COVER STORY: ACRE program snafu costs Montana growers millions

RESERVE, Mont. -- Excuse him, but Jerry Thuesen is very unhappy about the 2009 handling of the new ACRE program. One of the stalwart producers in the Reserve area of northeast Montana, Thuesen alleges that the U.S. Department of Agriculture didn'...

RESERVE, Mont. -- Excuse him, but Jerry Thuesen is very unhappy about the 2009 handling of the new ACRE program.

One of the stalwart producers in the Reserve area of northeast Montana, Thuesen alleges that the U.S. Department of Agriculture didn't correctly explain the loan deficiency payment program for the Average Crop Revenue Election. He says the Farm Service Agency didn't tell everybody about a "register" that had the effect of giving some farmers an improper marketing advantage and an ability to back out of the program.

This "misinformation" cost him $90,000, he says, and adds, "That's a pretty good chunk of change."

His son, David, 40, who lives in Medicine Lake, Mont., dispenses with political correctness.

"Hosed! We got hosed!" David says.


Anatomy of a snafu

The Thuesen family's Danish ancestors settled in the area in 1910.

Jerry started farming in 1968 and took over management about 1989. He holds a business degree from Montana State University in Bozeman. He was a state FSA committeeman for eight years in the Bush administration and a former president of both the U.S. Durum Growers and of the Montana Grain Growers. The Thuesens raise a variety of crops -- lentils, peas, canola, mustard and always durum.

Jerry signed up for ACRE Aug. 13, the day before the deadline.

The Thuesen duo briefly described the situation to Agweek as they prepared equipment in the waning days of fall field work.

They say USDA's Farm Service Agency office in Montana's Sheridan County improperly had told them they'd receive 70 percent of any LDPs available even if they were enrolled in the ACRE program. Instead, they lost 30 percent of their loan rate and, when a new posted county price was applied to that, they lost all of their loan deficiency payments.

Further, the county had suggested to some farmers -- apparently not all -- that they put their names on a "register" that allowed extra time to get signatures. Effectively, that allowed an extra 45 days for the person on the register to watch the market and back out of the ACRE program if it turned unfavorable.

"I don't think the register was fair without informing the rest of us that it was a possibility," Jerry says.


Underlying rationale

Sheridan County is the biggest durum county in the state of Montana -- 300,000 acres of durum, compared with about 20,000 acres of other spring wheat. The county also is a big producer of peas and lentils -- about 120,000 acres total.

Terry Angvick, the Sheridan County agricultural agent in Plentywood, who helps educate the public on such program, says he regrets that bad information on ACRE got passed along to people like Thuesen.

ACRE, of course, is a brand new program concept -- a groundbreaking part of the 2008 farm bill -- enacted May 22, 2008.

Unlike the direct and countercyclical program, it offers revenue protection for farmers and was created as a voluntary option. Some lawmakers created ACRE with the idea support for the DCP eventually might dry up.

The initial deadline for the program was June 1, 2009, but there was an extension that gave the FSA more time to explain how the program was supposed to work.

The second deadline was Aug. 14.

Another deadline


"In return for new revenue protection under ACRE, producers would get a 20 percent reduction in their direct payments a 30 percent reduction in loan rates, and they'd lose 100 percent of their countercyclical payments -- should there be any, and there haven't been any for years," Angvick says.

Producers would have to establish a five-year yield average per farm and drop the high and low (Olympic average) and take that yield times the two-year national price, which was historically high because durum had hit $20 per bushel in late 2007-early 2008 timeframe," Angvick says.

The all-wheat price average was $6.64 per bushel nationally, but that includes all types of wheat -- winter wheat, spring wheat and durum. Initially, the program didn't differentiate among them.

In a hypothetical example, Angvick says a Sheridan County producer could have taken the "established yield" for each farm -- say, 30 bushels -- multiplied that times the $6.64 per bushel and added on the cost of crop insurance. Most farmers, then, would calculate for themselves a "farm target revenue" of some $180 to $200 per acre for wheat.

If the actual revenue (yield and price) should falls below that figure, the farmer then would get an ACRE payout.

Trigger figures

For ACRE to pay out to a participant for a particular crop in 2009, two "triggers" -- state and individual triggers -- had to be tripped.

First was the state trigger.


Each state has a farm revenue figure that includes a state average yield for the particular crop, times the $6.64 per bushel. That's finally reduced by 10 percent to provide a state revenue figure -- the amount that would trigger a payment. The price is a two-year national average period, so the $6.64 came from 2007 and 2008. Marketing years run June 1 to May 30.

Second, there was an "individual farm trigger," calculated the same way, except the farmer is allowed to add his crop insurance premium to that figure.

If both the state and individual "triggers" are met, the ACRE payment is generated. Finally, the figure is reduced to 83.3 percent of the "base" acres on each farm. That's the total from all program crops such as wheat, barley and corn.

"When the USDA was doing initial projections, we were looking at a national average price for wheat at $5.30 per bushel," Angvick says. "The most current projection -- the most recent, is $4.80 -- and it's been dropping. If you have an established revenue figure of $200, you divide that by $4.80 per bushel. That tells you how many bushels that you would have to produce to trigger or not."

That calculates to 42 bushels per acre.

To compare, in early August, the durum wheat production outlook was in the 30-bushels-per-acre range. Instead, timely rains and cool temperatures put the crop into the upper 30s and low 40s.

Early misinformation

The information gap started last February.


Angvick -- an active farmer in his hometown, as well as the extension agent -- was among those helping farmers understand the ACRE program. Meetings covered the whole range of FSA programs. Angvick remembers good crowds -- 80 to 100 farmers in attendance -- for meetings held two days in a row.

Angvick remembers helping to ask questions of the FSA officials.

"Producers understood that they'd have a 20 percent reduction in direct payments and 30 percent reduction in the loan rates," Angvick says. "I personally asked, 'Does that include a 30 percent reduction in the loan deficiency payments?' The answer was yes. Producers left those meetings with the impression that -- yes -- they'd receive a reduction in LDPs, but that they'd receive 70 percent of what nonparticipants would receive."

Fast-forward to June.

Unbeknownst to some farmers, the government started to differentiate durum loan rates from the all-wheat rate, increasing the durum loan rate from the $2.75 per bushel up to $4.54.

"Most producers were not aware that the loan rate on durum had been raised, and most of the decision-making was based on that all-wheat loan rate," Angvick says. (Thuesen says he was aware.)

About this time, the South Dakota-based Wheat Quality Council did its annual survey of the crop size for durum and spring wheat, based on a field survey. The so-called "spring wheat tour" indicated an exceptionally good durum crop. Some economists in the region started to think farmers might "out-produce" the ACRE program formulas, meaning they might miss out on LDPs.

The real education


In early August, the government officials were especially energetic in educating farmers about ACRE. But of some 500 farm operators in Sheridan County, Angvick says, only about 30 people representing 47 farms enrolled.

Harvest was delayed because of cool, wet weather.

The Thuesens didn't start on their durum until early September. It was an excellent crop. Thuesen says his averaged about 35 bushels, compared with a county average of about 25 bushels. Yields in the 40- to 50-bushel range weren't uncommon.

With the national average price of $6.65 per bushel (lagging two-year running average), their trigger would be $186 per acre. Farmers could tack on another $8 would of crop insurance premiums, so the total "revenue figure" for an individual farm is $194 per acre.

A farmer not in the ACRE program could expect to "trigger" if his actual yields were less than 40 bushels.

In late August, the FSA started reporting an LDP payment of about 10 cents per bushel on durum. Thuesen expected he'd get 70 percent of any LDP payment.

That turned out to be false.

Thuesen thought he could apply when the harvested bushels were in his possession

By the end of September, he found he was wrong.

Instead of receiving 70 percent of an LDP based on a $4.54 per bushel loan rate, the ACRE participant would get a 30 percent reduction in the loan rate -- to $3.18 per bushel. Instead of netting $1.05 per bushel in LDPs, and Jerry and David Thuesen would get nothing.


Angvick figures that in Sheridan County alone has some 47 farms were signed up for the ACRE program in durum now are out an estimated at $1.5 million in LDP payments.

And there's another problem.

Registering complaint

Nationally, USDA had anticipated a huge run on its offices to meet the Aug. 14 deadline. So they quietly let county offices know they could establish a "register" to handle this flow.

Like many producers, the Thuesens didn't know about any kind of register.

Jerry signed up the day before the deadline, on Aug. 13, thinking that was the only deadline.

"Most people didn't find out there was a register available until the last day," Angvick says.

As a result, Thuesen says he was, in effect, "discriminated against for being timely" because he wasn't informed of a register.

"Unbeknownst to a considerable number of us who signed up for the program, if the county committee -- whoever -- felt like you couldn't get your landlord signatures, you were told that there was a 'register' that effectively could give us 45 days to get those signatures," Thuesen says.

He thinks a majority of producers weren't informed of this key information: "If you couldn't get a signature, or could find some excuse not to sign it, you could do it later. I know it was explained to a few, and I don't know how many. And I don't know how they selected them to be informed. I've never heard of a register before that wasn't available to everybody."

Thuesen thinks some producers who had full signature authority -- power of attorney for all their landlords -- simply intentionally could have left off some of those names so they could be on the register.

"That's the way it looks," he says.

The effect would be that they'd have an extra month and a half to watch the price of durum drop and the LDP potential rise. At the end of September came, they simply could choose to drop out of the program.

Appealing future?

Most producers caught up in the situation, like Thuesen, went ahead and applied for their LDPs, as though they'd dropped out of ACRE program. All of them got turned down.

Then they appealed to the local Sheridan County FSA county committee. Those appeals still are being processed.

The next steps, if necessary, would be appealing it to Montana's state FSA committee and then on up the chain, to a national FSA office and a National Appeals Division.

"Our local county committee can apply for relief due to misinformation," Angvick says. "We hope they do. If you have a certain amount of money damage levels, it's out of their hands."

Thuesen hopes to be allowed to withdraw from the program.

"Like the price of durum, I can't forecast what'll happen," Thuesen says. "I'm hopeful."

Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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