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Iowa Ag Review

Abstract

U.S. farmers have until June 1 to decide if they want to enroll in ACRE (Average Crop Revenue Election) for the 2009 crop year. ACRE participants must give up eligibility for countercyclical payments and 20 percent of their direct payments. Participants are still eligible for marketing loans, but loan rates are reduced by 30 percent. Perhaps the most important factor that will infl uence ACRE participation is whether farmers believe that they will receive more payments from ACRE than they will give up. This is a diffi cult question to answer because the loss in direct payments is the only future payment that is known with certainty. Loan defi ciency payments (LDPs) depend on the level of market prices and yields. Countercyclical payments (CCPs) depend on the level of National Agricultural Statistics Service (NASS) season-average prices relative to target prices. ACRE payments depend on both NASS prices and state yields. None of these factors can be known at the time of sign-up. However, a careful examination of how prices and yields affect ACRE payments relative to traditional program payments reveals that unless prices move signifi cantly higher in the next few months, nearly all corn, soybean, and wheat farmers will fi nd that signing up for ACRE will improve their fi nancial position.

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