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AgriLife Extension economist: Take 'wait-and-see' approach on farm billTexas With uncertainty in the commodity price outlook and "sticky" production costs, a Texas AgriLife Extension Service economist advises producers to wait for more information on the farm bill before taking action. The newly enacted federal farm bill, known as the Food, Conservation and Energy Act of 2008, requires farmers to choose between the old program and the new Average Crop Revenue Election or ACRE as it is being called, said Dr. Joe Outlaw, co-director of The Agricultural and Food Policy Center at Texas A&M University. Outlaw spoke at the eighth annual Texas Commodity Symposium held during the Amarillo Farm and Ranch Show, recently. "Relatively high and sticky-on-the-way-down production costs with declining commodity prices are a tough combination," Outlaw said. "In my opinion, Texas farmers do not have much of a choice for the 2009 crop." He said final or even nearly final details aren't available on the farm bill, but a choice has to be made soon because producers need to purchase seed and secure operating loans. "For this year, pick what we had in the past and wait and see," Outlaw advised. The commodity provisions are very close to previous programs with continuation of direct payments and marketing loan gains and maintaining counter-cyclical payments, he said. The Average Crop Revenue Election payment requires the producer to agree to a 20 percent reduction in direct payments and 30 percent reduction in loan rates, Outlaw said. "You don't have to make a choice this first year," he said. Under the new revenue election provision, beginning with the 2009 crop year, producers would have a one-time irrevocable option to choose, Outlaw said. "Once the choice is made, they are stuck with it," he said. "If you get in now, you are stuck for the remainder of this farm bill. But you can sign up any year, so just wait for now. "This program may not be for everybody," Outlaw said. "When the rules come out, AgriLife Extension will have a decision aid that will help them make the choice. Don't jump the gun. Wait until you can analyze it." He said producers should "stay on their toes" and at some point in 2009, there is likely to be a profitable price using strategies from a few years ago, minimizing their relative costs with limited price protection from the loan. 12/15/08 Date: 12/11/08 Advertisement
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