Crop producers have until June 3 to decide whether they will participate in the Average Crop Revenue Election plan or continue with the regular Direct and Counter-Cyclical Payment Program, according to the USDA Farm Service Agency.
"We understand that producers have gotten busy, but they can't forget to visit their county office and sign up for DCP or ACRE," said FSA Administrator Juan Garcia. "Just as farmers and ranchers plan their spring plantings, producers should plan to schedule an appointment to visit their USDA Service Center at the earliest possible time. It's best to complete the paperwork now rather than to stand in line the day before the deadline."
The sign-up for both DCP and ACRE programs began Feb. 19, 2013. The deadline to sign up for ACRE is June 3, 2013. The DCP sign up period ends Aug. 2, 2013.
The 2013 DCP and ACRE program provisions are unchanged from 2012, except that all eligible participants in 2013 may choose to enroll in either DCP or ACRE for the 2013 crop year. This means that eligible producers who were enrolled in ACRE in 2012 may elect to enroll in DCP in 2013 or may re-enroll in ACRE in 2013, and vice versa.
Purdue Extension agricultural economist Chris Hurt explained that under DCP, the two types of payments – direct and counter-cyclical – are each calculated using base acres and payment yields established on individual farms. But DCP only protects against low prices, and added farm payments under DCP would not start unless the U.S. average farm price for the 2013 corn crop dropped below $2.35 per bushel and soybeans below $5.56 per bushel.
Producers who choose ACRE could receive revenue-based payments instead of the price-based counter-cyclical payments under DCP. Revenue-based means that either low prices or low yields could trigger payments. ACRE participants are still eligible for 80% of their normal direct payments.
"ACRE can provide large payments if yields or prices should be very low," Purdue Extension agricultural economist Chris Hurt said. "Thus, it can provide considerable protection under low-revenue situations."
With near-normal soybean yields, ACRE payments could begin if the U.S. average farm price drops below about $11.75 per bushel. If farm prices dropped to $10 per bushel, ACRE payments would be about $50 per acre.
"Right now, I would put the odds of triggering soybean ACRE payments for the 2013 crop due to low prices at maybe 20-30 percent," Hurt said. "For corn, the odds of triggering an ACRE payment might only be 10-15 percent."
It takes two triggers for ACRE payments to happen. First, the state actual crop revenue for corn or soybeans has to be lower than the state revenue guarantee, which currently is $712 per acre for Indiana corn and $546 per acre for soybeans. Second, an individual farm has to have lower revenue than the ACRE revenue guarantee for that farm.
When growers enroll in ACRE, they are enrolling all of the crops on that farm, including corn, soybeans and wheat, but payments are made to individual crops. For example, there could be an ACRE payment on soybeans, but not wheat.
According to Hurt, the biggest cost associated with enrolling in ACRE is the 20 percent reduction in direct payments.
"Purdue estimates this is about $2 to $3 per acre for soybeans and about $4 to $6 per acre for corn on average-quality land," he said. "The potential benefit is protection against low revenues that could come from low yields, low prices or a combination of the two."
What makes the decision challenging is that producers can't possibly know by the enrollment deadline whether ACRE or DCP will have the highest returns. That won't be determined until crop yields and prices are known after harvest.
"This spring, the best producers can do is look at the cost to be in ACRE, examine the odds that prices or yields will be low enough to trigger ACRE payments and decide if they are willing to forego some of their direct payments for the added revenue protection that ACRE provides," Hurt said. "The odds of triggering ACRE payments for 2013 appear to be low, but if they do trigger, payments could be high - especially if prices collapse."