Ag Policy Blog

What Does the Farm Bill Extension Mean for ACRE Acres?

By Chris Clayton , DTN Ag Policy Editor

Officials with the USDA Farm Service Agency now are faced with deciding how to handle the Average Crop Revenue Election program for the 2013 crop.

Millions of dollars in direct payments this year could hinge on USDA's decision.

ACRE was supposed to end last Sept. 30 with the sunset of the 2008 farm bill. If you remember specifics of the program, once a producer opted in a piece of ground, that tract could not be removed from ACRE until the end of the farm bill.

With the nine-month extension now signed, questions have been raised over whether producers can sign up for ACRE or whether land already enrolled in the program must remain. For farmers, an option to leave ACRE could increase their direct payments for 2013.

A spokesman for the Farm Service Agency responded Thursday that details on how to handle ACRE have not been worked out yet. "The staff is working on it and will present some ideas to the Administrator and Undersecretary soon for their reaction," the spokesman stated in an email.

Under ACRE, a producer's direct payments were reduced 20% for land enrolled in the program and marketing -loan rates were reduced 30% as well.

As of last year, 36.1 million acres were enrolled in the Average Crop Revenue Election Program. Illinois had more than 5 million acres, while South Dakota, Nebraska, Iowa and North Dakota each registered between 3.4 to 4.4 million acres as the biggest states signing up for ACRE.

But ACRE has been a stingy program. Built for risk management to protect producers from a major revenue collapse, ACRE has not made payments over the past three years because of high commodity prices. It should be noted the traditional counter-cyclical programs have not kicked in, either.

The potential billions of dollars in payouts some analysts had projected if prices crashed never played out with ACRE. Instead, ACRE has been a small cost-saving measure by reducing direct payments 20% on those 36 million or so acres. With corn, soybeans and wheat making up the bulk of acres in the program, then it's safe to say ACRE has saved anywhere from $3 to $5 an acre for each acre in the program. That would seem to ballpark somewhere around $140-$150 million a year in savings over the past three years.

If the program has ended, it's a 20% increase in direct payments in 2013 for those tracts that have been enrolled in ACRE. If producers can opt out, many may also choose to move back to the old program in which they can collect higher direct payments and expand their usage of marketing loans. That 30% cut in marketing-loan rates was a major criticism of the program from some farmers.

Otherwise, USDA has to inform farmers they are required to stay in ACRE until a new farm program is completed. USDA also would then have to reestablish an enrollment period for the program for the 2013 crop as well.

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Comments

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Bonnie Dukowitz 1/4/2013 | 7:25 AM CST
Was it not the original intent of "Freedom To Farm", "Direct Payments" etc. to phase out government payments over a period of years and to replace the previous failed programs?