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Wheat Scoop: New revenue program option available for 2009Kansas Beginning in 2009, farmers will have an opportunity to enroll in a new revenue program called the Average Crop Revenue Election program or ACRE. Farmers who choose to enroll in ACRE forego the counter-cyclical program that has been in place for several years. Troy Dumler, Kansas State University Extension Agricultural Economist, says ACRE--a provision of the 2008 farm bill--gives farmers a risk management tool option that combines price and yield triggers. Except for direct payments, previous programs always were tied exclusively to price. "That is one of the reasons that we saw the interest in this revenue counter-cyclical program. Another reason is some groups really didn't think they were going to get payments under the current price programs, because market prices were so much higher than the levels when the programs would trigger payments. You add those two things together and we have a new revenue counter-cyclical program," Dumler said. Farmers enrolling in ACRE will forfeit 20 percent of their direct payments, and coverage occurs on just 83.3 percent of their planted acreage. Plus, marketing loan rates will be reduced by 30 percent. Finally, if producers qualify for ACRE payments, these will not be paid until as much as a year after harvest. This could have major cash-flow implications for many farmers. ACRE payments are triggered by a combination of two factors. One, the state must incur a loss. Two, an individual farm must also have a loss. Dumler warned that with ACRE, there may be a situation where a producer has a loss on his or her farm, but the state does not. In that scenario, the farmer would not receive a payment. The 28-year ACRE average payment, as determined by K-State earlier in 2008, would have been $3.07 per acre. Loss in direct payments due to ACRE in that same time would have been $3 per acre. ACRE--in which farmers must enroll at the local Farm Service Agency office for the duration of the 2008 farm bill--is a risk management option, much like crop insurance. "You don't take crop insurance out every year thinking you are going to take a loss every year, but you buy it in the event it would happen. So to a certain extent, ACRE is like additional crop insurance. The premium you pay is the 20 percent reduction in direct payment. But what the program potentially offers is additional support in a really bad year when revenue falls due to either a drop in production or drop in price." ACRE is not a replacement for crop insurance, Dumler warned. "If producers are going to individually rely on ACRE in place of crop insurance, they are going to be disappointed because there are state- and farm-level triggers necessary to get a payment." An example of ACRE's variability, had the program been in place, would have occurred in 2007, when much of central Kansas was hit by an Easter Freeze that decimated the wheat crop. Since the western third of the state had above average yields and market prices increased, the state revenue guarantee--one of the triggers for ACRE payment--was exceeded and thus, producers affected by the freeze would have received no payment. Final rules for ACRE have not yet been written by FSA, although sign up deadline is June, 2009. "As soon as we get better indication of what these final rules will be, we will work to make sure there are decision-making tools out there so that producers can run through numbers on their own farm and determine how ACRE may work," Dumler said. For more information, log onto www.agmanager.info. 11/24/08 Date: 11/20/08 Advertisement
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