Transcript Slide 1
2012 Farm Bill Update
Dr. Jody Campiche
Oklahoma State University
September 11, 2012
Current Situation
2008 Farm Bill expires on Sept. 30, 2012
Senate has passed its version of the farm bill
Reform, Food and Jobs Act of 2012
House Ag Committee passed its version of
the farm bill
Federal Agricultural Reform and Risk Management Act”
(FARRM)
Bill has not been debated on the House floor
Timeline
June 19
Senate passed its version of the farm bill
July 12
House Ag Committee passed its version of the farm bill
Bill has not received floor time in the House
July 27
House announced that it would consider a 1 year extension of the 2008 farm
bill and a disaster assistance package
Aug. 2
House Ag Committee dropped the 1 year farm bill extension and passed the
Agricultural Disaster Assistance Act of 2012
Aug 3 – Sept. 10
House & Senate scheduled to go out of session
Senate has not considered the drought assistance bill
House Disaster Relief Bill
Revive expired disaster relief programs for cattle
and sheep producers
Livestock disaster assistance programs in the
2008 farm bill expired in Oct. 2011
To make supplemental agricultural disaster
assistance available for fiscal year 2012
costs offset by changes to certain conservation programs
House Disaster Relief Bill
Livestock Indemnity Program
Payments to eligible producers on farms that have
incurred livestock death losses in excess of the normal
mortality
attacks by animals reintroduced into the wild by the Federal
Government or protected by Federal law, including wolves and
avian predators
adverse weather (including losses due to hurricanes, floods,
blizzards, disease, wildfires, extreme heat, and extreme cold)
House Disaster Relief Bill
Livestock Forage Disaster Program
An eligible livestock producer may receive assistance under this
subsection only for grazing losses for covered livestock that occur
on land that is:
Native or improved pastureland with permanent vegetative cover
Planted to a crop planted specifically for the purpose of providing
grazing for covered livestock
House Disaster Relief Bill
Emergency Assistance for Livestock, Honey
Bees, and Farm-Raised Fish
Emergency relief to eligible producers of livestock, honey bees, and
farm-raised fish
Aid in the reduction of losses due to disease, adverse weather, or
other conditions, such as blizzards and wildfires
Farm Bill Negotiations
FARRM will likely be reworked by the House
once it gets floor time
When the House passes its version of the
2012 farm bill, it will have to be reconciled
with the Senate farm bill through a joint
conference committee
Budget issues will continue to be a factor in
these negotiations.
Senate vs House Bill
Commodity/Crop Insurance Programs
Senate
Ag Risk Coverage (ARC)
STAX
Supplemental Insurance Coverage (SCO)
Marketing Loan
House
Revenue Loss Coverage (RLC)
Price Loss Coverage (PLC)
STAX
Supplemental Insurance Coverage (SCO)
Marketing Loan
Senate ARC
Option to choose coverage at the individual level
(based on individual farm yields) or at the county
level (based on average county yields)
Can also enroll in the Supplemental Coverage
insurance option with a coverage level of up to 79%
Once chosen, the decision is irrevocable for the life
of the farm bill
Upland cotton is not eligible
Senate ARC
Additional ARC Rules
$50,000 payment limit on ARC payments
$750,000 AGI limit from farm and non-farm
sources
not eligible for farm payments if AGI > $750,000
Senate SCO
Producers can purchase an area-wide policy to cover a
portion of the crop insurance deductible
Producers pay 30% of the premium for this coverage
2 options
1) if they enroll in ARC, they get SCO coverage up to 79%
(coverage can’t exceed 79% - insurance plan coverage level)
2) if they opt out of ARC, they get SCO coverage up to 90%
(coverage can’t exceed 90% - insurance plan coverage level)
Triggered if county losses exceed 10% of normal levels
Not available for producers enrolled in STAX
House Bill Commodity/Insurance Programs
Price Loss Coverage
Revenue Loss Coverage
STAX
Supplemental Insurance Coverage
Marketing Loan
House Commodity Programs
Choice between 2 options
Available on a commodity by commodity basis but once
selected are irrevocable
(1) Price Loss Coverage
price loss triggered
similar to the counter-cyclical payment (CCP) program
(2) Revenue Loss Coverage
revenue loss triggered
Upland cotton not eligible for PLC or RLC
House PLC
Risk management tool that addresses deep, multiple-year
price declines
Complements federal crop insurance, which is not designed
to cover multiple-year price declines.
Limits budget exposure by only addressing deep,
multiple-year price losses
Prevents the need for costly and unbudgeted bailouts
when markets collapse
House RLC
Risk management tool that addresses revenue losses, similar to the Senate ARC
program
Requires a producer to experience at least a 15 percent loss
ensures that all risk is not removed from farming and that no growers
are guaranteed profits
Offers coverage based on county-wide losses to ensure that a government
program is not set up to duplicate, for free, what farmers should pay for under
crop insurance
Uses yield plugs and an index of below cost-of-production prices as a
benchmark in establishing this revenue-based risk management tool for
producers
Provides full planting flexibility to ensure that producers plant for market and
agronomic conditions
PLC and RLC apply to planted acres up to total base acres on a farm in order to
House PLC
Reference prices provided to determine losses
similar to target prices
Payment triggered if the “effective price” of a
commodity is less than the “reference price” of that
commodity for the marketing year
House RLC
Additional RLC & PLC Rules
$125,000 payment limit on combined PLC and RLC payments
(peanuts have separate limit)
$950,000 AGI limit from farm and non-farm sources (not eligible for
farm payments if AGI > $950,000)
RLC is similar to the county ARC option in the Senate farm bill
ARC only has reference prices for rice and peanuts where RLC has
reference prices for all program crops
RLC lowers the trigger point by 4%, requiring producers to incur a
15% loss before receiving assistance
House SCO
Producers enrolling in PLC can purchase an area-wide policy to cover a
portion of the crop insurance deductible
Coverage up to 79%
Triggered if county losses exceed 10% of normal levels
Not available for producers enrolled in STAX
STAX
Stacked Income Protection Plan
Separate insurance program for upland cotton
Shallow-loss, area-wide revenue insurance
Voluntary program whereby farmers could supplement existing revenue
insurance with an area-wide insurance product subsidized at 80%
“Stacked” feature
Provides shallow-loss coverage that would sit on top of the producer’s individual crop
insurance deep-loss product
Uses an area-wide revenue product or group risk income protection (GRIP)
program where losses are determined at the county level rather than the farm
level
Area-wide policies such as GRIP are generally cheaper than farm-level
policies since the risk of loss is pooled at a more aggregate level
STAX
Delivered through crop insurance, providing protection against shallow
losses—between 10% to 30% loss of average revenue—by riding on top of
existing crop insurance policies
Can elect coverage between the individual insurance deductible and
90% of expected county revenue
If individual insurance not purchased, STAX coverage can be
elected between 70% and 90%
Multiplier factor up to 120% is allowed
Premium subsidy is 80%
STAX is not available to upland cotton acres in the Supplemental Coverage
Option
House vs. Senate STAX
Main difference between the House and Senate version of STAX
inclusion of a reference price in the House Ag. version of $.6861/lb
No Limits on STAX premium subsidies or acres covered
No insurance products are subject to limits or eligibility restrictions
Senate & House Conservation
Streamlines and consolidates 23 programs into 13
Improves conservation delivery by simplifying the numerous programs available to
producers
Still provides farmers, ranchers, foresters, and landowners with voluntary, incentivebased financial and technical assistance for conservation practices
Passing a Bill by October?
Disaster Assistance
Disaster Declarations
Many Oklahoma counties have been designated
as primary natural disaster areas
Producers in these counties are eligible for low-
interest emergency loans
Interest rate for emergency loans has been
reduced from 3.75% to 2.25%
Disaster Assistance
Emergency Haying and Grazing
CRP participants may be able to hay and graze acres that have
previously been ineligible – extended for 2 months
Additional acres have wetland-related characteristics and may
contain better quality hay and forage than on other CRP acres
CRP acres can already be used for emergency haying and grazing
during natural disasters
Lands that are not yet classified as "under severe drought" but that
are "abnormally dry" can now be used for haying and grazing
Reduction in annual rental payment reduced from 25% to 10%
Disaster Assistance
Environmental Quality Incentives Program (EQIP)
Producers may be able to modify their current EQIP contracts
prescribed grazing
livestock watering facilities
water conservation
other conservation activities to address drought conditions
NRCS will work closely with producers to modify existing EQIP
contracts to ensure successful implementation of planned conservation
practices
Wetlands Reserve Program (WRP)
May receive authorization to hay/graze WRP easement areas in
drought-affected areas
Disaster Assistance
Grace Period for 2012 Federal Crop Insurance Premiums
Crop insurance companies have agreed to provide a 30 day
grace period for 2012 insurance premiums
Producers will have an extra 30 days to make payments
without incurring interest penalties on unpaid premiums
Insurance Deadlines
Crop Insurance for wheat and small grains – Oct. 1
Pasture, Rangeland, Forage insurance – Nov. 15
USDA subsidized insurance program offered by RMA
designed specifically for hay and livestock producers
Drought insurance based on a Rainfall Index where you
insure your pasture as grazing land or hay land
2011 ACRE Payments
Initially, it did not look like OK wheat would trigger for an
ACRE payment based on the state yield of 22 bu/acre
reported by NASS earlier this year
FSA also considers failed acres when calculating the
average state yield for the ACRE payment calculation
divide NASS total production by NASS harvested acres plus
FSA’s “failed” acres and that lowers the state yield
2011 ACRE Payments
The prices and yields used in the 2011 ACRE calculation for
OK wheat and oats are final
An ACRE payment will be made on wheat, but not for oats
It is very likely that a few other crops will also trigger, but
the prices and yields are not final yet
2011 ACRE Payments
Oklahoma producers enrolled in the 2011 ACRE program
may receive an ACRE payment for enrolled wheat acres
For ACRE payments to be made, both the state and farm
level trigger must be met
State trigger has been met – state yield = 18.3 bu/acre
For the farm trigger to be met, the Farm ACRE Revenue
Guarantee > Actual Farm Revenue
Actual ACRE payment for each producer will vary based on
the farm benchmark yield
2011 ACRE Payments
Wheat- $19
Soybeans – max payment $55/acre
farm/state benchmark ratio
actual state yield = 13, benchmark yield = 23.5
Corn - ? – NASS doesn’t publish irrigated/non-
irrigated yields for OK
Sorghum-$34/acre
farm/state benchmark ratio
actual state yield = 21, benchmark yield = 51
Canola -$0
2011 ACRE Payments
State benchmark yield is 27.5 bu/acre
If the farm benchmark yield = state benchmark yield, the payment will
be $19.27/acre
Payment will be higher or lower than $19.27 if the farm benchmark
yield is higher or lower than 27.5 bu/acre
Max ACRE payment is $37.94/acre
2011 ACRE Payments – Farm Trigger
To determine if the farm trigger is met, need
Farm benchmark yield
2011 actual farm yield
2011 crop insurance per acre premium (this will be $0 if you don’t
have crop insurance (not required for ACRE participation but it
does increase the farm guarantee)
ACRE guarantee price ($5.29)
National average market price ($7.24)
2011 ACRE Payments – Farm Benchmark Yield
• Olympic average of farm yields per planted acre for
the five most recent crop years (excludes high and
low yields)
• So for 2011, it is the Olympic average of the 20062010 yields
2006
2007
2008
2009
2010
40
36
45 (highest)
20 (lowest)
39
Farm Benchmark Yield =
average (40,36,39) = 38.3 bu/acre
2011 ACRE Payments
Here is an example calculation to determine if the farm
trigger is met:
Farm ACRE Guarantee = 38.3 * $5.29 + $0 = $202.61
Actual Farm Revenue = 20 * $7.24 = $144.80
The farm ACRE guarantee > Actual Farm Revenue, so the
farm trigger is met
2011 ACRE Payments
ACRE Payment Calculation
Average payment is $19.27/acre but ACRE only pays on
83.3% of planted acres
Actual ACRE payment calculation is:
83.3% of farm planted or considered planted acres (not to
exceed total base acres)* (Farm Benchmark Yield/State
Benchmark Yield) * $19.27
.833 * (38.3/27.5) * $19.27 = $22.35/acre
or
.833 * 1.3927273 * $19.27 = $22.35/acre
2011 ACRE Payments
ACRE county plug yields are on the FSA website.
Click on
this link
http://www.fsa.usda.gov/FSA/webapp?area=home&subject
=dccp&topic=landing and then click on 2011 Program Year
County Yields (as shown below) to open the Excel file.
Pilot federal crop insurance program that provides insurance protection
for forage produced for grazing or harvested for hay
Administered by RMA and sold through private crop insurance companies
Due to difficulties quantifying price and yield for forage crops, particularly
for grazing, standard crop insurance products are generally not an option.
Similar to group risk insurance and provides area-wide coverage
RMA established a base value of forage for each county using multiple
data sources
Initially available in 2007 in OK and 5 other states and was based on a
vegetation index
Now expanded to many states and based on a rainfall or vegetation index
For OK and the majority of the US, now based on a rainfall index
Insures producers based on average rainfall in their geographic area
instead of the producers’ individual farm
Producers receive an indemnity payment when rainfall in their area falls
below the normal historical level
Rainfall Index uses National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA
CPC) data
Each grid is 0.25 degrees in latitude by 0.25 degrees in longitude
Does not directly reflect the rainfall amounts measured at a specific weather station within a particular grid
Reflects a smoothed result of nearby weather station estimates in order to obtain an estimate for the grid
Most group risk insurance provides coverage at the county level, but this product provides coverage at the
grid level.
Select at least two, 2-month time periods, called index intervals, when rain is important to the operation
Insurance payments are calculated using NOAA CPC data for the grid(s) and the chosen index interval(s)
If the final grid index < trigger grid index (coverage level * expected grid index), loss payment may be
issued
Only covers lack of rainfall
Producer may have low rainfall on their own farm and not receive a payment under the PRF policy
Does not measure direct production or loss
Do not have to insure all acreage
Producers will be asked to make several choices
Intended Use
Productivity Factor
Coverage Level
Insurable Interest
Insured Acres
Index Intervals
A decision tool is available allowing producers to estimate premiums and
indemnities from 1948 to the current year to see how the program would have
performed if they were enrolled in previous years
Can also view the historical rainfall indices for their area using the tool
1) Intended Use – Choose haying or grazing
2) Coverage Level
RMA has established a county baseline level of normal rainfall
Choose a level of 70, 75, 80, 85, or 90% of the baseline county value
Premium cost will increase with higher coverage levels
3) Productivity Factor
RMA has established a per acre productivity value for each county based on income received
for haying/grazing operations under normal rainfall conditions
Choose a factor between 60 and 150 % of the county value
Select the amount of protection based on the forage value that best represents the specific
grazing or hay operation, as well as the productivity of the land
Premium cost will increase/decrease depending on the protection factor selected
Producers can only select one productivity factor for each crop type and county
4) Insurable Interest
Choose the appropriate insurable interest for the acreage
Insurable interest is the insured’s percentage of the insured crop that is
at financial risk based on:
(1) Interest in the livestock to be grazed on the insured acres, if the
acres are cash leased
(2) Of the value gained of the livestock being grazed on the insured
acres if the acres are share leased
-Lessors under a cash lease are not considered to have a share in the
insured crop
5) Insured Acres
Same acreage cannot be insured for both haying and grazing in the
same crop year
Same acres cannot be insured in more than one grid ID or county
If acreage is located in more than one grid, producers can choose to
put all acreage in one grid or divide the acreage into separate grids
6) Sample Year
Choose any year from 1948 to the current year
Recent data from the current year will likely be
missing(for example, during the first of September 2012,
only the data for the Jan-Feb to May-Jun intervals is
available to view)
7) Index Intervals
Choose at least two, 2-month time periods (out of a total
of 11), that are most important to the operation
Cannot choose 2 intervals in a row because can’t double
insure acreage
for example, if you choose the May-June interval, you
cannot choose the June-July interval and you will see
a N/A in the unavailable interval
Use USDA Grid Locator
Grid 1
Grid 2
Tract A
Grid 2 – 75 ac grazing
Tract B: Option 1
Grid 1 – 85 ac grazing
Grid 3 – 155 ac grazing
Tract B: Option 2
County
A
A
County B
75 acres
240 Total Acres
B 85 acres
155 acres
Hay Meadow 50 Ac
Grid 1 or 3 – 240 ac grazing
165 acres
Tract C
Grid 4
165 ac grazing
50 ac hay
C
Grid 3
Grid 4
Questions?
Jody Campiche
528 Ag Hall
405-744-9811
[email protected]
http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters