The Average Crop Revenue Election (ACRE) program was heralded as the hot new addition to the 2008 Farm Bill and a way to transition the farm bill for the 21st century. However, participation has been low. Farmers complained it was too complex, and some lost money because they forfeited 20% of direct payments, a program requirement.
In order to establish a true safety net, a program is needed to help address multiple-year revenue declines and shallows losses, the original intent behind ACRE.
Why did ACRE end up so complicated? In one word: politics.
The program triggers at state yield losses, uses a difficult calculation for yield and price and overall falls short of the initial goals of the program because of restrictions placed on the program.
Carl Zulauf, agricultural economist at Ohio State University, estimates that the overlap between ACRE and crop insurance for the commonly purchased 75% revenue insurance product is only around 3%.
The idea receiving the most traction to improve ACRE is getting protection closer to the farm level, whether at crop reporting district or county-level. Zulauf says one way to reduce the overlap between crop insurance and ACRE is to reduce the state cap. Currently it is at 25%.
He would also like to see a 5-year Olympic average of revenue rather than separate calculations for yield and price. Currently it uses a 2-year average for U.S. price while a 5-year Olympic moving average is used for state yield.
NCGA spearheaded the first ACRE concept and is now hoping to reform the program by rolling it together with direct payments, countercyclical payments and Supplemental Revenue Assistance Payments (SURE) to create ADAP (Agriculture Disaster Assistance Payments).
ADAP will provide a risk management tool for farmers to protect year to year variability and multiple year declines, whereas crop insurance only provides coverage within a single crop year. Payments would cover lost revenue between 85 to 95% of the guarantee. Marketing loan rates would be restored to standard levels, rather than being reduced by 30% in ACRE.
Jim Reed, Monticello, Ill., farmer and president of Illinois Corn Growers Association, says in crafting ADAP the goal was to keep the trigger price closer to the farm while still being budget friendly. As Zulauf is suggesting, ADAP would guarantee revenue based on a 5-year Olympic average. The guarantee is based on harvest price rather than season average. The ACRE program has a 25% cap, but Reed says ADAP would use a 10% maximum payment.
“Depending on where you put the cuts and caps if any at all, you may be saving 10-30% over the current baseline of the direct and countercyclical payments as they’re structured today,” Reed adds.
Paul Taylor, who led the Illinois Corn Growers Association’s Farm Bill Taskforce, said this program will respond more quickly with payments instigated sooner to the time of stress.
"ADAP is simpler to understand and implement. It responds to farm stress in a much more timely fashion. It fills in the gap that crop insurance doesn't. It's sensitive to budget needs. It's the right program at the right time," Taylor added.
The catch with ACRE was that politics got involved and it got confusing as more restrictions were placed to keep it budget friendly. The corn growers hope they’ve got a more simple solution this time around.
What do you think? Would this be a safety net that could help in the multiple-year losses that crop insurance doesn’t cover?
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