By DEBORAH BEHRENDS
Illinois Correspondent

BLOOMINGTON, Ill. — Nick Paulson discussed using the Average Crop Revenue Election (ACRE) Program and crop insurance to manage risk, but he probably raised more questions than he answered.

Paulson was one of several speakers traveling with the 2009 Illinois Farm Economics Summit, sponsored by the University of Illinois extension, farmdoc, UoI Agricultural and Consumer Economics and the Illinois Farm Business Farm Management Assoc. (FBFM). The theme for the annual summit, replayed in five different cities on five days last month, was The Profitability of Illinois Agriculture: Profitability at a Crossroads.

“Expectations for ACRE payments on corn and soybean acres in Illinois have shaped up to be quite different from forecasts made this summer. The ACRE program would not trigger payments in 2009, if current yield and price projections hold,” Paulson said.
This is because of recent increases in expected prices and projected yield levels near or slightly above program yield guarantees for both crops.

Conversely, enrolled wheat producers can expect payments in the $70-$85 range per acre. Prices have fallen well below program guarantees, while average yields have fallen below historical average.

In terms of crop insurance, Paulson said the final harvest price on corn fell below the planting price, but the harvest price is only 8 percent below the guarantee, which means yield losses will be required to trigger payments.

In contrast, he said the harvest price for soybeans is well above the planting price. This implies yield losses on soybean acres will need to be more dramatic to trigger payments.

FBFM farms across the state were analyzed with a number of key results. First, Paulson said, ACRE does not provide an adequate substitute for crop insurance. This is most evident for years where crop insurance payments are triggered regionally due to yield losses.

Second, the ACRE program tends to be driven by price movements.
Some producers may be able to couple yield insurance with ACRE, offering comparable levels of risk reduction at a lower net cost than with an individual revenue plan. Paulson cautioned that the preferred combination of the two programs will vary by operation.
“Based on this analysis, producers are encouraged to carefully consider the decision to adjust their insurance choices based on ACRE program enrollment,” he said.