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

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

3.  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. ItemStateFarmDefinition 1ACRE Yield1601705 Year Olympic Average 2ACRE Price$4.15 2 Year Average 3(Adjustments) 4 Pct.90% 5 Ins. Premium$15.00 6ACRE REVENUE$597.60$720.50= 1 x 2 x 4 + 5 7 8Actual Yield155185Bu/Ac on Planted and Considered Planted 9Actual Price$3.78 National Price 10ACTUAL REVENUE$585.90$699.30= 8 x 9 11Trigger Met?YES = YES if 6 > 10

5.  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.  Link to FSA ACRE SiteFSA 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. 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.  Example price expectations  Corn not eligible for ACRE  Soybeans and Wheat are eligible for ACRE

9.  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.  Just a scenario  Usefulness for making my decision depends on how well I can forecast prices

11.  Link to 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.  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

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