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EMPOWERMENT THROUGH EDUCATION

Assisting Producers with the Average Crop Revenue Election (ACRE) Decision. EMPOWERMENT THROUGH EDUCATION. Chris Bruynis, PhD Assistant Professor & Extension Educator Erie Basin EERA & Wyandot County. Program Objectives. Explain the difference between ACRE and DCP program elections.

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EMPOWERMENT THROUGH EDUCATION

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  1. Assisting Producers with the Average Crop Revenue Election (ACRE) Decision EMPOWERMENT THROUGH EDUCATION Chris Bruynis, PhD Assistant Professor & Extension Educator Erie Basin EERA & Wyandot County

  2. Program Objectives • Explain the difference between ACRE and DCP program elections. • Use a case study farm to demonstrate potential payments under different revenue scenarios. • Create discussion around the ACRE/DCP election to build understanding.

  3. Trying to Predict Which Program Suite Will Pay More is Impossible • Predicting payments from the marketing loan, counter cyclical, and ACRE state revenue requires that you can predict prices and yields for 2009, 2010, 2011, and 2012. • Better approach is trying to determine which program reduces risk exposure to the farm business (since most of us cannot predict price for this year, let alone future years) • To prove this….write down the 2009 average Ohio yield and the U.S. average market price for corn, beans and wheat.

  4. Beginning with Crops Harvested in 2009 • Farmers and landowner have the choice between DCP or ACRE Marketing Loan Marketing Loan Rate (LDP)at 70% Direct Payment Direct Payment at 80% Price Counter-Cyclical ACRE State Revenue Program

  5. Payment Caps DCP Suite ACRE Suite ACRE Payments $73,000 Cap Direct payment reduction added to ACRE payment limit Counter Cyclical Payments $65,000 cap Direct Payments $40,000 Cap 20% reduction in payment Direct Payments $32,000 Cap

  6. Market Loans/LDP’s DCP ACRE Market loan rates for 2009 in Wyandot County $1.94/bu Corn $5.12/bu Soybeans $1.96/bu Wheat (SRW) 70% of market loan rate from DCP $1.36 Corn $3.58 Soybeans $1.37 Wheat (SRW)

  7. Direct Payments DCP ACRE Direct Payment - $18.55/acre (83.3*payment rate*direct yield*base acres) 2009 Payment Rates $0.28/bu Corn $0.44/bu Soybeans $0.52/bu Wheat Direct Payment – $14.84/acre 80% of direct payment from DCP 2009 Payment Rates $0.22/bu Corn $0.35/bu Soybeans $0.42/bu Wheat

  8. Counter Cyclical and ACRE Counter Cyclical ACRE Payment received when the average U.S. average cash price for the marketing year falls below the following prices (target price minus the direct payment rate) $2.35/bu Corn $5.36/bu Soybeans $3.40/bu All Wheat Payment received when the 2009 average Ohio crop yield times the average U.S. cash price falls below the State ACRE Revenue Guarantee $558/acre Corn $416/acre Soybeans $393/acre All Wheat

  9. ACRE Revenue Payment Flow Chart IS FARM REVENUE LESS THAN FARM ACRE BENCHMARK REVENUE? Farm benchmark revenue is 100% of ((2 year moving average of U.S. price times 5 year Olympic average of farm yield) plus insurance premium paid by the farmer for the crop.) ($4.20*147)+$20 = $637 IS STATE REVENUE LESS THAN STATE ACRE REVENUE GUARANTEE? ACRE revenue guarantee is 90% of (2 year moving average of U.S. price times 5 year Olympic average of state yield .9($4.20*150) = $567 Both must be met! State Per Acre Revenue Payment for Crop 83.3% (becomes 85% in 2012) times the smaller of State ACRE Revenue Guarantee minus actual state revenue or 25% of State ACRE Revenue Guarantee .833(.25*567) = $118 Adjusted to farm payment rate Individual Farm Per Acre Payment for Crop State Per Acre Payment times (farm 5 year Olympic average divided by state 5 year Olympic average) 118(147/150) = $116

  10. Benefit of Electing ACRE:Revenue Coverage, adjusted for payment rate, is Higher for ACRE than Counter-Cyclical Program, Ohio, Jan.2009 Revenue coverage for counter-cyclical program equals [.833 times counter-cyclical yield times effective target price] For corn [.85 x 119.8 x $2.35 = $239] ACRE state revenue [.833 x .90 x 150.0 x $4.15 = $466] .833 will become .85 in 2012

  11. Calculating a Wyandot County Example • Assumptions • 100 acres with 100% base acres • 42 corn • 47 beans • 11 wheat • Cropping intentions for 2009 (three examples) • 1 – all corn • 2 – all beans • 3 – all wheat • Yield assumptions • 147 bu/acre corn • 44 bu/acre beans • 63 bu/acre wheat

  12. Calculating a Wyandot County Example • Assumptions • 100 acres with 100% base acres • 42 corn • 47 beans • 11 wheat • Cropping intentions for 2009 (three examples) • 1 – all corn • 2 – all beans • 3 – all wheat • Yield assumptions • 147 bu/acre corn • 44 bu/acre beans • 63 bu/acre wheat

  13. ACRE vs Traditional: Corn

  14. ACRE vs DCP: Income/Acre

  15. 2009 Price Sensitivity to Yield

  16. Summary • The objective of this educational program was to explain ACRE as simply as possible. There were 32 meetings reaching 1527 farmers, factsheet distributed at FSA offices, and articles written for farm magazines. • It was apparent that most farmers did not understand DCP and both programs needed to be explained. • Approximately 6% of the farms representing 10% of the farmland were enrolled in ACRE in 2009. 2010 ACRE elections are minimal and will not effect percentages significantly. • Chris’ prediction • The largest sign-up for ACRE will happen the year after it pays!

  17. For More Information Chris Bruynis, Ph.D. 109 S Sandusky Ave, Rm 16 Upper Sandusky, OH 43351 419-294-4931 bruynis.1@osu.edu

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