USDA's ACRE program is about price protection, not how much money you can make -- that's what one county Farm Service Agency executive director said she is telling producers.
For a story on DTN today, "FSA Offices Prep for Late ACRE Interest," DTN Staff Reporter Susanne Stahl spoke with Marcia Bunger, county executive director for the Lake County, South Dakota FSA office.
Here are some excerpts from Stahl's interview:
"The price is what's making it [ACRE] work. Even though they have normal or above normal yields because the guaranteed price is quite a bit higher than the projected wheat price, they're coming in and signing up.
"What I try to do is run the calculator based on what USDA is forecasting for '09 prices on corn and beans. Right now they're forecasting corn at $3.75 and yesterday the guaranteed price was projected at $4.05 and that's about the breakeven in order to get an ACRE payment. I run the numbers that way. I have the producer tell me what he thinks his '09 yields are going to be. He has to give an idea of what his five-year average is on the farm. On the state calculation side I've been using the average yields for the actual projected yields and then I run the calculator and typically it shows that the state trigger for soybeans isn't being met, but for corn it is.
"Then I show them the side-by-side comparison between a DCP farm only and an ACRE farm only and at that amount, those levels, the DCP farm pays more.
"Then I say let's stick in $3.00 for corn and $8.50 for beans. When I run that scenario, then the triggers are met both at a farm and state level with normal or above-normal expected yields and it's paying considerably more for ACRE.
"This is not about how much money you can make, it's about price protection or revenue protection. If corn goes to $5, will you care that you gave up 20 percent of your direct payment -- and they said no, because that doesn't amount to a whole lot.
"But I said if corn drops to $3.00, can you bear that drop in revenue? Maybe, maybe not.
"This is what this program is doing. It's protecting the bottom on the price.
"There's still confusion that this is a disaster program. That's muddied it. SURE and ACRE are being interchanged in their minds. {SURE is Supplemental Revenue, which is the new disaster program, details of which have yet to be announced.]
"There are still producers who use our loan program and they don't want to take the 30-percent reduction in the loan rate in the fall when they go to seal their grain. Those producers are not quite as interested in signing up in ACRE.
"But the other thing we talk about is you don't have to be in ACRE on all your farms. If you want to seal your grain at the county loan rate, the bushels that come off of your non ACRE farms are still sealed at the normal loan rate.
"The significantly larger farmers may not be interested because under the old farm bill there was a payment limitation on LDPs; with the enactment of the '08 bill, they removed that so those producers who have lots of bushels have an unlimited amount of dollars they can earn if LDPs start to work and the ACRE program caps that at $65,000. So when you go to calculate an LDP on an ACRE farm you have to take off 30 percent from the loan rate because that's how we calculate the LDP. So Lake County's loan rate is $1.87; if you're in ACRE, we take off 30 percent, that drops it down to $1.30. So if the posted country price for any particular day is at a $1.50, that ACRE farm will not earn an LDP payment versus the neighbor down the road who didn't go into ACRE -- they're going to get a 37-cent LDP.
"You try to cover all of those things -- you become the devil's advocate when you take the signup because you want them to be fully educated as to what they're entering into or not entering into when they make a decision about ACRE."
See Stahl's article in DTN Ag News.
