Illinois pork producer Steve Moest was one of the few ACRE enthusiasts I encountered when researching DTN's series on the farm safety net decision last week. Because of tumbling corn prices, the Winslow, Ill. farmer believes 2009 offers the best chance to collect an Average Crop Revenue Election payment on the 3,200 acres of continuous corn he produces. That's largely because the brutal economics of the livestock industry has taught him how abruptly commodity markets can sour--and ACRE's potential payments of $70 to $80 per acre might buffer some of the anxiety.

Some dairies are losing $100 per cow per month, Farm Credit Administration regulators report; bankruptcies by Pilgrim's Pride and VeraSun demonstrate how hard it's been for large companies to manage extreme market volatility. Moest thinks most grain producers don't know how low prices can go, now that many major producers in the ethanol and livestock industry are broke. They may not fully appreciate how much they need ACRE's $4.20 per bu. corn price target.

But how to explain ACRE's complicated mechanics to elderly landlords remains a stumbling block for Moest--as it is for dozens of other operators I've interviewed about ACRE. People in their 80s tend to glaze over when they hear farm program details, Moest says, and some want to defer decisions to their adult children, doubling the education effort. Other owners may be apprehensive about a four-year commitment that may affect their land's marketability. Moest is planning one-on-one meetings with most of his landlords next week, but he says it may not be worth bothering one landlady in her early 80s who leases 160 acres. "ACRE is hard enough for farmers to understand," he says.

To continue our Q+A on ACRE, I asked several ag economists for advice on how farmers should pitch the program to their landlords. Here are responses from Carl Zulauf of Ohio State University and Bruce Babcock of the Center for Agricultural and Rural Development at Iowa State University.

Zulauf, Ohio State: I agree that the landlord joint concurrence is something that has to be thought about carefully.

What I have told farmers is to put the discussion in terms that the landlord can understand and to think retrospectively about the way they learned about ACRE -- what worked for you is likely to work for your landlords.

Second, I would discuss ACRE and traditional programs in terms of risk management by using visual graphs. Graphs work better than numbers. In other words, help the landlord realize that he is making a choice no matter what decision he makes. So, just as for the farmer, it is best to make a choice that is informed in regard to the ACRE program and to the traditional programs.

Third, talk about the potential benefit to the landlords in terms of future rents. I would avoid discussion of specific numbers since I do not believe you can forecast these anyways, but you can talk about the impact of risk management on the ability to pay rents in the future.

However, even if the above are useful, a direct payment is a fixed payment that from all accounts is factored directly into land rent and prices. This will be difficult for many landlords to give up.

Taylor, DTN: Bruce, you have forecast a 78 percent chance of Iowa's corn receiving an ACRE payment in 2009 and a 55 percent chance for soybeans. That's not a guarantee, but odds you think a farm operator should consider. What about the landlord's concern that they might be doing something to alter their property values if they commit to a four-year ACRE contract?

Babcock, Iowa State: I don't buy the argument that this will hurt land values. In fact, land values could be impacted negatively if they don't sign up for ACRE.

In essence, ACRE is a put option on a state's farm revenue that has way more value than the 20 percent of direct payments farmers give up.

I'd also emphasize that this is the year to sign up if you're going to do it, because this could be the year of the highest guarantee. Just remember, no one knows what markets will do, so ACRE might not end up paying anything in exchange for the cut in direct payments. But the downside for signup is quite limited.

See Babcock's graphs and latest article on ACRE in the Summer Iowa Ag Review

http://www.card.iastate.edu/…

Taylor, DTN: Art Barnaby, Kansas State University economist, also issued advice on how to explain terms to landlords on his website yesterday, referring readers to a National Corn Growers Association ACRE bulletin. http://ncga.com/files/pdf/ACREforLandowners.pdf 

Barnaby, Kansas State: While this is a corn example, Oklahoma wheat producers who are expected the maximum ACRE payment may be able to use the paper to explain ACRE to their landlords.  Also with the decline in prices, many ACRE models are starting to show potential corn ACRE payments of $100 or more per acre.  NASS will release a new price on July 30 and their first yield estimate on August 12.  This will give corn, grain sorghum and soybean producers more information to make their final ACRE decision.  The August 12 NASS yield report could be a game changer in some states.

Taylor, DTN: Each of these economists has examined ACRE from a different part of the country and with slightly different lenses. In recent weeks, Barnaby has made a compelling case on why wheat growers in states with bumper yields like Kansas may want to wait another year before they consider ACRE. In Oklahoma, which has experienced a crop disaster, Barnaby is enrolling his own farm and expects a maximum ACRE payment. To register for his Aug. 4 webinar on ACRE, go to http://commerce.cashnet.com/KSUAGECON

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