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Corn+Soybean Digest

Wheat Benefits From Extension Of ACRE Enrollment Period

Among the major U.S. field crop commodities, wheat is the crop most likely to benefit from the extension to enroll in the new Average Crop Revenue Election (ACRE) farm support program introduced in the 2008 Farm Bill.

USDA’s Farm Service Agency has extended the sign-up deadline from June 1 to Aug. 14 to give farmers more time to review details of ACRE and make a more informed decision of whether they want to try the new program or stay with traditional counter-cyclical farm payment programs. "Farmers are likely to benefit from the enrollment extension because they will know more about the crop on their own farm and nationally by August," says Carl Zulauf, Ohio State University agricultural economist, who helped write the ACRE program. "This holds true particularly for wheat farmers because the wheat crop is harvested much earlier than corn and soybeans."

The traditional suite of farm support programs – marketing loan, price counter-cyclical and direct payments – are designed to help farmers with what has been the traditional farm income problem since the Great Depression and that is chronic surplus capacity keeping prices chronically low over an extended period of time.

"The marketing loan and counter-cyclical programs presume that we will have farm prices low enough to trigger a payment," says Zulauf. In contrast, he says ACRE is a revenue (price times yield) program, not a price program. More importantly, ACRE does not presume what the market is going to be, it just follows the market. If prices or yields decline dramatically, ACRE provides support given the market conditions we are in at the time.

"It’s conceptually a fundamentally different program,” says Zulauf. “Both ACRE and traditional programs are risk-management programs, but they manage different kinds of risk. Traditional programs help manage the risk of chronic low prices. ACRE helps manage the risk of a decline in revenue over a short period of a few years. Producers need to understand that they can’t look at ACRE through the same eyes they looked at traditional programs."

Using data from the monthly USDA World Agriculture Supply and Demand Reports, Zulauf calculated that the amount of uncertainty resolved on average for the upcoming national revenue per acre for each crop between the May and August reports was 5% for corn, 12% for soybeans and 51% for wheat.

"Hence, my earlier conclusion that wheat is the most likely crop to benefit from the extension of the ACRE sign-up deadline," says Zulauf. "While on average it appears that corn and soybeans gain relatively little from the extension in the ACRE sign-up deadline, market events can happen between now and August to substantively impact the ACRE decision for corn and soybean producers and landlords.

“We could see a major increase in crop revenue, possibly due to higher prices resulting from a drought, that would clearly reduce the incentive to participate in ACRE. On the other hand, we could see a big decrease in revenue between now and August that would clearly increase the incentive to participate in ACRE."

Farmers may not know now what they intend to do, but Zulauf recommends they prepare the paperwork now in the event enrolling in ACRE becomes their choice. "The incentive now is for farmers to wait and see what the weather and markets bring. But there is practical advice that applies now,” he says. “If you think you are interested in ACRE on one or more of your FSA farms, it is probably a good idea to make an appointment with FSA and get the paperwork ready so all you have to do is sign the election and enrollment forms when you are ready to sign up for ACRE. That way you are prepared should a last-minute rush to enroll in ACRE occur."

More information on the ACRE program.

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