Transcript Farm Bill Update - PPT - Oklahoma State University

2014 Farm Bill
Commodity Programs
Dr. Jody Campiche
Oklahoma State University
Disclaimer
All analysis is based on my interpretation of the bill language.
Some information in unknown since USDA has not published
the regulations for implementation of farm bill programs.
ARC and PLC calculations are based on various price and yield
scenarios and do not reflect actual payments.
The information provided in this webinar is designed to
provide further understanding of new farm bill programs.
2014 Farm Bill
• Eliminated Programs
• CCP
• DP (except transition assistance payments for cotton)
• ACRE
• SURE
• New Programs
• Agriculture Risk Coverage (ARC)
• Price Loss Coverage (PLC)
• Supplemental Coverage Option (SCO)
• Stacked Income Protection Plan (STAX)
Summary of New Programs
 ARC – Revenue protection program similar to ACRE – used
individual or county yield instead of state yield as in ACRE –
sign up at FSA (not an option for cotton base)
 PLC- Price protection program similar to CCP – updated
reference prices – sign up at FSA (not an option for cotton
base)
 SCO – covers part of the deductible portion of an individual
insurance policy – purchased through a crop insurance agent in
addition to individual policy
 STAX – very similar to SCO but only for cotton
Cotton
 Since cotton is not eligible for ARC/PLC and STAX isn’t
available until 2015, cotton producers will receive transitional
payments
 Payment on 60% of base acres in 2014
 Payment on 36.5% of base acres in 2015 (if STAX isn’t
available in the county)
Choices
2014:
• 1. Retain or update base acres
• 2. Retain or update payment yields
• 3. Enroll in PLC or ARC (individual or county)
• 4. Chose individual insurance policy (RP, YP, other) coverage
2015:
• 1. If enrolled in PLC, option to enroll in SCO
• 2. Option to enroll cotton in SCO or STAX
• 3. Choose individual insurance policy (RP, YP, other) coverage
Commodity Program/Crop Insurance Choice
Base Update
 ARC/PLC paid on base acres (not including cotton base acres)
 ACRE was paid on planted acres, DP and CCP were paid
on base acres
 Do NOT have to plant to receive ARC/PLC on base acres (not
including cotton base acres)
 ARC/PLC payments are not automatic like direct payments
 Can receive ARC/PLC on cotton base acres if another crop
is planted each year on those acres – year by year decision
 Option to retain or reallocate base acres (not including cotton
base acres) to crops planted in 2009-2012
Base Update
 Reallocation is in proportion to the ratio of the 4-year avg of
planted acres for each covered commodity
 Ex: Producer has 80 acres of wheat base
 In the past 4 years, has planted 160 acres - 40 acres of
wheat (25%) and 120 acres of corn (75%)
 Can retain 80 wheat base acres or reallocate 25% to wheat
and 75% to corn (so 20 wheat base acres and 60 corn base
acres)
 Reallocation cannot increase base acres (still have the same
amount in effect on Sept 30, 2013)
Cotton (or Generic) Base
• All existing cotton base acres on a farm are automatically
converted to generic base
• Generic base is irrelevant unless a covered commodity is
planted on the farm
• Cotton is no longer a covered commodity
• Generic base is assigned to that covered commodity for
that crop year
Cotton (or Generic) Base
Assume the farmer has 100 acres of generic base
Example 1: Farmer plants 75 acres of peanuts. All 75 acres of generic base are
assigned to peanuts.
Example 2: Farmer plants 150 acres of peanuts. All 100 acres of generic assigned to
peanuts. NOTE: The farmer cannot receive more than 100 acres of payments on
generic base because he/she only has 100 acres of generic base.
Example 3: Farmer plants 35 acres of peanuts and 35 acres of soybeans, for a total of
70 acres of covered commodities. Since that is less than the 100 acres of generic base,
the farmer is paid on 35 acres of peanuts and 35 acres of soybeans.
Example 4: Farmer plants 80 acres of peanuts (50%) and 80 acres of soybeans (50%),
for a total of 160 acres of covered commodities. Since 160 acres is in excess of the 100
acres of generic base, the farmer is paid on a pro-rata share. Since 50% of the covered
commodity acres are in peanuts, 50% of the generic base (or 50 acres) goes to peanuts.
Since the other 50% of the covered commodity acres are in soybeans, the other 50% of
the generic base (or 50 acres) goes to soybeans.
Yield Update
 Option to update payment yields
 Only applies to PLC in the 2014 farm bill
 ARC not tied to payment yields
 May still want to update yields even if enrolled in ARC
 Recent yields may be higher than historic yields
 Payment yields could be used in future farm bill
programs
Yield Update
 Updated payment yield will be 90% of the average of the yield
per planted acre for the 2008-2012 crop years
 If the yield for any of the 2008-2012 crop years is < 75% of the
average of the 2008-2012 county yields, a yield plug of 75% of
the avg 2008-2012 county yield will be used
PLC vs. ARC
 Commodity-by-commodity and farm-by-farm decision
 One time irrevocable decision in 2014 (for remainder of 2014
farm bill)
 All owners and tenants must make same choice (or default to
PLC with no payments until the 2015 crop year – need to agree
and make the decision in 2014!)
 Program choice follows land (in case the land is farmed by a
different operator in a later year)
PLC vs. ARC
 Producers with cotton base will also choose ARC or PLC in
2014 in case they plant a crop other than cotton in a future year
(even if they are planting cotton in 2014)
PLC: How does it work?
 Payment if actual price* < reference price
 Payment rate = (reference price – actual price1) * payment
yield * 85% * base acres
1use
the higher of national marketing year price or loan rate – unlikely for price < loan rate
PLC: How does it work?
 PLC Reference Prices
Crop
2008 FB CCP
Target Price
PLC Reference
Price
Barley
2.24
4.95
Corn
2.63
3.70
0.7125
NA
Grain Sorghum
2.57
3.95
Peanuts
495
535
Oats
1.44
2.40
Rice
10.50
14.00
Soybeans
5.80
8.40
Wheat
3.92
5.50
Cotton
 PLC Payment on 85% of Base Acres
PLC vs. County ARC
PLC
ARC County
Reference Price
County Revenue
Benchmark Yield
FSA program yields
5 yr Olympic Average county yield
Benchmark Price
Reference Price
5 yr Oly Avg max (MYA Price, Reference Price)
Benchmark Guarantee
Reference Price
86% * Benchmark Price * Benchmark Yield
Actual Yield
NA
County yield
Actual Revenue
NA
County yield * MYA Price
Payment Acres
85% * base acres
85% * base acres (30% of PP)
None (except for $125K
combined payment limit)
10% * Benchmark Revenue
(and $125K combined payment limit)
Guarantee
Maximum Payment
ARC Individual
If ARC Individual is selected, election applies to all covered
commodities on the farm
 Calculations include the producer's planted acreage share in all
farms for which Individual ARC has been selected
Payments triggered when actual revenue is less than the
revenue guarantee
Payments on 65% of base acres
ARC Individual
Actual revenue is the weighted average of the actual revenues for each
covered commodity


Weights assigned by the amount of acreage planted to each crop in
each crop year
Actual revenue for each commodity = yield * MYA price
 Benchmark revenue
1. Annual benchmark revenue for each commodity = yield * MYA price
for each commodity for each year
2. Calculate the 5-year Olympic average benchmark revenue for each
commodity (computed in #1)
3. Use Olympic average benchmark revenue for each commodity
(computed in # 2) to compute a weighted average whole-farm
revenue with weights based on planted acres of each commodity
Price Forecasts
USDA
February 2014
2013/14
2014/15
2015/16
2016/17
2017/2018
2018/19
Wheat
7.00
4.90
4.35
4.30
4.45
4.60
Corn
4.50
3.65
3.30
3.35
3.40
3.60
Soybeans
12.15
9.75
8.85
8.90
9.05
9.25
Grain Sorghum
4.20
3.40
3.10
3.15
3.20
3.35
FAPRI March
2013*
2013/14
2014/15
2015/16
2016/17
2017/2018
2018/19
Wheat
7.12
6.19
5.95
6.01
6.11
6.28
Corn
5.18
4.69
4.73
4.79
4.83
4.88
Soybeans
11.49
11.25
10.98
11.22
11.47
11.67
Grain Sorghum
4.92
4.49
4.54
4.61
4.67
4.72
*New FAPRI forecast available in March 2014
Wheat
PLC vs. County ARC
Wheat
County/Program Yield
5 Yr Oly. Avg Price/Reference Price
100%/86% Coverage
Revenue/Price Guarantee
2014/15 MYA Price
Actual Yield
Actual Revenue
Guarantee - Actual
Payment Rate
Max Payment Rate
Base Acres
Payment Acres
Payment
PLC
42
ARC
30
5.50
5.50
5.50
5.06
NA
NA
0.44
18.48
NA
100
85
$1,570.80
6.52
5.61
168.30
5.06
30
151.80
16.50
16.50
19.57
100
85
$1,402.67
PLC vs. County ARC
Wheat
County/Program Yield
5 Yr Oly. Avg Price/Reference Price
100%/86% Coverage
Revenue/Price Guarantee
2014/15 MYA Price
Actual Yield
Actual Revenue
Guarantee - Actual
Actual Payment Rate
Max Payment Rate
Base Acres
Payment Acres
Payment
PLC
42
5.50
5.50
5.50
6.45
NA
NA
-0.95
0.00
NA
100
85
$0.00
ARC
28
6.52
5.61
157.08
6.45
22
141.90
15.18
15.18
18.27
100
85
$1,290.46
PLC vs. County ARC - Wheat
MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)
4.85
30
27.30
19.57
5.00
30
21.00
18.30
5.50
30
0.00
3.30
6.00
30
0.00
0.00
PLC vs. County ARC - Wheat
MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)
5.00
25
21.00
19.57
5.50
25
0.00
19.57
6.00
25
0.00
19.57
6.50
25
0.00
19.57
6.75
25
0.00
0.00
Corn
PLC vs. County ARC - Corn
MYA Price Yield
PLC Payment ($/base acre)
ARC Payment ($/base acre)
3.65
130
6.75
68.64
3.95
130
0.00
68.64
4.00
130
0.00
68.64
4.25
130
0.00
37.80
4.50
130
0.00
5.30
Soybeans
PLC vs. County ARC – Soybeans
MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)
10.00
38
0.00
19.68
10.95
38
0.00
0.00
11.10
30
0.00
46.47
11.50
30
0.00
46.47
12.00
30
0.00
46.47
SCO
Prices
STAX
Projected Price = futures price at planting
Harvest price = futures price at harvest
County Revenue
Expected county trend yield1 * higher of (projected price, harvest price)
Actual County Revenue
Farm Revenue
Actual county yield * harvest price
Farm APH yield * higher of
(projected price, harvest price)
NA
Range of Coverage
86% - individual policy coverage
level
Minimum of: 20% or 90% - individual
policy coverage level
Maximum Payment
Range of coverage * expected farm
revenue
Range of coverage * expected county
revenue * payment multiplier
Percent loss
86% - (actual county
revenue/expected county revenue)
90% - (actual county revenue/expected
county revenue)
Minimum of: maximum payment or
(% loss * expected county revenue)
Minimum of: maximum payment or
(% loss * expected county revenue *
payment multiplier)
65% (producer pays 35%)
80% (producer pays 20%)
NA
Up to 120%
Payment
Premium Subsidy
Multiplier
1higher
of expected county trend yield or 5 year moving avg county yield for STAX
Payment Limits/AGI
 $125,000 combined limit on ARC, PLC, MLG, LDP
 New regulations to define “actively engaged”
 One AGI Limitation of $900,000 for commodity and
conservation programs (instead of separate farm/non-farm
income limits)
Crop Insurance
Supplemental Coverage
 Supplemental Coverage Option (SCO)
 Available for commodities enrolled in PLC and cotton
 65% subsidy
 Available in 2015
 Stacked Income Protection Plan (STAX)
 Only available for cotton producers
 80% subsidy
 Available in 2015
Other
 Permanent higher subsidy for enterprise units
 Separate enterprise units for irrigated/non-irrigated crops
 Different coverage levels for irrigated/non-irrigated crops
 Option to exclude certain yield history from APH database
 If county suffers a 50% yield loss, farmers in the county
can exclude that year’s low yield out of their APH
 Revenue insurance for peanuts
Beginning Farmer/Rancher
 Premium assistance that is 10 percentage points higher
 Beginning farmer/rancher previously involved in farming
operation assigned a yield that is the higher of APH of previous
producer on the acreage
 Higher plug yield of 80% of applicable T-yield
NAP
 Producers may purchase NAP for crops/grasses used for
grazing (at the CAT coverage level)
 Could also choose to enroll in the new Annual Forage (AF)
insurance instead
Jody Campiche
528 Ag Hall
405-744-9811
[email protected]
http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters