Farm Compliance

“ACRE is about risk management. You are giving up a little but can gain a lot under the right market or weather circumstances. ACRE will be a personal decision for each farmer, so that means doing your homework and getting more than one opinion,” said Ron Litterer, NCGA Chairman. “You have to buy into the philosophy that you want to protect against risk for a small premium. If that’s a sound thing to do, you probably ought to do it.”

Before 2005, the counter-cyclical and marketing loan programs were income payment programs. In other words, prices were generally below the loan rate and counter-cyclical effective target price, says Dr. Carl Zulauf, one of the presenters at the webinar. Thus, farmers’ historical experience with these programs is not as a risk management program, but as an income enhancement program. Now, these two programs are, for most crops, risk management programs. This changes their interpretation and implications for a farm.

“ACRE is an innovative risk management tool and it is different than anything FSA has ever offered in the past. This is an important decision, so FSA is participating in the July 1, Webinar as one more way to reach out to growers with the latest information,” said Brad Karmen, Farm Service Agency’s Assistant to the Deputy Administrator for Programs.

The current farm program and ACRE have a very different risk management profile, and given the current environment of high costs and volatile prices, both deserve a thorough evaluation Zulauf said.

“You will never know whether the ACRE or traditional program will pay more until after the 2012 crop year ends, but you can ask which program provides me better risk management given the risks that I think my farm faces between now and 2012.”

In making the comparison between ACRE and existing farm programs, one key question is, “How much is the 20 percent loss of direct payment for your farm? For most corn, soybean, and wheat ground, a 20 percent loss will be between $2 and $5 an acre per year. For many people, the numerical dollar value has a different psychological meaning than a 20 percent reduction,” Zulauf noted.

“In short, I encourage farmers to think about the meaning of the dollar value, not the 20 percent reduction. They may still decide that the cost is too high, but they will now understand what it means on a dollar basis which is the key denominator,” Zulauf said.