Scan agricultural Web sites and it’s quickly apparent the new farm bill’s ACRE (Average Crop Revenue Election) program has not received a multitude of positive reviews.
At a recent LSU AgCenter-sponsored AgOutlook Conference in Baton Rouge, Stephanie Mercier, chief economist for the Senate Agriculture Committee, explained how the new farm bill’s ACRE and disaster programs came to be.
ACRE was “a concept developed by the National Corn Growers Association and American Farmland Trust,” said Mercier. “It was included originally in Chairman (Tom Harkin’s) mark in the Senate Agriculture Committee, where it was modified. Further modifications were made in conference committee.”
ACRE’s adoption is sort of an “anomaly” in the political process, said Mercier. It was only supported by a handful of groups and senators. Under those circumstances, “such programs don’t normally get into a farm bill.
“However, ACRE had two things going for it. First, according to the Congressional Budget Office, it generated savings — something we needed very badly. Second, it is an option for farmers. They can choose to go with ACRE or stay with the current program.”
With ACRE as an option, beginning this crop year, “farmers will have the choice to enroll all program crops and peanuts on a given farm. They’ll have that same choice through 2012 — but once they’re in the program, they’re in for the length of the farm bill.”
This is not a choice without cost. “There is, essentially, an entry fee for going into ACRE. If you go in, you’ll give up 20 percent of the direct payment you’re currently entitled to and will also lose 30 percent of your loan rate.”
However, it will be “pretty attractive” to producers of some crops. Mercier pointed to a comparison of the current target price for a specific crop alongside the estimate of its ACRE price guarantee. She pointed out these are preliminary numbers — the final numbers won’t be available until all the data for the 2008 crop year is in.
• Corn: 2009 target price of $2.63 per bushel. ACRE price, $3.64.
• Wheat: $3.92 per bushel/$5.97.
• Soybeans: $5.80/$8.71.
“There are a lot of people who believe this will be a very attractive option for producers of corn, wheat and soybeans.”
• Rice: $10.50 per hundredweight/$13.19.
“There is a significant difference in the rice prices. The downside is rice farmers would have to give up a quarter of their direct payment, about $25 per acre. That’ll discourage some rice producers.”
• Cotton: $0.7125 per pound/$0.494.
“ACRE won’t be attractive at all to cotton farmers. There is a significant disadvantage” for the crop.
As for features of the ACRE program, “you’re eligible to receive payment based on the state level revenue for your crop. That is 90 percent of the state average price, the last two-year national average and a five-year moving average of state average yields.”
The payment will be made on 83.3 percent of planted acres, which is a change of the current program based on a long-term base. The maximum payment will be 25 percent of the overall guarantee.
“Another important feature is it can’t move up or down more than 10 percent in a given year. So, for example, if the price for corn ends up at $3.64 for 2009, it can’t be more than, roughly, $4 and no less than around $3.20 for 2010.”
Another main feature of the new farm bill is a standing agriculture disaster program.
“There was a lot of frustration in Congress over how difficult it was to get ad hoc assistance the last several years. In particular that was true because the Bush administration insisted on offsets instead of treating it as emergency spending.”
Support for inclusion of this package in the farm bill was focused on by a few states that have experienced many disasters and fought for disaster payments over the last few years. Mercier said these were the top participants of ad hoc assistance (in terms of ad hoc share) between 2001 and 2004: Texas, 10.99; North Dakota, 8.33; Florida, 8.33; South Dakota, 7; and Kansas, 6.78. It is worth noting that barring Florida, no Southeast or Mid-South state was in the top 10.
What does the new disaster package do?
“It intends to cover a shortfall in crop revenue on farms rather than pay out on a crop-by-crop basis as was done previously. It does require that a farmer purchase at least catastrophic crop insurance. If that isn’t available, then NAP (Non-insured crop disaster Assistance Program) is required for all crops of economic significance on the farm.”
The program is available to farmers in disaster-designated counties (including contiguous counties) or to farmers with greater than a 50 percent loss on the farm.
“It calculates the gap between a guarantee based on crop insurance coverage — plussed up by 15 percent — and actual farm revenue. It’s currently available for 2008 through 2011. However, I’ll tell you, as long as Max Baucus is chairman of the Senate Finance Committee, this program will probably get more money.”
Other components of the program:
• Livestock Indemnity Program pays 75 percent of value of animals lost due to natural disaster.
• Livestock Forage Disaster Program provides payments based on severity of drought conditions.
• Tree Assistance Program.
• Emergency assistance for livestock, honeybees, and farm-raised fish. “This is sort of catchall fund, $50 million annually, that doesn’t fit under other categories.”