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Corn+Soybean Digest

U of I Economists Calculate Potential ACRE Benefit

There is a higher chance of Average Crop Revenue Election Program (ACRE) payments in 2009 as current projections of market prices are below benchmark prices used to calculate ACRE state guarantees for corn, soybeans and wheat according to University of Illinois (U of I) Economists Gary Schnitkey and Nick Paulson.

“The state corn yield for 2009 in Illinois is currently projected to be between 165 and 170 bu./acre and the projection for the average price is $3.75/bu. At these price and yield levels the average ACRE payment on corn acres in Illinois would be $16/acre for 2009.”

“Average ACRE payments on corn acres in Illinois could easily be greater than $60/acre at the low end of the projected price range or if state-average corn yields fall below current projections,” says Schnitkey.

He says, given the current yield and price projections, the probability of receiving an ACRE payment on Illinois corn acres in 2009 is roughly 60% while the expected payment level is greater than $30/acre.

For soybeans, the 2009 state soybean yield for Illinois is currently projected to be approximately 45 bu./acre and the projection for the average price is $9.30/bu.

“At these price and yield levels the ACRE payment for soybeans in Illinois would be around $13/acre. The average ACRE payment for soybeans could potentially exceed $45/acre if prices or yields fall below these expected levels, and could approach $90/acre at the low end of the price and yield ranges,” Schnitkey says.

Given the current yield and price projections for soybeans, the probability of receiving an ACRE payment on Illinois soybean acres is just under 60% with an expected payment level of about $17/acre.

“The Illinois wheat yield for 2009 is currently projected to be around 56 bu./acre while the midpoint of the most current WASDE price range is $5.30/bu. Average ACRE program payments would be $51/acre at these price and yield levels. ACRE payments on wheat acres in 2009 could approach the $75/acre payment limit if yields are below current expectations or wheat prices fall in the lower portion of the projected range,” he says.

Given current yield and price projections the probability of receiving an ACRE program payment on wheat acres in Illinois in 2009 is greater than 75% with an expected payment of just over $40/acre.

The 2008 Farm Bill gives producers the option of choosing commodity program support under traditional programs or the new ACRE program. At this point, Schnitkey recommends choosing the ACRE option.

“The ACRE option will require producers to give up about $5/acre in direct payments to be eligible for ACRE program payments. Moreover, given current price levels, the price-based programs in the traditional option are not expected to trigger payments between 2009 and 2012,” Schnitkey says.

“Based on historical experience for corn, soybean and wheat acres in Illinois, the ACRE program is expected to generate payments that exceed the direct payments given up to enroll in the program over time.”

He says, the chance of ACRE payments being triggered for corn, soybeans, and wheat in 2009 is projected to be higher than average. This is due to the ACRE program price guarantees being above expected price levels for 2009 for corn soybeans and wheat.

“And expected yield levels projected to be below ACRE program benchmark yields due to wet planting conditions and less than optimal growing conditions in Illinois in 2009,” he said.

Visit Farmdoc for the full report, including graphics.

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