Animosity Over ACRE

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Capitol Hill is now in the middle of a •re-do' on the Farm Bill. Because of that clerical error a few weeks back, the Senate had to repass the farm bill, now called the Food, Conservation and Energy Act of 2008 or H.R. 6124. President Bush will veto it again and Congress will override the veto again. In essence, the Farm Bill is a done deal.

Meanwhile critics are coming out of the woodwork to howl over potential windfall payments to farmers, should crop prices dip too low. The central focus is a new program called ACRE, short for Average Crop Revenue Election. (Congress may not get much right, but it sure can come up with some cool acronyms for farm programs.) Farm Policy guru Keith Good talks about it here.

Starting in 2009 farmers can give up 20% of direct payments and take a 30% cut in marketing loan rates to participate in ACRE. This is a revenue-based program designed to guarantee income in times of poor yields, poor prices, or both.  The traditional program does not protect against both, only when prices drop below a certain level. Once entered into the program, farmers must remain enrolled for the balance of the farm bill (2012).

Participants in ACRE will be eligible for state-based coverage with a revenue guarantee equal to 90% of the 5-year state average yield per planted acre (excluding the years with the highest and lowest yields) times the two-year national average price for the covered commodity.

"The first trigger for ACRE is that your revenue has to fall below 90% level of statewide average farm revenue,•bCrLf says Kansas State Risk Management Specialist Art Barnaby. "The second trigger is the farm must also suffer a loss.•bCrLf

USDA has suggested the voluntary program could generate a potential $16 billion in higher budget costs over the five-year farm bill. But Illinois Farm Bureau risk management specialist Doug Yoder says those concerns are "something of a stretch."

Based on a new analysis, Barnaby calculates Illinois corn growers would have received ACRE payments in seven out of the past 28 years. Illinois soybean producers would have seen payments in four years during the 1980-2007 period; wheat growers would have received payments in eight of those years.

Eye-Opening Facts Speaking of Illinois Farm Bureau, the organization has developed a new website to help explain what is happening to food and energy prices. This is the latest attempt by agricultural interests to battle the anti-biofuel campaign instigated by the Grocery Manufacturer's Association, detailed in earlier Farm Futures Daily columns. Check the website here.

One of the eye-opening facts you'll discover is this: Merrill Lynch analysts estimate that if ethanol production was not expanding, oil would cost $155 per barrel and regular gasoline would average $4.45 per gallon across the nation.

Ron Lamberty, a spokesman for the American Coalition for Ethanol, says although it might not seem like it because of high gas prices, ethanol saves motorists almost $35 million a day.

"Without ethanol, Americans would pay a billion dollars more each month for gas,•bCrLf he says.

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