Farm Bill Update - PPT - Oklahoma State University

2014 FARM BILL:
COMMODITY PROGRAMS
Jody Campiche
Assistant Professor & Extension Economist
Oklahoma State University
Livestock/Forage Programs
LFP and LIP Payments
Covered Commodity Programs
Eliminated Programs
New Programs
COMMODITY PROGRAMS
CROP INSURANCE
Covered Commodities


Covered commodities include wheat, oats, barley,
corn, grain sorghum, long grain rice, medium grain
rice, pulse crops, soybeans, other oilseeds and
peanuts
Upland cotton is no longer a covered commodity
Choices
2014:
1. Retain or update base acres (landowner)
2. Retain or update payment yields (landowner)
3. Enroll in PLC or ARC (individual or county)
(landowner/producer)
4. Choose individual insurance policy (RP, YP, other) coverage
(producer)
2015:
1. If enrolled in PLC, option to enroll in SCO (producer)
2. Choose individual insurance policy (RP, YP, other) coverage
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)
 ARC/PLC payments are not automatic like direct payments
 Two types of base acres:
 Total base acres (non-cotton acres)
 Generic base acres (old cotton acres)
Reallocation of Base Acres
 Option to retain or reallocate total base acres
to crops planted in 2009-2012 – cannot
update cotton base acres
 Generic cotton acres cannot be reallocated
 Can receive ARC/PLC on generic cotton
acres if another crop is planted on those
acres
Reallocation of Base Acres
 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, 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)
Yield Update
 Option to update payment yields
 Only applies to PLC in the 2014 farm bill
 ARC not tied to payment yields
 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
 (except farm-level ARC – must select farm-level
ARC for all commodities on a farm #)
 One time decision in fall 2014 or early 2015 (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)
PLC vs. ARC
 PLC – price protection
 Payment if actual price* < reference price
 Payment rate = (reference price – actual price1) *
payment yield * 85% * base acres
 ARC – revenue protection
 Option to choose farm or county level coverage
 Farm paid on 65% of base
 County paid on 85% of base
PLC
Crop
Barley
Corn
Cotton
Grain Sorghum
Peanuts
Oats
Rice
Soybeans
Wheat
2008 FB CCP
Target Price
2.24
2.63
0.7125
2.57
495
1.44
10.50
5.80
3.92
PLC Reference
Price
4.95
3.70
NA
3.95
535
2.40
14.00
8.40
5.50
ARC




Farm-level ARC is a whole-farm revenue program
Farm-level ARC might trigger payments more frequently
than county-level ARC but producers would receive a
payment on 20% less base acreage
With county-level coverage, a producer could have a loss on
his own farm, but would not receive a payment if the county
does not suffer a loss as well
Producers with yields that do not follow closely with the
county average may want to consider farm-level ARC
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)
Maximum
Payment
None (except for
$125K combined
payment limit)
10% * Benchmark Revenue
(and $125K combined payment limit)
Guarantee
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

Not available for acreage enrolled in ARC

65% subsidy
RMA – SCO questions…


What if I decide I want to enroll into the ARC program after
I've selected SCO coverage for winter wheat?
Producers who enroll their winter wheat in SCO may elect to
withdraw from SCO prior to their acreage reporting date
without any penalty. This allows producers additional time to
make an informed decision related to whether to enroll in the
ARC or PLC. If they choose ARC, they will not be charged a
crop insurance premium so long as they withdraw from SCO
prior to their acreage reporting date.
RMA – SCO questions…


Will I be able to purchase SCO for the 2015 crop year?
It depends. RMA is making every effort to offer SCO to as
many producers as possible. SCO will be available for corn,
grain sorghum, rice, soybeans, spring wheat, and winter wheat
in selected counties for the 2015 crop year. Program details
and eligible counties will be made available in the early
summer of 2014.
RMA – Beginning farmer/rancher
questions…


I have heard that the farm bill has provisions that will both
help new and beginning farmers purchase crop insurance
and enhance the crop insurance beginning farmers already
have.
Yes, a beginning Farmer and Rancher will be exempt from
paying the $300 fee for CAT coverage policies, and receive
premium subsidy assistance for additional coverage policies
that is 10 % points greater than what is otherwise available.
RMA – Beginning farmer/rancher
questions…


It defines a “beginning farmer and rancher” to be a person
who has not actively operated and managed a farm or ranch
with a bona fide interest in a crop or livestock as an owneroperator, landlord, tenant or sharecropper for more than 5
years. In addition, in certain instances, a beginning farmer may
use the production history of another farm operation they were
previously involved with in the decision making or physical
involvement in the production of the crop.
If the beginning farmer experiences a poor yielding crop, they
may replace the poor yield in their yield history for
determining next year’s guarantee with 80 percent of the
county T-Yield, which is 20 percentage points higher than they
previously would have received.
Upland Cotton
Cotton Safety Net

Reduced direct payment, called a transition
payment, in 2014 (and possibly 2015)
 Since cotton is not eligible for ARC/PLC and STAX isn’t available until
2015
 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)

Marketing loan support

STAX - area-wide revenue insurance program
STAX


STAX coverage can range from 90% of the county
revenue guarantee to 70% or the coverage level of
the underlying policy (if there is one) whichever is
higher
An individual policy is not required with STAX
SCO vs. STAX


Upland cotton producers have the option to elect
SCO instead of STAX for planted cotton acreage
Key differences
 With
SCO, the producer’s APH yield is used to calculate
the liability
 Higher subsidy with STAX
OSU/KSU Decision Tool
Results
Results
FSA Timeline
Implementation