Average Crop Revenue Election awaits

0
2

On Jan. 8, 2008, an investment banker at Goldman Sachs predicted crude oil prices would top $200 a barrel by summer, then slip lower but remain well above $100 through 2011.

What looked smart then looks ridiculous now.

Today, crude prices are far closer to zero than $200 and the spectacularly wrong investment banker, like the rest of his well-paid dodo buddies, is extinct.

Likewise, a year ago the Senate and House Ag committees were piecing together a much-delayed 2007 farm bill that Democratic leaders promised would not require one penny of new spending.

Their “pay-go” pledge — if you can’t pay for it, you can’t go for it — seemed like sound budgeting and smart politics at the time.

Is it still?

ACRE

Sound or smart, pay-go helped deliver the bill’s biggest new program, ACRE, or Average Crop Revenue Election.

ACRE is an income support idea whose key selling point to Congress was budget savings, an estimated $1.6 billion over the previous law.

That loot, in turn, funded other farm bill goodies like biofuel research.

Once the aggies had 1.6 billion reasons to back ACRE — there were others, but a billion-six was easily the biggest — it became part of the farm bill even though few in Congress could then or can now explain how it works, whether its cost estimate is accurate or how it compares to the more traditional price support program also included in the 2007 law.

But, hey, comprehension never stopped Congress from acting and it certainly didn’t stop Congress from including ACRE in the farm bill.

Now law

As such, the ACRE alternative is now law and farmers have until June 1 to enroll in either it or in an updated, although less attractive, version of the 2002 farm program.

Given the drop in commodity prices and the collapsing global economy since the farm bill passed last summer, is ACRE still good policy?

More importantly, is the key driver behind ACRE’s adoption, its $1.6 billion cost savings (if true), still relevant given the mockery the White House and Congress have made of federal spending since the farm bill’s enactment?

Most farmers cannot answer either question because most have not examined either ACRE or the updated price support program contained in the new law.

When they finally do, they will discover ACRE is very complex, isn’t a price support program at all and, as such, cannot be “gamed” regardless how sharp a marketer the person might be.

How complex?

Very complex

Here’s a thumbnail explanation of ACRE by ag attorney Anthony Schutz from his Oct. 15, 2007, post on http://aglaw.blogspot.com: “Basically, ACRE payments are triggered when state revenue per acre falls below the target revenue for the state — what is called the ‘ACRE program guarantee.’ That trigger is not, however, complete until the farmer has an individual revenue shortfall as well. That shortfall occurs when the farmer’s actual revenue falls below the target revenue for that farmer — what is called the ‘ACRE farm revenue benchmark.'”

Got it?

Another take

If not, here’s another take: ACRE is an enormous shift away from the generations-old price support farm policy that most farmers know as well as their children or grandchildren.

It is a farm revenue program more akin to crop insurance than the loan and target schemes of farm bills gone by.

As such, you’re not going to understand which program is right for you over just two cups of coffee and some quick math on the back of a FSA envelope.

This one’s gonna’ take some time.

The early January view of ACRE, however, is it looks like a winner for corn growers.

Then again, the investment banker looked like a winner last January, too.

STAY INFORMED. SIGN UP!

Up-to-date agriculture news in your inbox!

<
SHARE
Previous articleTake heart: Spring is six weeks away
Next articleOld friends are never forever gone
Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com

NO COMMENTS

LEAVE A REPLY

Receive emails as this discussion progresses.