Transcript 2014 Farm Bill update - August - Department of Agricultural Economics
2014 FARM BILL COMMODITY PROGRAMS
Dr. Jody Campiche Dr. Eric DeVuyst Department of Agricultural Economics Oklahoma State University
Disclaimer
This information is based on my reading of the 2014 farm bill and discussions with Congressional Agriculture Committee staff I know there will likely be differences in my interpretation and the final rules and regulations This information is intended to be for educational purposes only Additional information will be available before most decisions need to be made
2014 Farm Bill
One-time decision to reallocate base acres **total base acres cannot increase (will be the same as on Sept. 30, 2013) One-time decision to update CC yields on a farm One-time (5 year) election of: Price Loss Coverage (PLC) Ag Risk Coverage – County (ARC-CO) Ag Risk Coverage – Individual (ARC-IC)
Owner/Operator Acreage History Letters
Should have received a letter with basic background of base acreage Should receive a Summary Acreage History Report Acreage of covered commodities reported to FSA from 2008-2012 Includes your base acreage and CC yield as of 9/30/13 Contact your local FSA office if your acreage history is incorrect Collect your 2008-12 yield data
Decisions at the FSA office
Do you want to update your base acreage?
Do you want to update your FSA payment yields?
Do you want to enroll each crop/farm in ARC or PLC?
Payment Acres
ARC/PLC paid on base acres Do NOT have to plant to receive ARC/PLC on base acres (not including cotton base acres) PLC calculation uses the FSA payment yield
Decisions at the crop insurance office
If you chose not to enroll a crop/farm in ARC, do you want to purchase SCO?
Are you comfortable with a county-level product SCO only pays if the county has a loss but the premium is much cheaper than an RP policy
Reallocation of Base Acres
Option to retain or reallocate total base acres to crops planted in 2009-2012 Reallocation is in proportion to the ratio of the 4-year average of planted acres for each covered commodity
Reallocation of Base Acres
Example: Producer has 80 acres of wheat base In the past 4 years, 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)
Base Reallocation Example
Corn Grain Sorghum Wheat Totals
2009
0 150 250 400
2010
0 100 300 400
2011
200 0 200 400
2012
200 0 200 400
Yield Update
Updated payment yield = 90% of the average of the yield per planted acre for the 2008-2012 crop years Exclude any year when no acreage was planted to the covered commodity Will likely use crop insurance APH yield data for 2008 2012 Producers with yields in any of the 2008-2012 years that are < 75% of the county average yield can use 75% of the 2008 2012 county average yield as a substitute The substitute yield for Garfield County Wheat = 24
Yield Update Example
Wheat CC yield = 35 bu Garfield County 75% of 2008-12 yield = 24 (75% of 24 = 18) Wheat 75% Avg Garfield County Yield 2008 2009 2010 2011 2012 45 24 15 24 42 24 10 24 43 24 Avg Yield 35 90% of Avg Yield 31
New Programs
COMMODITY PROGRAMS CROP INSURANCE
4 Commodity Program/Crop Insurance Choices
PLC PLC + SCO ARC-County ARC-Individual
Plant a different crop than base crop
Important Points
Distinction between programs tied to base acres and programs tied to planted acres ARC/PLC paid on base acres SCO paid on planted acres Payment limits exist for commodity programs but not for crop insurance programs
Important Points
The decision to enroll in ARC/PLC varies by crop, region, farm size, etc… SCO may not be an attractive option for some crops/regions/farms ARC/PLC paid on 85% of base acres, SCO paid on 100% of planted acres
Farm Program Choices
Farm Program Choices
Interaction between programs Choices will all take place at different times This may be particularly confusing for ARC/PLC and SCO No SCO for 2014 crop year SCO sign-up for the 2015 crop year will occur before ARC/PLC sign-up for the 2014 crop year (for fall planted wheat)
PLC
PLC – price protection Payment if actual national average marketing year price < reference price Paid on 85% of base acres Do not have to plant to receive payment if payment is triggered
Crop
Barley Corn Cotton Grain Sorghum Peanuts Oats Rice Canola Soybeans Wheat
PLC
PLC Reference Price
4.95
3.70
NA 3.95
535 2.40
14.00
20.15/cwt 8.40
5.50
ARC
ARC – revenue protection Option to choose farm or county level coverage Farm paid on 65% of base (includes whole farm revenue) County paid on 85% of base Do not have to plant to receive payment if payment is triggered
ARC
Similar to ACRE in 2008 farm bill Key differences: County level trigger (ACRE had a STATE/farm trigger) Payment limited to 10% of the benchmark revenue Huge difference for OK wheat ($45-$60 ACRE payment compared to $16-$20 ARC payment)
PLC vs. ARC County
Both are limited by $125K payment limit per entity Both paid on 85% of base acreage ARC – limited to 10% of benchmark revenue ($160-$210 for wheat)
PLC vs. ARC County
PLC – limited to: $5.50 – actual price * FSA payment yield Ex. $5.00 price and 35 bu FSA payment yield = $17 PLC Ex. $4.75 price and 35 bu FSA payment yield = $26 PLC Ex. $4.50 price and 35 bu FSA payment yield = $35 PLC Then if you add SCO and the county has a revenue loss, you could get an SCO payment The maximum SCO payment is higher than the maximum ARC payment but you do pay a premium for SCO
SCO
Shallow loss insurance program that covers county wide losses and complements a producer’s individual insurance policy Requires that producers purchase an underlying insurance policy Covers the difference between 86% and the level of coverage of the producer’s individual insurance policy 65% subsidy
SCO
County-level policy endorsement that is in addition to an underlying crop insurance policy Starts in 2015 – can enroll each year as long as ARC is not selected for the crop/farm Producers who elect to participate in ARC are not eligible for SCO for the crop and farm participating in ARC
SCO Decision Tool
Alfalfa Beaver Beckham Blaine Caddo Canadian Cimarron Comanche Cotton Custer Dewey Ellis Garfield Garvin Grady Grant Greer Harmon Harper
SCO Expected Area Yields
35.3
27.3
21.7
27.5
30.5
30.9
20.7
23.7
24.0
28.5
26.5
21.5
33.2
31.9
28.1
32.5
24.2
26.6
25.4
Jackson Kay Kingfisher Kiowa Logan Major McClain Noble Oklahoma Ottawa Payne Roger Mills Texas Tillman Wagoner Washita Woods Woodward 27.2
30.6
30.2
26.7
31.3
30.3
31.7
25.4
33.2
33.1
26.5
24.5
33.5
26.2
31.7
27.6
31.8
26.5
SCO: Slightly Confusing PLC/ARC Details
Example 1 Producer has 100 acres wheat base and enrolls the wheat in ARC – plants 100 acres of wheat – CANNOT enroll wheat in SCO Example 2 Producer has 100 acres of wheat base, enrolls the wheat in ARC - plants 100 acres of corn – CAN enroll the corn in SCO
SCO/RP/YP/ARC/PLC Decisions
Is ARC a better option for your crop/farm?
Is your base acreage different than your current planted acreage?
Will you reallocate base acreage?
What is your current RP/YP coverage level?
What is the cost of higher RP/YP coverage?
Do you have enterprise units?
Are you planting a large amount of acreage over your base?
Timeline
Sept 30, 2015 – elect SCO for 2015 wheat Late Summer/Early Fall 2015 – update yields and reallocate bases Winter 2014 – final base and yield notices issued, elect ARC/PLC Winter 2014 – withdraw from SCO if you elect ARC Early 2015 – Enroll in ARC/PLC for 2014 and 2015
OSU/KSU Decision Tool
Results
Questions?
Jody Campiche [email protected]
http://agecon.okstate.edu/agpolicy/ 405-744-9811