DAVENPORT, Wash. – Farmers need to decide by June 3 whether or not to participate in the federal ACRE (Average Crop Revenue Election) farm subsidy program for 2013. Below are some information and suggestions from Washington State University Extension for farmers to consider before deciding.
A fact sheet from the U.S. Farm Service Agency (FSA) that explains the program and includes a worksheet for evaluating an individual farm’s situation can be found at http://www.fsa.usda.gov/dcp; select the fact sheet called 2013 Average Crop Revenue Election (ACRE) Program Fact Sheet.
For an Excel spreadsheet template to evaluate ACRE, contact the WSU Extension office in Davenport at 509-725-4171 or plattom@wsu.edu (email requests should have ACRE Template in the subject line). There is a $5 charge for the template. Please include complete contact information so you can be sent an update after FSA’s monthly price projections are made in mid-May.
The template saves a lot of pencil pushing in evaluation of projected price and yield and whether or not ACRE is likely to make a payment for the 2013 crop.
Supplemental insurance
ACRE is designed to give added protection to farmers against statewide revenue loss for program crops; that is, when statewide revenue drops below a guarantee determined by the previous years’ crop yields and prices.
In order for a farm to qualify for a revenue loss payment, it must also suffer a revenue loss on the same crop. But the amount of loss payment is based solely on the statewide loss, not on the actual loss on a particular farm.
ACRE will not cover losses on an individual farm if statewide revenue losses do not occur. Consequently, it is not meant to replace traditional crop insurance. Rather, it is meant to supplement it. Federal crop insurance should be the first line of protection.
In evaluating ACRE, farmers need to address questions similar to the ones they address regarding other insurance:
- “What kind of loss does this insurance cover?”
- “What is the likelihood that these losses will occur?”
- “Do I need added protection from these losses?”
- “Is the protection worth the cost?”
Predicting 2013 crop revenues
At this time, there is no long-term decline in farm revenue that makes the ACRE program look necessary or promising. Could this outlook change between now and the June 3 deadline? Yes, if spring precipitation drops well below normal and grain prices continue their downward trend.
A WSU Extension model of dryland farms in Whitman, Lincoln and Adams counties showed it would take an 18 percent reduction in 2013 wheat revenue (farm and state) for a farm to recoup its ACRE premium and for ACRE to begin to cover additional losses if revenue slid further.
A model of an irrigated Grant County farm showed a 26 percent reduction would be needed in 2013 corn revenue for the farm to recoup its ACRE premium and for ACRE to begin to cover additional revenue losses. Over the last five years, the greatest annual, countywide corn yield loss was only 10 percent below the five year average of 207 bushels in Grant County. Consequently, it appears that, for irrigated corn, price is a more likely a driver than yield in triggering ACRE payments.
Readers are cautioned that the percentage of revenue loss required to recoup ACRE premiums and protect from further revenue loss differs somewhat from farm to farm, because the premium is based on a farm’s mix of farm program base acres, which also varies from farm to farm. Therefore, the losses cited above should be considered ballpark figures only.
The bottom line is: If you are concerned about 2013 crop revenues dropping 15-20 percent below 2012, evaluate the ACRE program carefully. If not, forget about it.