Choosing ACRE or DCP on the farm in 2013
The extension of the 2008 Farm Bill opens up the decision to participate in either of the safety net programs: the Average Crop Revenue Election (ACRE) program or the Direct and Countercyclical Program (DCP). Farmers have until June 3, 2013 to sign up for the ACRE program and August 2, 2013 for the DCP program.
Under the earlier rules of the 2008 Farm Bill, farmers who signed up for ACRE had to remain in ACRE through 2012. The extension changes that requirement. Even if farmers signed up for ACRE before, the extension allows them to change their choice and sign up for DCP if they think that is a better choice for them in 2013. (Farmers are not required to sign up for either program, but participation makes sense for 2013 in almost all cases.)
The 2013 decision to sign up for ACRE involves some uncertainty because the drought of 2012 has cast doubt on the potential yields for 2013 and thus the potential market prices. Also, changes in the demand side for grains may have weakened the market's ability to absorb higher production at current price levels.
At this point in early May, the decision seems to tilt toward the sign up for the DCP in 2013. Prices for the 2013 crop are still strong in the futures markets. And so far yields are not expected to drop drastically due to late planting. The most recent snows did not cover the entire state, so the state yields may not suffer as much as individual yields in the affected areas.
As we learn more about the planting season and potential production levels and price movements, this situation may change. So farmers need to pay attention to these changes and make their final choice between ACRE and DCP closer to the deadline of June 3.
Due to this uncertainty and their individual situations, every farmer needs to evaluate his or her own conditions and payment limits and decide whether the ACRE or DCP program is the best option for their farm in 2013.
Farmers and their advisers can use a worksheet provided by University of Minnesota Extension (http://z.umn.edu/dkf) to help them evaluate their situation for the 2013 decision.
Kent Olson is a Professor of Applied Economics with University of Minnesota Extension.