowa State University Extension created an Average Crop Revenue Election (ACRE) Payment Estimator, an online tool, in 2008 to assist producers as they determined if they should enroll in the ACRE program. The calculator has since been updated. You can use this same calculator now to estimate the potential 2013 ACRE payment for your farm, which appears likely for corn base acres. You can find an Information File and Decision Tool titled Average Crop Revenue (ACRE) on the Ag Decision Maker website.

For information related to the 2014 Farm Bill, visit the Ag Decision Maker Farm Bill webpage.

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