Will the drought trigger ACRE payments?

By Chris Bruynis, PhD, Assistant Professor & Extension Educator, OSU Extension.

Those farmers that signed up for the Average Crop Revenue Election created in the previous Farm Bill, are wondering if there might be a payment in 2012. The program was set up with both state and farm level revenue triggers that were based on the five year Olympic average and the previous two year average price for each commodity.  Since the state trigger needs to be met before the farm trigger, an examination on the revenue levels and the possibility of falling below these will be discussed first.

The Ohio five year Olympic average yield for corn and soybeans are 157 bushels and 48 bushels respectively. The two year average market price currently is projected at $5.69 for corn and $11.85 for soybeans.  Both crops probably will increase slightly in price, but because of the 10% cap rules in the legislation the state revenue trigger will be capped for both crops well below the calculated revenue levels.  Under the current price projections, the corn revenue level calculates as $893 per acre and the soybean revenue level at $569 per acre.  The 10% cap from the 2011 revenue levels has the revenue guarantee at $627 for corn and $493 for soybeans.

ACRE payments will be triggered at the state level if the 2012 crop yields times the 2012 average crop price (September 1, 2012 – August 31, 2013) falls below the revenue guarantee level.  If December corn ($7.90) and November soybean ($16.80) futures price from July 20, 2012 holds true for the 2012 crop, what corresponding yield would trigger the state revenue guarantee?  The average Ohio corn yield would need to be below 80 bushels and the soybean yield below 30 bushels for this to happen.  Are these possible? In 1988 we had 85 bushel corn and 27 bushel soybeans and in 2002 88 bushels and 30 bushels respectively.

If and when the state trigger is met, then farmers will need to do the same calculations for their farm.  There are some farms that will easily meet their farm trigger and the actual ACRE payment is calculated on the farm level in terms of revenue loss.  However, if we fail to fall below the state revenue trigger, there will be no acre payments made, even if the farm revenue level is below its trigger.  At this time, farmers probably should not count on ACRE payments to cover losses from this year’s short crop. Even if there are payments, farmers would not receive them until after August 31, 2013 at the earliest.

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