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ACRE decisions ‘enormously complicated’

Mississippi producers face “a nasty, complicated choice” in analyzing whether to participate in the new Average Crop Revenue Election (ACRE) program or stick with the countercyclical program, says Keith Coble, professor of agricultural economics at Mississippi State University.

And, he cautions, “There are going to be a lot of people trying to help farmers make decisions, and several decision tools available. But producers should beware of bad decision tools — some of the ones we’ve reviewed make poor assumptions.”

Compared to the decisions farmers had to make under the previous farm bill, this will be “an enormously complicated choice to analyze,” he said at the 34th annual meeting of the Mississippi Agricultural Economics Association.

“They’re going to have to make decisions over multiple years, for multiple crops, based on what prices and yields are expected to be for the life of this farm bill. Producers are being asked to think about some things they’ve never had to deal with before.

“It’s going to be tougher for Mid-South producers than for those in the Midwest,” Coble says. “A lot of Midwest people probably are going to take the ACRE program and not think twice about it.”

But in Mississippi, the choice may come down to the crop mix on a particular farm.

“A serious caveat,” Coble says: “If you’re shifting acreage away from cotton and planting a lot more corn and soybeans, I can certainly find a case under this set of scenarios for shifting to the ACRE program. If you have a lot of cotton or rice, ACRE likely will be less attractive.”

One of the tendencies people have in this kind of analysis, he says, is to “backcast” — to look back in time and ask, “What would this program have paid in the last five years or 10 years?”

In times like these, when the world and agriculture are so different than in the past, “that can be a dangerous method,” Coble says.

Mississippi State University economists have created a model, which continues to be refined, “in which we’ve tried to develop reasonable relationships between random prices and yields at farm, county, state, and national levels, then simulate them over the coming five years. It’s basically a set of representative farms in a lot of counties.

“I don’t believe there will be a better model in the country,” Coble says. Producers interested in the model may contact Agricultural Economics Professor John Anderson for information ([email protected]).

e-mail: [email protected]

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