Average Crop Revenue Election (ACRE) 2010 Payment Simulation Results

By Cory G. Walters and Greg Halich

The deadline for deciding whether to enroll in the optional ACRE program over Direct and Counter-Cyclical Program (DCP) is fast approaching, June 1, 2010. The purpose of this short article is to identify the likelihood of ACRE payments for both the 2010 crop year and the entire life of the farm bill, 2010-12 crop years.

ACRE program provides revenue protection similar to crop insurance. There are four primary differences between ACRE and crop insurance. First, the revenue guarantee incorporates historical revenue instead of expected revenue found in crop insurance. This takes revenue experienced in the past and extends it out into the future. If price were to drop from one year to the next an ACRE payment may be made. Second, ACRE uses state yields to compute the revenue guarantee instead of farm yields found in crop insurance (not including group insurance products). ACRE payments are based on what happens to state yield. When state yield drops but prices remain constant ACRE payments may be available. Third, ACRE uses U.S. season average prices instead of futures. ACRE payments are made when revenue falls from one crop year to another, unlike crop insurance where revenue products pay when futures prices drop from planting (base price) to harvest (harvest price). Fourth, the ACRE insurable “unit” is the farm number where in crop insurance the insurable “unit” is categorized as optional, basic, enterprise, whole farm. With the insurable unit being farm number, producers interested in signing up can pick and choose which farm numbers to enroll.

Price protection found in ACRE is significantly higher than that found in the DCP. In corn, the ACRE trigger price (holding yields constant since it is a revenue program) is $3.45 where in DCP the trigger price is $2.35. Meaning that if payments were to be made in either program ACRE would start paying well in advance of DCP. For soybeans, the ACRE trigger price is $8.74 where the DCP trigger price is $5.36. For wheat, ACRE starts paying when price drops below $5.26 (holding yields constant) and DCP starts paying when price drops below $3.40.


To help determine if ACRE is the best program for KY farmers we ran many revenue simulations using current market information. In this process we had to come up with reasonable expectations for a range of prices and yields, accounting for correlation between these variables in the process. The mean price estimates are noted in the table below (titled Mean Price Estimates). However, each price has a range built around this mean price. For example, the 2010 corn price has a 10% chance of falling below $2.98/bu and has a 10% chance of rising above $4.02/bu in the distribution we used.


Mean Price Estimates
2010 2011 2012
Corn $3.50 $3.76 $3.80
Soybeans $8.86 $9.03 $9.20
Note: Prices based on CME fall contract futures for the week of 5/10/10 and adjusted for $0.30 and $0.40 per bu basis for corn and soybeans respectively.



The base scenario evaluated was for a 1000 acre farm (collection of farm numbers summing to 1000 acres) that is in a 50-50 rotation of corn and soybeans. This base scenario resulted in a +$3.50/acre per year net benefit for the ACRE program in 2010-2012 over DCP. This means that on average, the ACRE payment exceeded the loss in direct payments by $3.50/acre per year. For 2010 only, the net benefit to ACRE rose to +$11.50 over DCP. This means that 2010 looks to be the most likely year for an ACRE payment for the remainder of the farm bill with current market conditions. In other words, if you are considering signing up in the next three years, 2010 is the time to do it.

Farm size will have an impact on the expected ACRE payout. As farm size increases, the likelihood of reaching the yearly payment limitation increases. The practical implication of this is that as you go above 1000 acres, the expected ACRE payments will decrease. With a 2500 acre farm, the net benefit to ACRE decreased from +$3.50 to +$0.50 for 2010-2012. Two points to note about this:
1) You do not have to enroll all of your farms in ACRE and thus you could put roughly 1000 acres in the program.
2) The $0.50 net benefit does not account for the risk management benefit of ACRE (it is providing a type of insurance).

For questions and comments please contact either Cory Walters at cgwalters@uky.edu or Greg Halich at greg.halich@uky.edu

ACRE meetings scheduled across Kentucky

ACRE meetings scheduled across Kentucky
By Katie Pratt
LEXINGTON , Ky., (May 10, 2010) – With the June 1 sign-up deadline fast approaching, University of Kentucky agricultural economists Cory Walters and Greg Halich will host meetings across the state to explain Average Crop Revenue Election (ACRE) and help producers determine whether it fits their operation.
ACRE is an optional risk protection program created by the 2008 Farm Bill and offered by the U.S. Department of Agriculture. Producers eligible for ACRE include those who grow corn, soybeans, wheat, sorghum, barley, rice, upland cotton, oats, peanuts, pulse crops and other oilseeds.
Unlike the traditional farm support programs that offer direct payments, counter-cyclical payments and marketing assistance loans if a price of a particular crop falls below a certain level, ACRE pays if crop revenue falls below a revenue guarantee. Revenue includes price and yields.
Those who enroll in ACRE forgo any counter-cyclical program payments, forfeit 20 percent of direct payments and have loan rates reduced by 30 percent.
Walters and Halich will discuss how the program works, the probability of payments, and its relationship to crop insurance at the following times and locations.
• 1 p.m. EDT May 17- Hardin County extension office
• 6:30 p.m. CDT May 17- Daviess County extension office
• May 18- during the UK Wheat Field Day at the UK Research and Education Center Farm in Princeton
• 7 p.m. CDT May 18- Union County extension office
• 8 a.m. CDT May 19- Sedalia Restaurant in Graves County
• 1 p.m. CDT May 19 – Christian County extension office
• 12 p.m. CDT May 20- Butler County extension office
• 7 p.m. EDT May 20- Marion County extension office
For more details on a specific meeting, contact the county’s agriculture and natural resources extension agent.
Contact: Cory Walters, 859-257-2996
Greg Halich, 859-257-8841

Herbicide Issues in Flood Damaged Corn Fields

Jim Martin and J. D. Green

The following are herbicide related issues involving flood damage corn fields:

1)    Previous Herbicides Applied May Affect What Crop to Plant:  The specific herbicide(s) used in the initial planting may determine what crop can be planted in flood damaged fields. See Corn & Soybean News April 2007, Vol 7 Issue 5 http://www.uky.edu/Ag/CornSoy/cornsoy7_5.htm#3

2)    Adding More Herbicide to Replant Corn: The need to add more herbicide will depend on specific field situations.  In some cases, where a previous soil-residual herbicide had been applied, relying on postemergence treatments following corn replanting may be the best option for weed control throughout the remainder of the season.  If additional soil-residual herbicide is desired the maximum amount that can be reapplied depends on the products used.  For example, if the previous amount of atrazine applied was 1.5 lb ai/A, then an additional amount of 1.0 lb ai/A can be applied up to a maximum total of 2.5 lb ai/A of atrazine per season.  For other herbicide active ingredients consult the label for maximum use rate guidelines. 

3)    Controlling Surviving Corn Plants to Replant: If there are surviving corn plants, it may be necessary to use a burndown herbicide program.  It will be more challenging to control surviving corn plants if the field is planted back to corn than if it is planted to soybeans.  For specific options for controlling corn prior to replanting back to corn see page 29 in the Corn Section of the Extension publication “Weed Control Recommendations for Kentucky Grain Crops 2010” AGR-6 http://www.ca.uky.edu/agc/pubs/agr/agr6/02.pdf 

There are several foliar-applied herbicides available to control corn in soybeans.  If corn plants have the Roundup Ready (glyphosate – tolerant) trait, consider such options as Asure II, Fusilade DX, Fusion, Poast,  Select and Select MAX. If corn plants do not have the glyhosate tolerant trait then glyphosate is an effective and economical option as a burndown treatment or as an “in crop” treatment in Roundup Ready soybean.

Estimating N Losses in Wet Soils

Greg Schwab and Lloyd Murdock

Wet soils cause nitrogen losses. In cases where high intensity rain results in high runoff, leaching losses will probably be low. The primary nitrogen loss mechanism in saturated soils is denitrification, which occurs when soil nitrate nitrogen (NO₃-N) is converted to nitrogen gas by soil bacteria. Two to three days of soil saturation is required for bacteria to begin the denitrification process.

Well-drained upland soils that have been wet from a series of rains probably have not experienced much denitrification. Soils in lower landscape positions that stay saturated longer will likely lose more N. Losses can be calculated by estimating 3 to 4 percent loss of fertilizer NO₃-N for each day of saturation. Use the Table below to determine how much fertilizer NO₃-N was in the soil.

EXAMPLE: Determining the Amount of N Loss
A farmer applied 175 lb nitrogen (N)/A as urea to corn grown on poorly drained soil. Three weeks after application the field became saturated for seven days. How much N was lost?

Step 1. Determine the amount of applied N that was in the nitrate (NO3‐N) form.
According to the table, 50% of the urea will be in the NO3‐N form three weeks after application. 175 lb N x 50% = 88 lb N.

Step 2. Determine the amount of N lost.
Remember that two days are needed for the bacteria to begin the denitrification process. Therefore, denitrification occurred for five days (seven days total saturation minus two days to start the process). With 4% lost each day for five days, 20% would have been lost. 88 lb N x 20% = 18 lb N lost and 157  lb N remaining. The N loss calculated in this example is not as high as most people would assume. A soil N test can verify this estimation.

Nitrogen Soil Test
An additional tool for determining NO₃‐N in the soil after flooding is a NO₃‐N test. The soil sample should be taken down to 12 inches deep, and several samples should be taken in each field of both the low and higher ground. The samples should be mixed well and a subsample sent for nitrate analysis.

If the nitrate‐N is less than 11 ppm, there is a low amount of plant‐available N in the soil. Therefore, there is a good chance corn will respond to a sidedress application of N ranging from 100 to 150 lbs N/acre.

If the nitrate‐N is between 11 and 25 ppm, there is a greater amount of plant‐available N in the soil, indicating corn may or may not respond to sidedress N. The recommended sidedress N application at this soil test level is 0 to 100 lbs N/acre. If the soil test nitrate‐N is close to 11 ppm, then higher sidedress N rates would be used. Lower rates would be used as nitrate‐N approaches 25 ppm. The test is least accurate in this range, so the test results can only be used as a broad guide.

If soil test nitrate‐N is greater than 25 ppm, there is adequate plant‐available N in the soil, which indicates corn will probably not respond to sidedress N application.

Nitrogen Broadcast Prior to Rain
Farmers sometimes broadcast fertilizer nitrogen on a field within 24 hours of a heavy rain. In most cases, very little nitrogen is lost to runoff, especially if the field was under no‐till soil management. The nitrogen fertilizer begins to dissolve almost immediately after being applied to the soil surface and will dissolve completely in a short period of time. As rain begins, the first water that falls moves into the soil, taking most of the fertilizer nitrogen with it. Once in the soil, most of the fertilizer nitrogen is protected from runoff. The only exception is a very intense rain soon after application that also erodes topsoil from sloping areas. Even in this situation, the loss would probably be less than one third of the fertilizer applied.

Flood Damage to Corn

The heavy rainfalls over the past weekend has many fields under water. According to the latest USDA Crop Progress & Condition report, about 80% of the corn crop in Kentucky is planted and almost 60% is emerged.

Two resources on assessing damaged corn include AGR-193: Assessing Flood Damage to Corn and AGR-195: Replanting Options for Corn.

The impact of flooding on corn depends on the depth of flooding, the soil temperature and the duration of flooding. When soil temperatures are 70 degrees F or higher, corn can withstand complete submersion for about 24 hours. Higher soil temperatures reduce that time. Corn that is not fully submerged can withstand longer periods of standing water. 

While you may want to walk through a field (or in some cases, take a boat through a field), assessment of corn can not occur until two or three days after the water has subsided. Plants will most likely look yellow, but if the growing point is white and turgid, the plants are alive. 

Nitrogen losses occur with submerged fields and they type of nitrogen and the duration of flooding affects how much N is lost. 

While losing corn and nitrogen are very frustrating, they don't compare to the loss of lives from this flooding. We hope that you and yours are staying safe.