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FSA writes KSU is forecasting an ACRE payment; Correct?[1]

Dear Art,

I received the following note in my Nebraska FSA newsletter.

“Assuming the projected actual state yields are more accurate than the projected market prices listed below is the calculated state trigger price for a “yes” on Nebraska state ARCE trigger.  Based on Barnaby's projected market prices (below), irrigated soybeans and grain sorghum is a “yes” for a state trigger.  Since we also need the farm trigger to be “yes” I need farm level revenue below the farm ACRE trigger too.”

Is this Correct?  Are you forecasting sorghum and soybean ACRE payments for Nebraska?

A Husker Reader

Dear Husker,

This is always dangerous to comment on a quote from FSA that could be out of context.  In any case, your interpretation of the estimated ACRE payments for Nebraska is inconsistent with KSU estimates.  The short answer is only on grain sorghum is there a forecasted Nebraska ACRE payment.  I am currently only estimating a soybean ACRE payment in Texas (all states were not analyzed).

These are my estimated yields listed by FSA but they have a large amount of errors in the estimates.  NASS does not split the yield by irrigated/non-irrigated until February.  Currently NASS has only published state yield estimates for the combined irrigated/non-irrigated yields.  The combined yield will continue to be updated but the final number will likely be close to the value published in February. 

I estimated the irrigated and non-irrigated yields based on the historical relationship between combined yield, irrigated yield and dryland yield using the current combined yield published by NASS.  It is likely in a good year with a “high” combined yield this method will over estimate the irrigated yields and under estimate the dryland yields.  It is a big source of error in the KSU estimated ACRE payments.

There will be additional yield errors especially on wheat.  The state’s total production will be divided by harvest acres plus FSA determined failed acres.  The FSA failed acres will be under reported unless farmers make sure to report those failed acres to FSA.  In the past FSA did not spend a lot of resources determining failed acres because it had no effect on payments, but if failed acres are under reported it will reduce the ACRE payment. 

Soybean ACRE yield will be set by FSA, by simply dividing the state total NASS production by NASS planted acres rather than harvested acres.  Nebraska was the only state analyzed that has soybeans split between dryland and irrigated and has all of the same yield estimating errors as corn with yields split by practice.

I am not sure where the price estimates came from even though they are credited to me.  These may be recent estimates but they are not the most current estimates.  In Table 1 below shows the current KSU estimated Marketing Year Average (MYA) price that will be used to settle ACRE payments (more details and updates are posted on AgManager.info).  I also included the KSU estimated MYA price that was published prior to August 14, just before the signup deadline.  It was that price that farmers had to base their decision on.  As expected the updated prices have changed from the price estimates before signup.

Table 1.  Updated KSU MYA Price Estimates and August 14 Estimates

The current KSU estimated feedgrain prices are higher than the August 14 estimates.  If correct final ACRE payments will be lower.  The MYA price estimate for wheat and soybeans have changed very little.  I should also point out that with the exception of soybeans, the USDA current price estimates are lower than those published by KSU.  If USDA is correct, the ACRE payments will be higher than the ACRE payments estimated by KSU. 

I have posted in tables 2, 3, 4, 5, 6, and 7 estimated ACRE payments for Nebraska based on current KSU estimated yields and prices.  Notice that in the matrix of payments it shows a combination of possible payments based on different yields and prices.  Lower prices or lower yields or a combination of the two values will increase ACRE payments.  Oklahoma and Texas wheat will receive the maximum ACRE payments and Colorado wheat will receive no payment.  Washington wheat will be near the maximum and most other states, including Nebraska and Kansas are in the “gray” area.

Thanks for the email question.  I assume you and most of your friends are headed to San Diego for the Holiday Bowl.  I do wish the Huskers the best…..but that will change in 2010.

Art

Table 2.  Nebraska Irrigated Corn Estimated 2009/10 ACRE Payment

Table 3.  Nebraska Non-Irrigated Corn Estimated 2009/10 ACRE Payment

Table 4.  Nebraska Irrigated Soybean Estimated 2009/10 ACRE Payment

Table 5.  Nebraska Non-Irrigated Soybean Estimated 2009/10 ACRE Payment

Table 6.  Nebraska Grain Sorghum Estimated 2009/10 ACRE Payment

Table 7.  Nebraska Wheat Estimated 2009/10 ACRE Payment