2014 Farm Bill Summary & Decision Aid Tool

Levi A. Russell Assistant Professor & Extension Economist Joe L. Outlaw Professor & Extension Economist Co-Director, AFPC Coastal Bend Extension Training September 24, 2014

Dallam Joe Farmer 4567, 6789

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FSA Crop History Summary

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In We want actuals or the Rate Yield

Price Forecasts

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21 Covered Commodities USDA

– – – Midsession review from this summer for 2013 2018 2013 and 2014 updated monthly from WASDE Not sure about coverage

FAPRI

– – Special analysis done monthly after WASDE published I have files for most crops from January and all 21 starting in July

Browser Compatibility

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IE 9 or greater Firefox Chrome Safari If you update your computer regularly, you shouldn’t have a problem

Covered Commodities

• Wheat, Oats, Barley, Corn, Grain Sorghum, Long Grain Rice, Medium Grain Rice, Pulse Crops, Soybeans, Other Oilseeds and Peanuts – Other Oilseeds • Sunflower seed, Rapeseed, Canola, Safflower, Flaxseed, Mustard Seed, Crambe, Sesame Seed, or any oilseed designated by the Secretary – Pulse Crops • Dry peas, Lentils, Small Chickpeas and Large Chickpeas

Yield Updating

Year

2008 2009 2010 2011 2012 75% T Yield Could Update to:

Corn Wheat

DNP DNP DNP 100 150 70 30 15 22 0 32 18 (100 + 150)/2*.9 =112.5 (30 + 18+22+18+32)/5*.9 =21.6

Yield Updating

Year

2008 2009 2010 2011 2012 75% T Yield Could Update to:

Corn

DNP DNP DNP DNP 150 70 150*.9 =135

Wheat

DNP DNP DNP DNP DNP 18 18*0.9 = 16.2

Base Reallocation

• One time base reallocation Two choices • • Reallocate (cannot add base acres to a farm) Retain existing base acres Reallocates bases other than cotton that were on the farm as of September 30, 2013 Reallocation is in proportion to the ratio of: • • The 4 year average of planted acres to each crop from 2009 to 2012 plus prevented planting/the 4 year average of all covered commodities planted plus prevent planting Under planting does not affect the amount of base. The planted acres of covered commodities only affects the proportion of base acres that you will reallocate among commodities

Base Reallocation Example

Base Plantings 2009 2010 2011 2012 Average Share Corn 0 500 500 500 500 500 50% Sorghum 0 250 250 250 250 250 25% Reallocated Base 500 Source: House Agriculture Committee Staff 250 Soybeans 0 250 250 250 250 250 25% 250 Wheat 1,000 0 0 0 0 0 0% 0 Total 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Base Reallocation Example

Base Plantings 2009 2010 2011 2012 Average Share

With a Non-program Crop

Corn 0 600 600 600 600 600 75% Sorghum Soybeans 0 100 100 100 100 100 0 100 100 100 100 100 12.5% 12.5% Reallocated Base 750 Source: House Agriculture Committee Staff 125 125 Wheat 1,000 0 0 0 0 0 0% 0 Alfalfa n/a 200 200 200 200 200 n/a Total 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Base Reallocation Example

Base a/ Plantings 2009 2010 2011 2012 Average Generic Base Cotton 500 200 200 200 200 200 500

With Cotton

Corn 0 600 600 600 600 600 Share Reallocated Base Source: House Agriculture Committee Staff 75% 375 Sorghum Soybeans Wheat 0 0 500 100 100 100 100 100 12.5% 62.5

100 100 100 100 100 12.5% 62.5

0 0 0 0 0 0% 0 Total 1,000 1,000 1,000 1,000 1,000 1,000 500 500

Cotton Base Becomes Generic Base

• All Cotton base on the farm as of September 30, 2013 is renamed Generic Base Upland cotton no longer receives traditional commodity program payments (other than loan protection against very low prices) In an attempt to resolve longstanding WTO dispute with Brazil, the only income support upland cotton will receive is through purchased insurance On an annual basis, generic base acres can be assigned to other covered commodities based on the number of acres planted of the other covered commodities • Example: 100 total acres on farm 50 acres of wheat base and 50 acres generic. If farmer plants 50 acres of wheat and 50 acres of sorghum they would have 75 acres of base for wheat and 25 acres of base for sorghum crops for that year. If planted all wheat then would have 100 acres of wheat base for that year. If planted all cotton then in Washington terms the generic base is idle for that year. (see following examples)

Generic Base

100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 50 acres of wheat and 50 acres of sorghum Original Wheat Base Allocated Generic Base to Wheat Allocated Generic Base to Sorghum Farmer has protection on 75 acres of wheat and 25 acres of GS

Generic Base

100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 100 acres of wheat Original Wheat Base Allocated Generic Base to Wheat Farmer has protection on 100 acres of wheat

Generic Base

100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 100 acres of cotton Original Wheat Base Generic Base Idled for Year Farmer has protection on 50 acres of wheat

Generic Base

100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 50 acres of wheat and 50 acres of cotton Original Wheat Base Allocated Generic Base to Wheat Farmer has protection on 100 acres of wheat

Generic Base

100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 1 acre of wheat and 99 acres of cotton Original Wheat Base Generic Base Idled for Year Farmer has protection on 51 acres of wheat

Covered Commodity Wheat Barley Oats Corn Grain Sorghum Rice Other Oilseeds Soybeans Peanuts Pulse Crops Subcategory

Medium Grain Long Grain Japonica Canola Flaxseed Rapeseed Sunflower Mustard seed Safflower Crambe Sesame Dry Peas Lentils Small Chickpeas Large Chickpeas

Units

Bushels Bushels Bushels Bushels Bushels Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Hundredweight Bushels Ton Hundredweight Hundredweight Hundredweight Hundredweight

Marketing Year

June 1 - May 31 June 1 - May 31 June 1 - May 31 Sept 1 - Aug 31 Sept 1 - Aug 31 Aug 1 - July 31 Aug 1 - July 31 Aug 1 - July 31 July 1 - June 30 July 1 - June 30 July 1 - June 30 Sept 1 - Aug 31 Sept 1 - Aug 31 Sept 1 - Aug 31 Sept 1 - Aug 31 Sept 1 - Aug 31 Sept 1 - Aug 31 Aug 1 - July 31 July 1 - June 30 July 1 - June 30 Sept 1 - Aug 31 Sept 1 - Aug 31

2014 - 2018 Reference Price

$ 5.50

$ 4.95

$ 2.40

$ $ 3.70

3.95

$ 14.00

$ 14.00

$ 16.10

$ 20.15

$ 20.15

$ 20.15

$ 20.15

$ 20.15

$ 20.15

$ 20.15

$ 20.15

$ 8.40

$ 535.00

$ 11.00

$ 19.97

$ 19.04

$ 21.54

2014 - 2018 Loan Rate

$ 2.94

$ 1.95

$ 1.39

$ 1.95

$ 1.95

$ 6.50

$ 6.50

$ 6.50

$ 10.09

$ 10.09

$ 10.09

$ 10.09

$ 10.09

$ 10.09

$ 10.09

$ 10.09

$ 5.00

$ 355.00

$ 5.40

$ 11.28

$ 7.43

$ 11.28

Flow Chart of Title I Producer Choices for Covered Commodities (Does Not Include Upland Cotton)

Title I Title XI County Choose ARC Crop Insurance

Choice Between ARC and PLC

Individual

Base Reallocation Decision

LANDOWNER DECISION OR TENANT IF P.O.A.

Choose PLC TENANT (CASH) OWNER/TENANT (SHARE) LANDOWNER DECISION Beginning in 2015 can choose SCO insurance option This decision is on a crop by crop basis for each farm unless the producer chooses individual ARC then it is for all the crops on that farm. If all parties cannot agree on a choice then the farm would not be enrolled in ARC or PLC for the 2014 crop and the farm would automatically be enrolled in PLC for the 2015 crop and beyond.

Who Makes The Decisions?

• Base reallocation -

As soon as practicable after the date of enactment of this Act, the Secretary shall provide notice to the owners of a farm regarding their opportunity to make an election

• Yield Update -

At the sole discretion of the owner of a farm, the owner of a farm shall have a 1-time opportunity to update, on a covered commodity-by-covered-commodity basis, the payment yield that would otherwise be used in calculating any price loss coverage payment for each covered commodity on the farm for which the election is made.

Who Makes The Decisions? (Cont)

• ARC or PLC For the 2014 through 2018 crop years, all of the producers on a farm shall make a 1-time, irrevocable election to obtain— (1) price loss coverage under section 1116 on a covered commodity-by covered-commodity basis; or (2) agriculture risk coverage under section 1117.

IN GENERAL.—The term ‘‘producer’’ means an owner, operator, landlord, tenant, or sharecropper that shares in the risk of pro ducing a crop and is entitled to share in the crop available for marketing from the farm, or would have shared had the crop been produced.

This decision stays with the farm for the life of the farm bill

Guess at the Sign-up Timeline

August 2014 Sept Fix Planted Acres with FSA Oct Nov Dec Reallocate Bases & Update Yields Jan Feb March Choice Between ARC & PLC April May Annual Sign-up June 2015

Wheat Signup (SCO Sept 30) Cotton Transition Pmt (Oct 7)

Crop Insurance Expected Revenue Example of Price Loss Coverage (PLC) Plus SCO

How useful will SCO be? Depends on the relative size of the deductible and the cost If buying 85% coverage level not as exciting SCO 40% with the 2015 crop year Insurance Guarantee Indemnity 26% Ind. Coverage Indemnity

Example: 60% Actual coverage Price X Actual Yield + Any PLC Benefits

Producers applying for SCO for the 2015 winter wheat crop may withdraw coverage on any farm where they have elected, or where they intend to elect, ARC for winter wheat by the earlier of their acreage reporting date or Dec. 15, without penalty. This allows producers additional time to make an informed decision related to whether to elect to participate in either the ARC or Price Loss Coverage (PLC) programs for their winter wheat. If producers withdraw SCO coverage for a farm by the earlier of their acreage reporting date or Dec. 15, they will not be charged a crop insurance premium. In order to withdraw coverage without penalty, producers must notify their agents of their intended election for ARC by the earlier of their winter wheat acreage reporting date or Dec. 15.

Crop Year 2015 S tacked Income P rotection (S TAX ) Availability for Cotton L e g e n d P rogram O ffered

Choice of STAX with or without crop insurance or SCO with underlying insurance policy Can’t have both on same acres

Flow Chart of Title XI Decisions for Upland Cotton STAX Coverage from 90% to 70% or underlying coverage level whichever is higher

Area-wide policy Premium Subsidy – 80% Protection Factor 80 to 120% Loss and indemnity determined by county data

SCO Coverage from 86% to underlying coverage level

Area-wide policy Premium Subsidy – 65% Loss determined by county data, indemnity by individual APH

Illustration of Government Support for Wheat Under PLC Insurance Base Price – $7.02

Revenue per bu

Reference Price – $5.50

PLC

Loan Rate – $2.94

Market Price

MLG/LDP Market Receipts 86% of benchmark

Paid on base acres x .85

Supplemental Coverage Option

Crop insurance coverage

Illustration of Government Support for Wheat Under ARC-County

Revenue per bu 86% 76%

Loan Rate – $2.94

MLG

Market Price

Market Receipts Revenue Benchmark Revenue Guarantee

[paid on base acres x .65 (individual) or .85 (county)]

Crop insurance coverage

Producer Price Outlook a Factor in ARC/PLC Decision (Corn Ex.)

7 Yields could also offset 6,5 FAPRI Price Projections 6 5,5 5 4,5 4 3,5 5,28 5,28 4,82 4,07 3,96 3 2,5 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sept. 2014 FAPRI Prices Benchmark Price 86% 76% Ref Price

Producer Price Outlook a Factor in ARC/PLC Decision (Wheat Ex.)

6,5 6 5,5 5 8 7,5 7 6,60 6,67 6,67 6,13 5,77 Sept. 2014 FAPRI Prices Benchmark Price 86% 76% Ref Price 4,5 4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Producer Price Outlook a Factor in ARC/PLC Decision (Grain Sorghum Ex.)

6,50 6,00 5,50 5,00 4,50 4,00 5,09 5,09 4,73 4,05 3,95 Sept. 2014 FAPRI Prices Benchmark Price 86% 76% Ref Price 3,50 3,00 2,50 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Major Insurance Provisions

• • • • • A new area-wide insurance program (SCO) will be available to all producers to purchase beginning in 2015 that is designed to protect them against losses that would normally fall within their insurance deductible range. Must have individual policy.

Up to 86% revenue guarantee. 65% premium subsidy Makes enterprise unit discount permanent. Allows enterprise units to be split out for irrigated and non-irrigated crops.

Adjustment in actual production history to determine insurable yields.

A producer may choose to exclude any year from their APH if their yield

Don’t Count on This For Next Year

and non-irrigated acres.

Must create a revenue policy for peanuts in time for the 2015 crop

Discussion of NAAFP Decision Aid

• • • • National Association for Agriculture and Food Policy (NAAFP) has been working on the decision aid for nearly 2 years – – AFPC at Texas A&M FAPRI at University of Missouri-Columbia Applied for and received funding from USDA-FSA to develop nation-wide decision aid Available today at: https://www.afpc.tamu.edu/models/decisionaid.php

Available soon on the USDA-FSA website 4/25/2020 35

Overview of NAAFP Farm Bill Decision Aid

• • • Register as a producer or multi client user – – Email address and password protect your data Email address allows us to contact user when FSA changes rules or new price projections are available Enter data for all FSA Farm and Tract Numbers – – All Crops and their Practices by Tract number Types not critical to FSA but important to RMA for SCO, STAX, and insurance Analyze yield update, base reallocation, ARC-IC, ARC-CO, PLC, SCO, STAX, and insurance options 4/25/2020 36

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Overview of NAAFP Farm Bill Decision Aid

Producers’ data are stored in the decision aid – Data accessed by a user name and password We encourage producers to enter their data now and run the tool for each decision – – – Presently farmers should be using the tool to analyze Yield Update decision Next farmers can consider the interaction between Base Reallocation and PLC, ARC-CO, ARC-IC Election • This decision should be tested with multiple price scenarios Before final election, farmers can re-run the analysis to see if updated price outlooks in the Spring changed their preferences 37

Preparation for Using NAAFP Decision Aid

• Information needed for the Decision Aid are available from two primary sources – FSA Reported Commodity Crop History Summary (letter from FSA to producers, August 2014) • • • FSA farm number Base Acres and CCP Yield for covered crops Planted Acres – 4/25/2020 Crop Insurance Actual Production Report • Historical yields and planted acres • Ten years of yields preferred but 2008-2013 is essential 38

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First Step Is to Register

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Producer data is Saved, Email to Notify Regarding FSA Updates

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Producer and Multi Client Users

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Create Client Records & Switch Clients

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Farm with Two Crops and One FSA Number

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Yield Update Analyzer

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Results for Yield Update

• • Producer can print the FSA Yield Worksheet Print a separate form for each FSA number. Fill in the name and email address for contact person, farm number, historical yields, state code, and county code.

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Select the Base Acre Reallocation & PLC/ ARC Decision Aid

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Base Reallocation Options Calculated Directly, Next Analyze their Impacts on Payments by Program

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Three Choices for Testing Alternative Price Scenarios

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Output for Base Reallocation, PLC, ARC-IC, and ARC-CO

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Whole Farm Decision: All Crops Elect the Same Program

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Crop-by-Crop Results for Each Program Election Option

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Crop-by-Crop Results for Each Program Election Option

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

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Crop Insurance Analysis Interacts with ARC/PLC+SCO

Net revenue for the “best” combination of ARC/PLC and Insurance is presented.

Result here is ARC, with Revenue Protection at 85%.

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Summary

• • • • • • Decision Aid available on AFPC website since June 20 th – More than 2,000 testers so far Will be on FSA website when officially released All 21 covered commodities plus cotton available in the official release version Changes we expect after the official release: – – – Monthly updates of price projections by FAPRI USDA price projections updates as available Tool will be updated as FSA updates rules Accessible by smart phones, tablets, iPads, anything that can access the internet Helpdesk available 7 am to 7 pm after official release