Date post: | 30-Dec-2015 |
Category: |
Documents |
Upload: | rafael-reed |
View: | 21 times |
Download: | 0 times |
Peanut Provisions of the Farm Security and Rural Investment Act of 2002
2002 Farm Bill Education ConferenceKansas City, MissouriMay 20-21, 2002
Nathan SmithUniversity of Georgia
New Peanut ProgramNew Peanut Program
• Eliminates Quota • Provides a Quota Buyout• Establishes a
– Marketing Loan for Peanuts– Peanut Base – Direct Payment– Counter Cyclical Payment
Sources of Income
• Production Related– Market Sales– Marketing Loans
• Non-Production Related– Direct Payments– Counter Cyclical
– Buyout
Base Payments
Quotaholders
Producers Have Two Separate Decisions To MakeProducers Have Two Separate Decisions To Make
What Bases To Have To Maximize Payments?What Bases To Have To Maximize Payments?
Direct Payments (DP) and Counter Cyclical Payments (CCP) are tied to Base acres and what you produce or not produce has no bearing on these payments.
What Crops To Produce?What Crops To Produce?
LDP’s/POP’s or Marketing Loan Gains (MLG) are the only payments tied to actual production. Producing for cash+LDP or the loan rate.
Basic Peanut ProvisionsLoan Rate $355/ton
Direct Payments $36/ton
Target Price $495/ton
Base Acreage 1998-2001 Average
Direct Payment Program Yield 1998-2001 Average
Counter Cyclical Program Yield 1998-2001 Average
Payment Limits Separate but Equal
Buyout $0.11/lb per year for 5yrs Or $0.55 lump sum
1996 Farm Bill 2002 Farm Bill
Cash Price 610 Quota 325
Loan Rate 132* 355
LDP 30 **
Total Price610 Quota
132-375 Addt’l355
Direct Payment 36
Counter-Cyclical Payment
104
Buyout 220
Comparison Program @ 325/ton PeanutsComparison Program @ 325/ton Peanuts
*Additional peanuts**No Specifics on Calculating LDP are Known
Establishment of Peanut Base for each Historic Peanut
Producer• Program Yield
– Average yield for 1998-2001 excluding any year peanuts were not planted
– May substitute for a farm up to 3 years when peanuts were planted the county average yield from 1990-1997
• Base Acreage– Average acreage planted for 1998-2001, including
years of zero acreage.– Prevented planted included.– Base acres cannot exceed actual cropland on the
farm.– Exception for double-cropping.
Assignment of Peanut Base
• Deadline is set as March 31, 2003• Can assign to own farm or another farm
in the same state or a contiguous state (must be a historical producer in the state or a producer in the state on Mar. 31)
• One time assignment
Direct Payments• Upfront, fixed payment• Payment rate = $36/ton
DP = (payment rate x (base acres x .85) x farm program yield)
Example:$36 (or $0.018/lb) x 100 x 85% x 1.5 tons (or 3000 lb) = $4,590
= $45.90/acre
Option to receive 50% in advance after December 1 of each calender year
Counter-Cyclical Payments Target price
- Effective price Counter-cyclical payment rate ($/ton)
Effective price equals the higher of market price or loan rate plus the direct payment rate
CCP = CCP rate x Base acres x 85% x Farm Program Yield
Example:$495 – ($355 + $36) * 100 ac. x .85 x 1.5 tons (or 3000 lb) = $13260 = $132.26/acre
Timing of CCP Payments
• As soon as “practicable” after the end of the 12-month marketing year
• PARTIAL PAYMENTS:
– 1st payment : Up to 35% in October
– 2nd payment: Another 35% in February not to exceed 70% of estimated payment
Marketing Loan
Non-recourse Marketing Loan for all peanuts produced.
LDP could be taken on peanuts instead of actually taking out a loan.
9 month loan beginning the 1st day of month after the month in which the loan is made
Generic Marketing Certificates allowed CCC pays cost of storage, handling &
associated costs for loan peanuts
Loan Deficiency Payment / Market Loan Gain
• LDP/MLG = Loan Rate – “Loan Repayment Price”• No specifics are available on what how the Loan
Repayment Price will be calculated for peanuts. This price would be similar to “posted county price” for corn or the “adjusted world price” in cotton.
Examples: Loan Rate LRP LDP/MLG 355 – 300 = 55 355 – 350 = 5 355 – 400 = 0
Payment Limitations
• Separate limitations for Peanuts– Direct Payments = $40,000– Counter-Cyclical = $65,000– LDP/MLG = $75,000
• 3 Entity & Spouse Rule Apply to effectively double the limits
• Generic Marketing Certificates allow use of loan after limitation is reached.
• For 2002 payments, refers to the Historic Peanut Producer, i.e. 1-entity limit on payments to the producer.
Max Peanut Acres with $75,000 LDP Limit
LDP$/ton
Yield Per Acre (Pounds)
2000 2500 3000 3500 4000 4500
25 3000 2400 2000 1714 1500 1333
50 1500 1200 1000 857 750 667
75 1000 800 667 571 500 444
100 750 600 500 429 375 333
Max Peanut Acres with $40,000 DP Limit
Payment Yield
2500 3000 3500 4000 4500
Payment Acres 889 741 635 556 494
Base Acres 1046 871 747 654 581
Max Peanut Acres with $65,000 CCP Limit
PaymentYield
Price and CCP
300 325 350 400 450
104 104 104 59 9
2000 735 735 735 1296 8497
2500 588 588 588 1037 6797
3000 490 490 490 864 5664
3500 420 420 420 741 4855
4000 368 368 368 648 4248
4500 327 327 327 576 3776
Example Direct and Counter-Cyclical Payments, $ Per Base Acre
Corn Cotton Peanuts
Direct Payment 20 37 38
Maximum (Potential) Counter-Cyclical Payment
25 76 111
Maximum Combined Payment 45 113 149
Corn Cotton PeanutsPayment Yield: 85 bu. 650 lb. 2500 lb. Direct Rate: $0.28/bu. $0.0677/lb. $36/ton Target Price: $2.60/bu. $0.724/lb. $495/ton. Loan Rate: $1.98/bu. $0.52/lb. $355/ton.
Difference Between Peanut and Cotton Payments, $ Per Base Acre
Peanut Payment minus Cotton Payment
Peanut Average Season Price
Direct Payment
Counter-Cyclical Payment
Direct + Counter Cyclical
Payments
$350 1 36 37
$375 1 15 16
$400 1 (12) (11)
Cotton PeanutsPayment Yield: 650 lb. 2500 lb. Direct Rate: $0.0677/lb. $36/ton Target Price: $0.724/lb. $495/ton Loan Rate: $0.52/lb. $355/ton
Buyout
• $0.11 per pound per year for five years
• Allows the option to take $0.55/lb. in lump sum payment in year of quotaowner’s choosing.
Marketing Assessment?
• Quota is eliminated• No quota to assess for the $100+
million loss from 2001 crop
WHAT TO PRODUCE?Estimated Returns Above Variable Cost
for Peanuts and Cotton, $ Per Acre
Enterprise Expected Price (including LDP)
Expected Yield
Variable Cost
Return Above Variable Cost
Irrigated Peanuts
350 3500 461 152
Non-Irr. Peanuts
350 2500 404 34
Irrigated Cotton
0.56 1000 397 163
Non-Irr. Cotton
0.56 650 330 34
UGA Extension Ag Econ UGA Extension Ag Econ WebpageWebpage
www.agecon.uga.edu
Click on Extension(
www.ces.uga.edu/Agriculture/agecon/agecon.html
)
Click on: Farm Bill 2002
Find: PresentationsDecision Aid
(Excel Spreadsheet)
Producer enters Farm Historical and Updated Dataas well as 2002 Farm Plan Data
Includes Program Payment Analysis andLDP Payment Analysis
Provides Cash Flow Analysis by Commodity andReturn above variable expenses for Whole Farm operation
Note to Users: This decision aid is intended for education purposes and will updated periodically. Results are subject to change with USDA rules and regulations. Users should consult
their local FSA office before making final decisions.
Farm Bill Decision Aid
Input Menu
University of Georgia
Whole Farm Analysis
Program Analysis Results
Version 1.3 (updated 5/14/02)
2002 Farm ProgramInformation
Input Menu
Program Payment Analysis
Whole Farm Analysis