Michele MarraProfessor

Department of Agricultural and Resource Economics

NCSU

June, 2009

The basic commodity programs remain, including direct and countercyclical payments, and loan programs.

Two new safety net features have been added: The ACRE program – an optional program The SURE program – a permanent, dedicated

disaster assistance program, also optional More funding for “working lands”

conservation programs. More funding for nutrition programs.

First Option: Business as usual. Farmers can choose to retain the full amount of the direct, and counter cyclical payments and loan programs.

Second Option: Average Crop Revenue Election(ACRE) program.

One-time choice for the life of the Farm Bill – can sign up before any crop year, but once signed in, you’re in for the life of the Bill.

To enroll, a grower must accept a 20% reduction in direct payments, a 30% reduction in the loan rate (totally irrelevant this year for most crops) and receive no CCP.

Revenue payments from a program tied to the national price and state-level production outcomes.

If you sign up for ACRE, you must sign up for all your acres and for all crops for the life of this Farm Bill.

Signup ends August 14th for this crop year.

The decision is complicated, but decision aids are available. See the following websites:

http://www.card.iastate.edu/ag_risk_tools/acre/http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landing Two triggers:

If Actual State Revenue is below State ACRE Guarantee and

If your actual farm revenue is below your Farm Acre Benchmark

Then, you will get a payment

STATE ACRE Guarantee = 90%* 5- year Olympic State Avg. Yield * 2-year Natl. Average Marketing Year PriceRestricted to < 10% change/ year

Actual State Revenue =Actual State Planted Acre Yield * MAX [ Natl. Average Marketing Year Price OR 70% of the loan rate].

Farm ACRE Benchmark = Farm’s 5-yr. Olympic Avg. Yield *2-year Natl. Average Marketing Year Price + Crop Insurance Premium per acre

Actual Farm Revenue = Actual Farm’s Planted Acre Yield * MAX [Natl. Average Marketing Year Price OR 70% of the loan rate]

>

AND

>

THENFarm Payment = 0.833 (.85 in 2012) * Actual Planted or Considered Planted Acres * [Farm’s 5-year Olympic Average Yield/State’s 5-year Olympic Average Yield] * MIN[State ACRE Guarantee – Actual State Revenue) OR State Acre Guarantee * 25%]Note: All Yields are Planted Acre Yields

IF

Commodity

Unit 2007/08 2008/09E

Preliminary Guarantee Price

Estimate for 2009 ACRE 2/ 2009/10F

All Wheat Bushel $6.48 $6.85 $6.67 $5.40Peanuts Pound $0.205 $0.236 $0.221 $0.213Corn Bushel $4.20 $4.20 $4.20 $4.30Grain Sorghum Bushel $4.08 $3.30 $3.69 $3.65Soybeans Bushel $10.10 $10.00 $10.05 $10.00All Sunflower Seed Pound $0.2170 $0.2265 $0.2218 $0.1760Upland Cotton Pound $0.593 $0.490 $0.542 $0.540Mustard Seed Pound $0.2800 $0.2775 $0.2788 $0.2425

E = Estimate; F = Forecast

1/ Source: World Agricultural Supply and Demand Estimates and Internal USDA Estimates as of June 10, 2009. Price forecasts are the mid-point of the price forecast range, when applicable.2/ Simple Average of 2007/08 and 2008/09E.

PRELIMINARY AVERAGE CROP REVENUE ELECTION (ACRE) GUARANTEE

June 2009 Update

COMPARED WITH2009/10 PRICE FORECASTS 1/

Source: USDA, FSA

Latest update: 06/11/09 06/11/09 06/11/09 06/11/09 06/11/09 06/11/09Unit bushels pounds bushels bushels pounds bushelsType

UNIT WHEATUPLAND COTTON

CORNGRAIN

SORGHUMPEANUTS SOYBEANS

STATEPreliminary Guarantee

Price EstimateITEM

per unit $6.67 $0.542 $4.20 $3.69 $0.221 $10.05

North Carolina ALL Benchmark Yield unit per acre 55.1 819 112.0 52.0 3,210 30.5New York ALL Program Guarantee per acre $335.57 NA $480.06 $122.88 $610.62 $375.37

North Carolina ALL Program Guarantee per acre $330.77 $399.51 $423.36 $172.69 $638.47 $275.87

Source: USDA, FSA

State-Level Guarantees – Estimated as of 6/11/09

The total number of payment acres cannot exceed base acres on the farm.

Provisions for assigning yields, etc. by using yields from a “similar state.”

BUT… ACRE is NOT a substitute for crop insurance! It only pays up to 25% of the revenue guarantee,

while crop insurance pays up to 85-90% of the yield guarantee and 100% of the price guarantee and is based on only your farm’s performance.

It has been shown (by me and others) that state yields are much less variable than individual farm yields, so state trigger should activate less often.

Studies have shown that a payout occurs about 30% of the time (national average).

However, studies have shown that ACRE is more likely to benefit producers if: A state has higher yield variability

(Southeast, Mid-Atlantic) Crops with prices well above the loan rate

(soybeans, corn, wheat) States where yield does not impact

national price (NC) Crops with higher increases in yields in the

recent past (corn)

Where to go for updates:

http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landing

I will email this slide set to all county directors and ask them to forward to their ag agents. If you don’t get a copy in one week, and want one, ask your county director or email me:

michele_marra@ncsu.edu

CAP AND TRADE Renewable fuels and carbon intensity

Feds will apply “weights” to each fuel source Looks like ethanol and biodiesel will be

“punished” by adding a penalty for “land use changes”

Comment period Carbon sequestration with reduced tillage

A possibility, but not a dead cert No market yet. Need certification process.

World incomes and the demand for food.

Biotechnology and market access.

Others?