Government Programs

Government Farm Programs

The Food, Conservation and Energy Act of 2008 was passed by Congress and vetoed by President Bush in May 2008. Congress then voted to override the President’s veto in June 2008 and the Farm Bill was signed into law. Several details in the bill include:

Direct Payment rates remain the same as those in the 2002 Farm Bill but the Direct Payment amount is reduced by $313 million by reducing the percentage of base in which a producer can receive the payment from 85% of base acres to 83.3% of base acres (2009-2011) and back to 85% in 2012. Advance payment of 22% of the total payment to be issued in 2008-2011. No advance payment is scheduled in 2012.

The annual Direct Payment rates are:

Corn	$.28/bu.
Soybeans	$.44/bu.
Wheat	$.52/bu.
Sorghum	$.35/bu.

The loan rates are:

	2002-03	2004-07	2008-09	2010-12
Corn	$1.98/bu.	$1.95/bu.	$1.95/bu.	$1.95/bu.
Soybeans	$5.00/bu.	$5.00/bu.	$5.00/bu.	$5.00/bu.
Wheat	$2.80/bu.	$2.75/bu.	$2.75/bu.	$2.94/bu.
Sorghum	$1.98/bu.	$1.95/bu.	$1.95/bu.	$1.95/bu.

An optional new revenue based Counter Cyclical Program called the Average Crop Revenue Election (ACRE), will begin in 2009 in exchange for a 20% reduction in Direct Payments and a 30% reduction in loan rates. Producers will be able to enroll in this state level revenue Counter Cyclical Program. ACRE will provide participating farmers beginning in 2009 a state revenue guarantee on acres planted equal to 90% of the five year state average yield factor (excluding the highest and lowest yields) times the national season average price for the previous two years for the commodity.

Target prices are as follows:

	2002-03	2004-07	2008-09	2010-12
Corn	$2.60/bu.	$2.63/bu.	$2.63/bu.	$2.63/bu.
Soybeans	$5.80/bu.	$5.80/bu.	$5.80/bu.	$6.00/bu.
Wheat	$3.86/bu.	$3.92/bu.	$3.92/bu.	$4.17/bu.
Sorghum	$2.54/bu.	$2.57/bu.	$2.57/bu.	$2.57/bu.

Producers with a three year average adjusted gross income (AGI) over $750,000 in farm income would be denied Direct Payments. Those with a three year average AGI over $500,000 in non-farm income would also be denied Direct Payments, Loan Deficiency Payments and Counter Cyclical Payments. The Bill establishes direct attribution of payments and eliminates the three-entity rule. There is a $1 million limit on AGI for Conservation Programs, but for those with more than two thirds of their income from farming there would be no Conservation Program limit. Direct Payment limit of $40,000 (no change). Counter-Cyclical Payments or ACRE, $65,000 limit (no change).

CRP income would not be subject to Social Security Tax.

The Food, Conservation and Energy Act of 2008 will be supportive to farm income and farmland values. It continues to offer planting flexibility and will provide payments for soil and water conservation activities that are so vital for the improvement of our environment. It appears the Average Crop Revenue Election will provide enhanced support in times of low prices or low yields.

Additional Resources:

University of Illinois Extension Article, “The ACRE Program” http://www.farmgate.uiuc.edu/archive/2008/09/the_acre_progra.html

Iowa State University Center for Agriculture and Rural Development CARD) - ACRE Payment Calculators
http://www.card.iastate.edu/ag_risk_tools/acre/

Kansas State University ACRE Calculation Worksheet
http://www.agriculture.com/ag/pdf/0822ACREworksheet.pdf