ACREs of alternatives?
University of Illinois ag economist Gary Schnitkey suggests a variety of ways in which ag lawmakers could cultivate ACRE (the average crop revenue election program) to respond more effectively and easily to risk management needs.

With only July and August average prices left to plug into federal program calculations, Schnitkey deemed it “highly likely” Illinois corn producers would see a state ACRE payment for 2009.

ACRE payments are based on the combination of a national price trigger, a state yield trigger, and a per-acre farm yield that falls below the state trigger. Thus, a state ACRE payment “doesn’t necessarily mean a farm will get a payment,” Schnitkey nonetheless stressed.

He argued multiple triggers add to program complexity and can mean the difference between “a sizable payment and no payment.”

According to the economist, ACRE alternatives for the next farm bill could include eliminating farm-level triggers, which would raise payment prospects and “eliminate a lot of the complexity of the program”; switching from a state yield trigger to county or crop reporting district guarantees “more closely aligned to what happens on the farm”; or moving from a season-average price trigger to a fall harvest price trigger similar to that in crop revenue insurance policies.

The latter would help growers better coordinate insurance and marketing strategies and expedite ACRE payments (currently distributed roughly a year after harvest).

But each option poses both pros and cons. U of I analysis suggests a corn grower who receives a $14.34-per-acre payment under the existing program could see a $15.08 payment were the farm-level trigger eliminated or a $17.36 payment with use of county rather than a state trigger.

Because Illinois has a greater correlation between harvest prices and yields than many other states, that producer might see only an $11.78-per-acre corn payment, even if he receives it far earlier. While use of county yields could increase individual benefits, potential for increased payouts would raise ACRE’s federal price tag.

A possible answer to that concern would be to institute a lower county-triggered coverage level, still improving payment potential but dropping U of I-projected corn payments to $14.10. Growers may have to accept such a compromise to sell ACRE reform, Schnitkey advised.

“It’s likely going to have to be budget-neutral, given where we’re at with the U.S. government,” he told FarmWeek.

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