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Agricultural News


A Look Back- ACRE Program Advantages Explained by OSU's Michael Dick

Fri, 02 Apr 2010 5:55:30 CDT




We asked several questions of Dr. Michael Dicks and the ag policy folks at Oklahoma State University regarding the value of ACRE to wheat farmers, as well as on a more macro basis- the value if we get substantial signup in Oklahoma to the rural economy of the state.

Dr. Dicks and Jody Campiche responded to us- and answered the first of our questions- about the value of acre to a farm that has wheat base acres.

Our questions were based on a hypothetical 1000 base acres of wheat.

Dr. Dicks offers the following observations:

The current DCP (three legged stool that will be missing two legs because prices will remain too high for LDPs and CCP to be paid) will pay $.52/bushel per acre up to $40,000 per person (ssn). On 30 bushel wheat this amounts to $12.95 per acre (paid on 83.3% of base acres) and the cap would be hit at 3088 acres. This is paid on base and not on what is produced.
Currently the ACRE would require you to give up 20% of the $.52/bushel DP or $3.12/acre for each year of the program (4 years) for a total of $12.48 per acre. Under the ACRE it would require 3861 acres to meet the DP cap.
The 30 bushel per acre farm would get a substantial ACRE payment this year. Assume the at the end of the marketing year the season average national price is $5.50 and the 2 year season average price is 6.64. Average state yield is 21 and Olympic average state yield is 31. ACRE would pay $45.023/ acre or $45,023 for the 1000 acres. At this payment rate the payment cap on ACRE of $65,000 would be reached at 1444 acres.
Sum of ACRE and DP would be $55,410 and $87,009 over the 4 years. The DCP would pay $52,244
Some points to note.
1. If you base yield is greater than the state average you will receive a larger ACRE payment.
2. If you qualify for SURE, the SURE payment will be reduce by 60 cents for every dollar of ACRE payment
3. I have assumed that farm trigger is met ( farm yield does not exceed 5 year Olympic average farm yield)
Because of the hard fall of both price and yield this year the probability of an ACRE payment next year and/or the size of that payment would be severely reduced.

Now, Dr. Dicks tells us that the MACRO question is still being looked at- but let's make some guesses- if you get an extra $42.42 per acre on your base wheat acres over the direct payment alone if you stay with the old farm program, how does that impact rural Oklahoma? Let's guess and say that three million acres of base wheat acres end up in the program- that's over $127 MILLION dollars that goes into the pockets of Oklahoma wheat producers to spend as they see fit. If that money circulates three times or so- we are approaching a half billion dollars worth of benefit from the ACRE program back into state of Oklahoma. That's HUGE!!!



Dr. Dicks' colleague, Jody Campiche, also dropped us an email, expanding a bit on our 1000 acre concept- to show that farmers MAY be leaving over $40 an acre on the table if they don't signup for ACRE.

Here's the example we are dealing with and the numbers that Jody offers up:

Here is the breakdown:

DCP
Direct payments: $12,995 over 3 years + 13,260 for 2012 (since it jumps to 85% of base) = $52,245

ACRE
Direct payments: $10,395 over 3 years + $10,608 for 2012 = $41,793
ACRE in 2009: $45,023
Total: $86,816
Difference over 4 years: $34,571 (EXTRA MONEY YOU PUT IN YOUR POCKET!!!!!)
Difference for 2009: $55,418 (10,395 + 45,023) - $12,995 = $42,423 (Translation- Uncle Sam is waiting to pay you $42.42 per base acre if you sign up for ACRE!)

So, the farmer loses $10,452 in direct payments over 4 years but gains at least a $45,023 ACRE payment (maybe more in 2010-2012).
Jody adds in response to a questiont hat we asked about any future ACRE payments being on top of these levels that we know for certain: "And yes you are correct about years 2010-2012. Any payment in those years would just be extra money."
Wheat farmers definitely need to look at this!

 

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