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Friday, August 20, 2010

ACRE:  What Spurred The Decision To Sign Up Or Not?


Did you enroll in the ACRE program? “Of course not, it was too complex to figure out!” OK, how about you over there, did you enroll in the ACRE program. “You bet, I needed it to manage my risk.” Which of the two neighboring farmers did you align with?

Over a year ago, Cornbelt farmers had to make a wrenching decision. Should they enroll their 2009 crop in the ACRE program or should they remain with the conventional Direct Payment program. Only a small slice of Cornbelt farmers took the plunge and opted for ACRE, but with so many of their neighbors not wanting to participate, what did those farmers see in the program that the majority did not? That was the question that Iowa State Ag Economist William Edwards wanted to find out when he sent out surveys to nearly 3,400 Iowa farmers. While only 12% of those returned the surveys, what they revealed could be widely applied to the rest of the farmers in the Cornbelt. There were some significant findings.

There were some variations from state to state about the number of farmers or volume of acreage that was enrolled, which was probably a function of how much effort state Extension educators and FSA staff put out to reach their clientele. After all, the Internet based spreadsheets were available to everyone, and rules for ACRE were the same across the nation.

Edwards’ survey revealed that nearly 90% of farmers used FSA newsletters and staff to learn about ACRE. The farm media’s focus on ACRE was caught by 79% of farmers and Extension staff reached 68% of farmers in Iowa. However, about 25% of farmers used the various spreadsheets that were available on the Internet.

Why did someone enroll in ACRE? The primary reasons were the desire for more risk protection and the belief that ACRE payments would surpass those of the Direct and Countercyclical programs.

Why did someone not enroll in ACRE? Farmers said the program was too complex and the process for calculating the guarantees was too complicated. Nearly as many said they did not want to sacrifice the Direct Payment.

But Edwards wanted to know what the characteristics of those farmers were who made the decisions whether or not to enroll in ACRE. Larger acreage farmers tended to enroll versus the smaller acreage farmers who opted out of the program. Those who enrolled in ACRE also used higher percentage levels of crop insurance to manage risk, and also tended to price more of their crop prior to harvest. Did age or debt level make any difference? No, says Edwards. It was more of a case of managing risk, and those who enrolled in ACRE saw it as another tool to manage risk, just like the use of crop insurance and having a marketing plan. Even though the signup for the program was August of 2009, those who signed up will have to wait until later this fall to see if their decision paid off or not.

Nearly every Cornbelt farmer is aware of the complexity of the ACRE program which is the safety net program in the current Farm Bill. That complexity caused many farmers to not want to participate because of the difficulty in calculating potential benefits. However there was a small slice of farmers who did sign up for ACRE, and those were generally larger farmers, those who have a higher level of risk management plan and those who use a marketing plan.

Posted by Stu Ellis on 08/20 at 01:12 AM | Permalink

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