Billed as the risk management program for the future of agriculture when it was being debated in Congress, you would think farmers are not yet ready for the future when it comes to the ACRE program. ACRE is an acronym for Average Crop Revenue Election, and many farmers apparently must think the program is just as complex as its name. No one has signed up for it. Well, almost no one, if you consider 1% have enrolled out of the hundreds of thousands of US farms that grow crops covered by USDA's programs. The slim enrollment would not be significant, were it not for the fact the deadline for sign-up is August 14, and the unbiased experts at Cornbelt universities are strongly urging farmers to enroll their farms.

In a two-part series (part two will be next Sunday, five days before the deadline) the facets of ACRE will be outlined so Central Illinois farmers and landowners have a better understanding of the new farm program for managing revenue risk in a volatile market. After sitting through three locally-presented meetings about ACRE, and listening to farmers ask questions and discuss it afterwards, there are several significant observations that could be made. 1) Farmers are perplexed with the complexity of the calculations; 2) Farmers are befuddled about the requirement for all operators and landowners involved in a farm to approve enrollment, and 3) Farmers are waiting to see how ACRE works in 2009 so they can enroll their farm in 2010.

Whoa! Say a dozen ag economists and farm management specialists at universities like Illinois, Iowa State, and Purdue, who say the stars are lining up for ACRE to provide a potential significant payment this year, but there are no guarantees next year. Some of the experts have characterized the ACRE enrollment decision as a "no-brainer." But sitting beside farmers the past several days, it is obvious they have a brain and it is working overtime on one of the biggest challenges they have faced. This is not like Round-up where the field is sprayed and everything but the soybeans dies. Enrolling in ACRE requires a sacrifice of a guaranteed direct payment that totals about $5 per acre for Central Illinois, but also is irrevocable and commits the farm to ACRE through the end of the current Farm Bill in 2012. Dr. Gary Schnitkey at the University of Illinois says that is a $5 insurance policy premium in case commodity prices go down.

Can prices go down? Compared to the $1.50 tumble that December corn futures and the $2.20 drop in November soybean futures have taken since June, prices can indeed fall from the lofty levels of $7 corn and $15 beans seen in early summer of 2008. However, ACRE does not use futures prices as its benchmark, but a combination of the Illinois state yields over the past five years, multiplied by the average of the national average cash price over the past two years. While the two year national average cash price will not be confirmed until September, it is shaping up to be within a penny or two of $4.13. Since the Illinois state yield over the past five years is 172, USDA calculates the state guarantee at $650 per acre. If state average revenue for the 2009 corn crop is less than that guarantee, then one of two requirements has been met for an ACRE program payment that may be in the vicinity of $60 to $70 based on current yields and prices.

The other requirement is for a farm's revenue to be sub-par compared to a five year average. Each farm has a guarantee that is calculated from a five year historical yield multiplied by the two year national average cash price, then added to whatever crop insurance premium was paid per acre. If that calculation exceeds the 2009 yield multiplied by the average market price, then the second requirement is met and the farm is eligible for an ACRE payment.

No, farmers did not devise the program, but it was done by Congress, trying to help farmers manage their financial risk within the limits of the federal budget as it was known in the spring of 2008. Part two will explore the decision-making for ACRE enrollment, but in the meantime find more information at: http://www.farmgate.uiuc.edu/archive/2009/07/acre_if_you_nee.html