The Enid News and Eagle, Enid, OK

May 18, 2013

Time running short for DCP, ACRE decisions

By Rodney Jones, Extended Forecast
Enid News and Eagle

ENID, Okla. — By Rodney Jones

Signup is under way for the 2013 farm program. Producers have the option of signing up for either the Direct Countercyclical Program (DCP) or the Average Crop Revenue Election (ACRE) for the 2013 crop year, regardless of which option you were enrolled in for the previous four years.

The deadline to choose the ACRE option is June 3, and the deadline for DCP is Aug. 2. I am still getting a lot of questions regarding the choice for the 2013 crop year. Remember, producers who choose ACRE give up 20 percent of the direct payment in return for the chance of an ACRE payment.

ACRE payments are triggered for a particular crop when two things occur. First, the state-level calculated revenue for 2013 (average state yield times the marketing year average price) must be below the previous five-year benchmark, which is based on an Olympic average yield multiplied by a two-year average price. Second, your farm-level calculated revenue for 2013 (your actual 2013 yield times the marketing year average price) must be below your previous five-year benchmark, which is calculated based on the individual Olympic average yield for that FSA farm number multiplied by the two-year average price.

Let’s consider the farm “trigger” first as a guide to helping producers make the decision. Producers with above-average looking wheat (or with a current expectation of producing at least average other crops on that particular farm in 2013) will have little chance of triggering an ACRE payment on that particular farm based on the farm-level criteria, so DCP may be the logical choice. For individual farms that have a below-average yield expectation in 2013, the farm-level trigger for an ACRE payment likely will be met.

However, the state-level trigger also must trip. Up until about a week ago, I was fairly confident the Oklahoma average state wheat yield would end up being low enough to provide a high probability of triggering a state-level ACRE payment, especially after the Oklahoma Wheat tour released their consensus projection in early May that essentially resulted in an average yield estimate in the low-20 bushel per acre area. Of course, there still would be some uncertainty, because the 2013 national average price will not be finalized for about a year; however, a yield in the low-20s would be similar to both 2009 and 2011, when ACRE triggered for wheat in Oklahoma at the state-level.

Then, the National Agricultural Statistics Service (NASS) May crop production estimate came out with an initial Oklahoma State yield projection of around 30 bushels per acre. At anything close to 30 bushels per acre, there would be essentially no chance that an ACRE payment would be triggered for wheat in Oklahoma.

Therefore, if you have an average or above-average yield expectation on an individual farm (regardless of crop, but obviously that expectation is more firm for wheat than for spring planted crops), the decision is fairly straightforward and there is a minimal chance ACRE will turn out to have been the best program choice.

If, on the other hand, you have a below-average yield expectation for 2013, you will need to form your own opinion regarding which predictions are closer to correct regarding state yield (and ultimately state calculated revenue), and your chances of getting an ACRE payment that will more than offset the 20 percent of the direct payment you are giving up to choose ACRE. It is unusual for either estimate to be off by the magnitude that apparently one of them is (either the wheat tour estimate is too low, or the NASS estimate is too high relative to what will actually be harvested), making this a more difficult decision.

One caveat to consider is that it is not expensive this time to make the ACRE election and take a chance that ACRE will pay off for any particular crop. Most northwest Oklahoma producers give up 20 percent of the direct payment for wheat base acres for one year, or in most cases less than $3 per acre. A pre-recorded webinar, as well as an Excel-based Oklahoma ACRE decision tool are available at sion/. Any updated information will be posted to the OSUFarmManagement Facebook page as soon as it is available.

Jones is Oklahoma Cooperative Extension Service area agricultural economics specialist.