Congress extended the 2008 Farm Bill to the 2013 crop. Thus, farms will have the decision to enroll in either the Direct and Counter-Cyclical Program (DCP) or Average Crop Revenue Election (ACRE) program. Enrollment status in the 2012 farm program does not matter. Any Farm Service Agency farm serial number, hereafter simply referred to as a farm, can enroll or not enroll in the 2013 ACRE program. This post discusses this decision. It is not an easy decision. It involves consideration of all 3 farm safety net programs: the traditional DCP program, the ACRE election option, and crop insurance. As in prior years, ACRE appears to offer more risk management assistance than DCP, especially for crops associated with the midwest and plains. However, unlike prior years, ACRE also appears, in general, to offer higher price risk assistance relative to individual crop insurance. Thus, as of late February 2013, the context in which the 2013 ACRE decision will be made is likely to differ from that of prior years.
Direct and Counter-Cyclical Program (DCP)
Farms can sign up for DCP from February 19 through August 2, 2013. DCP provides direct payments and potential counter-cyclical and marketing loan price payments. Direct payments are made irrespective of price and yield. They will be paid beginning in October 2013. Counter-cyclical payments are made only if the average U.S. price for the crop year is below a crop's target price (see Figure 1). Payments are based on a farm's counter-cyclical program yield and historical base acres. Counter-cyclical payments, if they occur, are made after the crop year ends. For example, for corn and soybeans, any payment will probably occur in October 2014. Marketing loan payments occur if market price is below the loan rate for the county in which the farm is located on a day chosen by the farm. Marketing loan rates for a crop range from 17% below (soybeans) to 38% below (rice) the crop's target price.
Farms have the option to enroll in the ACRE program. Previous ACRE elections do not matter. The decision to enroll in ACRE for 2013 crops must be made by June 3, 2013. ACRE must be elected as the DCP program is the default selection. Farms electing ACRE
- have direct payments equal to 80% of direct payments under the DCP program,
- have marketing loan payments with loan rates set at 70% of the DCP marketing loan rates, and
- substitute ACRE revenue payments for DCP counter-cyclical price-based payments.