Complexity is Holding Down ACRE Signup

To find out why relatively few farmers signed up for the new ACRE option in the USDA farm program, Iowa State University economists ran a survey.

Published on: Jul 16, 2010

FAQ: Why haven't more Iowa farmers enrolled in USDA's new Acreage Crop Revenue Election or ACRE farm program?

Answer: Provided by William Edwards, Iowa State University Extension agricultural economist.

For 2009 and again in 2010 Iowa farmers were faced with the decision of whether to continue with the traditional USDA farm program--the direct and countercyclical program or DCP--or to enroll in the new Average Crop Revenue Election or ACRE option.

The new program offered a chance to put a floor under gross revenue instead of price, but also required farmers to give up some of the benefits of the old program. In both 2009 and 2010, the majority of Iowa crop farmers elected to continue with the existing DCP program.

Just under 12% of FSA farm units in Iowa were enrolled in ACRE for the 2009 crop year. However, more than 16% of the eligible acres were enrolled, which indicates that the farm units that were enrolled were larger than the ones that were not, on average.

Iowa State University Extension specialists sent out a mail survey to 3,384 randomly selected Iowa producers who were enrolled in FSA commodity payment programs in 2009. A total of 365 usable replies were received. Survey questions asked how farmers received information about ACRE and what factors influenced their decision to enroll or not.

Survey asked farmers where they got ACRE information

Not surprisingly, FSA newsletters and personnel were the most common source of information about ACRE, used by 89% of the respondents. The next most common source was the farm press (79%), followed by ISU Extension meetings, websites and articles (68%). A quarter of the respondents had used an electronic spreadsheet to analyze the potential effects of the ACRE program. The most common sources of the spreadsheets were ISU Extension (52%) and FSA (30%).

The producers who responded to the 2009 survey had enrolled 20% of their FSA farm units in ACRE, a higher rate than for the state as a whole.

They were more likely to enroll farms that they owned themselves (24%) than farms they were renting from another owner (17%). Over one-fourth of the respondents said they enrolled at least one of the farm units that they operated in 2009, either owned or rented.

Why did farmers who enrolled in ACRE decide to do it?

Those who enrolled at least one farm in ACRE were asked to rate the importance of several possible reasons for doing so. The responses are summarized in Table 1.

Two reasons stood out from the rest: a desire for more risk protection against falling revenue and a belief that the payments received under ACRE would exceed the value of the FSA direct payments given up over the four years of enrollment. High yield variability, advice from a farm lender or manager and encouragement from a landlord were also cited as reasons for enrolling.

What reasons did farmers give for not enrolling in ACRE?

On the other side of the coin, respondents who enrolled none or only some of their farms in ACRE (87%) were asked to rate the importance of various reasons for not doing so. As shown in Table 2 below, two reasons again were significantly more important than the others.

The factor that was given the most importance was that the program was too complex and the process for calculating the guarantees and payments was too complicated. The second most important reason for not enrolling was to avoid giving up 20% of the FSA direct payment.

What other risk management tools are farmers using?

Some information was gathered in this ISU survey about farm characteristics and other risk management tools that the farmers who answered the survey were using. The farmers who enrolled at least some of their farms in ACRE were then compared to those who did not enroll any farms for 2009.

The data in table 3 show that the farmers who enrolled in ACRE were farming significantly more crop acres (1,095 to 682) and received a higher percent of their farm income from crops. They also insured a higher percent of their crop acres, at a slightly higher coverage level, and tended to price more of their crop prior to harvest.

There was no significant difference between the two groups in their farm debt-to-asset level or age, however. In general, farmers who enrolled in ACRE seemed to be more concerned about controlling crop financial risk in their farming operations than those who did not.

Respondents were also given the opportunity to make suggestions about how to improve the ACRE program. About 11% said it should be simplified, while about 5% said it should be eliminated altogether.

ISU Extension thanks the farmers who took the time to respond to the survey and provided information on how this important farm management decision - whether or not to enroll in ACRE - was made.

If you have specific questions or need details regarding USDA farm programs, contact your local USDA Farm Service Agency office. You can also get news and information about DCP, ACRE and other USDA programs at www.fsa.usda.gov.

Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm.

And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com