ACRE Decision Aids

1. Roman Keeney, Assistant Professor Learning Tuesday—April 13, 2010 Policy Web Address: http://www.ag.purdue.edu/agecon/Pages/agpolicy.aspx ACRE Decision Aids

2. Objectives • Overview the ACRE payment calculation • Identify public access decision-aids • USDA’s Farm Service Agency Information • http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landing • Texas A&M/AFPC National ACRE decision aid • http://www.afpc.tamu.edu/models/acre/index.php

3. ACRE Payment Calculation • ACRE enrollment is by FSA farm number • Deadline is June 1 • Payment basis is the actual planted crops on the farm in a given year • Number of program base acres still limit payment base for ACRE • ACRE payment is crop specific • E.g. you could receive a wheat ACRE payment but have no other crop eligible on the FSA farm

4. Step 1: Evaluate Two Triggers(Corn example)

5. Step 2: Calculate ACRE Payment if both triggers are met • ACRE payment basis • BPMT = State guarantee – State actual • Limit of 25% of the state guarantee • Adjustments • Base acre reduction (same as DP) • R = 83.3 % of base receives payments (85% in 2012) • Farm yield factor based on 5 year olympic averages • F = Farm yield/State yield • Payment = F*R*BPMT

6. Farm Service Agency Material • Link to FSA ACRE Site • Background information, Fact Sheets • Program parameter updates (prices, yields) • Finalized at completion of 2008/2009 crop market yr. • Calculator • Useful for learning/explaining ACRE • Less than ideal as a risk decision aid

7. FSA Calculator: Farm Data Inputs Farm: Acreage, Fixed Payment Yields and Acreage (DP,CCP), Current Planting Historical Yields: (Five years worth for farm and state) Expectations: Yields for farm and state, national market prices

8. FSA Calculator: Expected Prices • Example price expectations • Corn not eligible for ACRE • Soybeans and Wheat are eligible for ACRE

9. Example Revenue Triggers for Corn • State Guarantee = $554.40 • State Actual = $561.00 • Farm Guarantee = $656.00 • Farm Actual = $613.36 • Loss on the farm but no payment due to the state guarantee

10. FSA Calculator: Comparison • Just a scenario • Usefulness for making my decision depends on how well I can forecast prices

11. AFPC Calculator • Link to Calculator • Accounting for uncertainty • Takes your forecast price and yield • Uses historical estimates and your forecast to generate a range of possible prices and yields • Randomly draws 500 yield and price combinations • Calculates payments 500 times and reports: • ACRE and DCP program payments • Average, standard deviation, maximum, and minimum

12. AFPC Merits • Accounting for uncertainty means decision is less sensitive to our skill at forecasting • Easy to use interface • Web-driven stepwise input sheets • Calculations done in background (4 years worth) • Save farm data and consider alternative scenarios • Prices, yields, acreage allocations • Extensive set of results for comparing DCP and ACRE

13. AFPC Calculatorhttp://www.afpc.tamu.edu/models/acre/index.phpVideo Demonstration of AFPC Calculator’s Usehttps://gomeet.itap.purdue.edu/acre/

14. Results: Base Scenario

15. Results: Base Scenario

16. Risk Chart 60 times out of 500, ACRE has lower payments. 440 times out of 500, ACRE has higher payments.