Disclaimer: This web page is designed to aid farmers with their marketing and risk management decisions. The risk of loss in trading futures, options, forward contracts, and hedge-to-arrive can be substantial and no warranty is given or implied by the author or any other party. Each farmer must consider whether such marketing strategies are appropriate for his or her situation. This web page does not represent the views of Kansas State University. 

Estimate for 2010 & 2011 Sorghum ACRE Payments[1]

Below are estimates for the 2010 and 2011 sorghum ACRE payments.  The calculation for the corn, wheat, and sorghum ACRE yield is based on the National Agricultural Statistics Service (NASS) total state production divided by the total NASS planted acres plus Farm Service Agency (FSA) failed acres.  The FSA 2010 failed acres are final but have not been published, therefore a KSU estimate failed acre value was used to calculate the forecasted 2010 ACRE payment.

ACRE uses the Market Year Average (MYA) price as one of two prices to set the prior year’s ACRE strike price and to settle the current year’s ACRE claims, if any.  The 2010 price will not be final for corn, sorghum, and soybeans until October 1, 2010.  At that time FSA will publish any payments, but likely will not release the failed acre value.  One can calculate the failed acre value used if there is an ACRE payment or if the yield is used in the next’s year’s Olympic average yield, otherwise it will remain an estimate.

For the 2010 ACRE payments the MYA price is about 70% complete for corn and sorghum and about 80% complete for soybeans.  The failed acre value will have little impact on the final 2010 ACRE calculations so the estimated 2010 ACRE payments if any, are likely close to the final number.   However, if there are any 2010 payments, farmers would have had to elect ACRE a year ago.

2011 ACRE estimates.  The estimates for 2011 ACRE payments will carry a large amount of errors for corn, sorghum, and soybeans.  The 2011 strike price and Olympic yield are not final until October 1, 2011.  Farmers who enroll in ACRE prior to June 1, 2011 will not know their guarantee until fall.  The analysis below used the FSA estimated Olympic yield and the KSU estimated 2010 MYA price, but the estimate is nearly the same as the one proved by USDA.  The final guarantee will likely be very close to the estimated values.

The largest errors will occur in the 2011 estimated actual yield and 2011 MYA price.  The 2011 marketing year for these crops does not start until this fall and is not final until next fall (September 1).  Therefore the MYA price is a price forecast that is 18 months out from the current date.  The KSU “long range” MYA price forecast is based on futures. 

It is also too early for any prediction of the actual 2011 crop yields for corn, sorghum, and soybeans.  The 2011 ACRE yield estimates were based on a KSU estimated yield based on trend yield. 

Understanding the results.  Using the Kansas sorghum as an example, the trend yield was 66 bushels.  If the 2011 yield is equal to trend yield (the most likely yield), then the 2011 MYA price would need to fall below $3.74, highlighted in red.  If the KSU MYA 2011 price forecast of $5.75 is correct, then the Kansas  sorghum crop will need a yield loss approaching 48% to trigger payments.  It is very unlikely that Kansas will suffer a 48% state wide yield loss on  sorghum.  The payout matrix shows the combination of price and yield required to trigger payments.  Under current market conditions, it is very unlikely that ACRE will pay on 2011 Kansas sorghum.

Summary.  Those who have already signed up for ACRE are locked in all crops for the reminder of the Farm Bill.  Those who have not elected ACRE must select ACRE by June 1 for the 2011/12 market year.  They will also be locked in to ACRE for next year on farm serial numbers that have elected ACRE. The expected ACRE Guarantee for next year, 2012, is also included in the tables.

Based on current yield and price forecast it is unlikely that either 2010 or 2011 will generate an ACRE payment for Kansas sorghum.  Based on current estimates, the author would suggests there is only a small possibility for a 2011 sorghum payment in the other states.  State yields would likely need to fall far short of trend yield to trigger payments.

All crops planted on a farm serial number enrolled in ACRE are included in ACRE.  So if there are other crops that have significant planted acres it may still make no sense for unenrolled farmers to elect ACRE prior to June 1.  The prevented planted acres are not included in ACRE because they are not counted as FSA failed acres and they are not harvested.  The soybean yield is based on NASS planted acres rather than harvested acres plus FSA failed acres.  If the acre is not planted then it does not show up in the ACRE calculation.  At the farm level if the state triggers an ACRE payment (would not include state level prevented planted acres), then an individual famer would be paid ACRE payments based on planted and “considered planted” (prevented planted) acres.

Warning.  Remember in all cases, if the state triggers an ACRE payment, then the farmer must meet an individual trigger (farm revenue below the farm level benchmark).  The farmer’s payment trigger can’t trigger an ACRE payment; it can only prevent a farmer from collecting an ACRE payment.  Enrollment cost for ACRE is 20% of a farmer’s direct payments for the next two years by farm serial number, so the cost has declined.