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Will ACRE Signup in 2010 Pay Off?

A concern with ACRE is the "if" questions.

Producers who have not enrolled in the Average Crop Revenue Election (ACRE) previously have until June 1 to sign up for 2010 through 2012. The North Dakota State University Extension Service ACRE Analyzer software, with updated price and yield data, is available at http://www.ag.ndsu.edu/farmmanagement/farm-bill to assist North Dakota and Minnesota producers with the ACRE decision.

“To find out if it will pay to sign up for the program, we first need to look at recent history,” says Andy Swenson, NDSU Extension Service farm management specialist. “Most producers have not perceived that ACRE will be beneficial, as indicated by the enrollment of only about 15 percent of Farm Service Agency farm units in 2009 for North Dakota. Most of that enrollment was concentrated in the southeastern corn growing area of the state. For 2009, this was a good decision because an ACRE payment of $17 per acre for corn is projected.”

Signup was very low in the west half of North Dakota. This also was a good decision. There will be no ACRE payments associated with the 2009 wheat crop in North Dakota. However, Minnesota will have a payment of about $33 per acre payment for wheat. Yields in North Dakota were too good to trigger an ACRE payment at the state level, and many individual farm yields would have been too high to be eligible, even if there had been a state payment.

“ACRE for 2010 in North Dakota looks good for several crops if we have average yields and projected prices remain,” says Dwight Aakre, NDSU Extension Service farm management specialist. “If wheat averages 36 bushels per acre statewide and the 2010 national marketing year price for all wheat is $4.60 per bushel, there would be an ACRE payment of about $20 per acre. However, producers with durum acres should not enroll because the opportunity cost of reduced benefits under the marketing assistance loan program looks to be extreme. County loan rates increase by about $1.50 per bushel for 2010 and range between $6.02 and $6.33 per bushel. These very high loan rates would be reduced by 30 percent under ACRE.”

In 2010, an ACRE payment in North Dakota of about $30 per acre would occur for barley, field peas and sunflowers if state average yields are 56 bushels per acre, 31 bushels per acre and 1,400 pounds per acre, respectively, and if in 2010 the national average marketing year prices are $2.60 per bushel, $5.10 per bushel and $0.147 per pound, respectively.

Flax and lentils would receive $40 per acre payments if state average yields are 18 bushels per acre and 1,120 pounds per acre and if national prices are $7.70 per bushel and $0.23 per pound, respectively.

Corn is not expected to generate an ACRE payment in 2010 and canola and soybeans are on the bubble.

“A concern with ACRE is the ‘if’ questions,” Swenson says. “Any combination of a crop’s state average yield and national average price which equates to revenue less than the state’s ACRE revenue guarantee will trigger a payment at the state level. We only can guess what these yields and prices will be. A bad combination for ACRE is high yields and low prices. They will tend to offset each other in regard to determining state revenue and the associated ACRE payment. However, two of the three costs of enrolling in ACRE are based on prices. If prices drop low enough, an ACRE enrollee may give up marketing assistance loan benefits and/or counter-cyclical payments greater than ACRE benefits.”

The ACRE state revenue guarantee will drop for most crops in 2010.

“Even so, many crops project a potential ACRE payment if the yields are average and projected prices are accurate,” Aakre says. “ACRE state revenue guarantees are projected to drop further in 2011 and 2012, which will make it less likely there will be ACRE payments.”


NDSU Agriculture Communication

Source:Andy Swenson, (701) 231-7379, andrew.swenson@ndsu.edu
Source:Dwight Aakre, (701) 231-7378, dwight.aakre@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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