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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
CCP
SURE
ACRE
DP
New Programs
ARC
STAXSCO
PLCCROP INSURANCE
COMMODITY PROGRAMS
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 reallocatedCan 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 baseIn 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 billARC 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 protectionPayment if actual price* < reference pricePayment rate = (reference price – actual
price1) * payment yield * 85% * base acres
ARC – revenue protectionOption to choose farm or county level
coverageFarm paid on 65% of baseCounty paid on 85% of base
PLC
Crop 2008 FB CCP Target Price
PLC Reference
Price
Barley 2.24 4.95
Corn 2.63 3.70
Cotton 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
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
Guarantee 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)
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 owner-operator, 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