North Dakota farmers struggle with decision to enroll in insurance program

Aug 11, 2009      Agweek

Mikkel Pates

Aug. 11, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- EDGELEY, N.D. -- The current official closing date for the so-called ACRE program alternative in the farm program is Aug. 14, and interest is only beginning to pick up.

The North Dakota Corn Growers this past week sponsored a Hail Mary play to get the word out, as the corn crop looks more precarious in the state.

Tom Lilja, executive director for the North Dakota corn group, addressed an interested but skeptical crowd at a meeting room in an Edgeley, N.D., bar and grill. ACRE is an acronym for Acreage Crop Revenue Election.

The program applies to 17 crops grown in North Dakota, and it appears the formulas might allow payments in several of these this year because of a high guarantee price and yields that have been initially calculated for the state in comparison to 2009 pricing. Lilja says if it works anywhere in the state this year for corn, it should work in LaMoure County and the rest of southeast North Dakota's traditional concentration of corn and soybeans.

"This may be the year it might work," Lilja says, noting the phone has been ringing off the hook in the past two weeks. He says there appears to be a good chance that the ACRE program will hit statewide triggers if yields are no better than 105 to 110 bushels per acre.

If there were a crop disaster -- a situation that many worry is brewing for 2009 in the state -- the farmer in one example might be giving up $4 an acre in direct payments annually during the four years of the farm bill, but this year, could stand to receive up to $100 an acre in ACRE payments. Lilja cautions that it's likelier the payoff would be $20 to $40, but it's still a "no-brainer."

Lilja's words are underscored by Scott Stofferahn, state staff director and an ag specialist for Sen. Kent Conrad, D-N.D., who was a negotiator on the farm bill, which included the provision.

ACRE is essentially a new way to deliver a kind of revenue coverage for farmers of the major crops. It is somewhat analogous to revenue-based crop insurance. But instead of being based entirely on an individual farm's situation, it allows payments if the crop and price combination hits certain separate triggers at both a state level and on individual farms.

But it requires giving up 20 percent of direct and all of counter-cyclical program benefits and cuts the loan rate by 30 percent for which a farmer can receive loan deficiency payments.

Any of a farmer's "units" enrolled in 2009 or later must then be re-enrolled on that farm unit and forgo those payments and benefits through 2012. While the National Corn Growers Association pushed for passage of the program, Lilja and Stofferahn acknowledge that congressional opposition required the statewide trigger -- instead of a preferable county trigger -- to cut the cost.

It is complicated.

Farmers, who must be convinced themselves about it, often then must turn and sell it to landowners from whom they rent.

Dale Ihry, a state program director with the U.S. Department of Agriculture's Farm Service Agency in Fargo, says that as of Aug. 4, only 80 of the North Dakota's 57,000 FSA farms had made made the commitment.

On average, each farm operator handles three units. Ihry notes that LaMoure County is leading the way with 30 approvals and another 30 waiting to be approved.

Ihry offered a "matrix" approach for understanding the triggers, which included different colored boxes with benchmark yields and formulas.

Stofferahn, himself a former farmer and a former state FSA director in the Clinton administration, says that if he still were farming his home farm in North Dakota's Sargent County area, he'd likely enroll the whole thing in the ACRE program in 2009.

Primarily, Stofferahn says this is because the formulas for allowing a payout are based on prices in the 2007 and 2008 crop years, which were extraordinarily high. It's also because of the growing concern that much of the corn crop in the area is just starting to tassel, creating big worries about whether it'll "make corn" before the typical killing frost date in the mid- to end of September. Nighttime temperatures in the state already have been dipping into the 40s.

Stofferahn says the biggest payouts would occur if prices dropped and the state suffers an early freeze.

Stofferahn notes that one benefit is that the program is based on what farmers currently are growing vs. the "base" formulas from pre-1985 production, on which some programs still are based. He says with ACRE, the payments from the government are "more likely when needed."

"I know, in my mind, there's a lot of risk in this (2009) crop," Stofferahn says. "We're behind in growing degree days for the corn. The beans are green yet, but we need a rain. There's a good chance -- a reasonable chance -- to anticipate a statewide reduction in corn yields like we did in 2004 and 1995 that would likely trigger a revenue payment."

He suggests that farmers with multiple farm units might consider enrolling their owned farm units in the program this year and considering adding rented units in future years to "stick your toe in the water."

Many of the farmers who attended the meeting say they are just beginning to focus on the ACRE after a busy, difficult spring and early summer.

When Stofferahn asked how many farmers were rethinking about enrolling, only about a half-dozen raised their hands.

One farmer from near Linton, N.D., says it appears the program works better for Red River Valley and southeastern North Dakota farmers, where statewide triggers are more likely to reflect their personal situations.

"I can get smoke and they can get a great crop," he says.

Two Kulm, N.D., farmers say they've already signed up units and plan to sign up even more.

Ihry cautions that national FSA officials have not changed the signup deadline, as they sometimes do. One possibility, he allowed, is that FSA county committees could request that if they have sufficient interest in a program with a hard deadline, they can set farmers up in a "register" or a queue that would allow them an appointment for a signup after the deadline.

While Lilja, Ihry and Stofferahn refer farmers to their county FSA offices or Extension Service agents to help make decisions, here were a few issues of interest to farmers at the Edgeley meeting: -- Besides giving up 20 percent of direct payments, the enrolling farm also has a big change in how loan deficiency payments are calculated.

Some farmers in the room say they misunderstood they'd receive a 30 percent cut in LDP benefits if they enrolled. Not so. FSA officials say the enrollee's LDP benefits kick in at a marketing loan level that is 30 percent less than non-enrollees. In an example, if the loan rate on a crop was $5 per bushel, the ACRE participant gets no LDPs until prices fall to $3.50 per bushel. LDP payments are not capped to individual growers, regardless of size. Direct payments are capped at $40,000 per farmer (plus $40,000 for a spouse). ACRE payments are capped at $65,000 (plus $65,000 for spouse). ACRE payment limits can go up to $73,000, depending on how many of an individual's farms are enrolled in ACRE.

ACRE benefits have been calculated on formulas that include an Olympic average of the 2004 to 2008 crop years for a given crop. Where proven yields aren't available, the program "populates" the missing years with a "plug" figure, based on a 95 percent of the county average yield.

These plugs are taken from the county in which the farmer's base operation is located. If farmers chose to substitute their proven yields from 2004 to 2008 years, they have until July 2010 to do it.

Computer "calculators" are available at www.fsa.usda.gov/dcp and www.ag.ndsu.nodak.edu/aginfo/farmmgt/farmmgmt.htm, as well as at other land grant universities, including Ohio State, Kansas State and Texas A&M.

Newstex ID: KRTB-0012-37139073

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