Dr. Jody CampicheOklahoma State University

2014 Farm Bill Commodity Programs

Disclaimer

All analysis is based on my interpretation of the bill language.

Some information in unknown since USDA has not published the regulations for implementation of farm bill programs.

ARC and PLC calculations are based on various price and yield scenarios and do not reflect actual payments.

The information provided in this webinar is designed to provide further understanding of new farm bill programs.

2014 Farm Bill• Eliminated Programs

• CCP• DP (except transition assistance payments for cotton)• ACRE• SURE

• New Programs• Agriculture Risk Coverage (ARC)• Price Loss Coverage (PLC)• Supplemental Coverage Option (SCO)• Stacked Income Protection Plan (STAX)

Summary of New ProgramsARC – Revenue protection program similar to ACRE – used

individual or county yield instead of state yield as in ACRE – sign up at FSA (not an option for cotton base)

PLC- Price protection program similar to CCP – updated reference prices – sign up at FSA (not an option for cotton base)

SCO – covers part of the deductible portion of an individual insurance policy – purchased through a crop insurance agent in addition to individual policy

STAX – very similar to SCO but only for cotton

CottonSince cotton is not eligible for ARC/PLC and STAX isn’t

available until 2015, cotton producers will receive transitional payments

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)

Choices

2014:• 1. Retain or update base acres• 2. Retain or update payment yields• 3. Enroll in PLC or ARC (individual or county)• 4. Chose individual insurance policy (RP, YP, other) coverage

2015:• 1. If enrolled in PLC, option to enroll in SCO• 2. Option to enroll cotton in SCO or STAX• 3. Choose individual insurance policy (RP, YP, other) coverage

Commodity Program/Crop Insurance Choice

Base UpdateARC/PLC paid on base acres (not including cotton base acres)

ACRE was paid on planted acres, DP and CCP were 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 paymentsCan receive ARC/PLC on cotton base acres if another crop

is planted each year on those acres – year by year decision

Option to retain or reallocate base acres (not including cotton base acres) to crops planted in 2009-2012

Base UpdateReallocation 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, has 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)

Reallocation cannot increase base acres (still have the same amount in effect on Sept 30, 2013)

Cotton (or Generic) Base

• All existing cotton base acres on a farm are automatically converted to generic base

• Generic base is irrelevant unless a covered commodity is planted on the farm

• Cotton is no longer a covered commodity

• Generic base is assigned to that covered commodity for that crop year

Cotton (or Generic) BaseAssume the farmer has 100 acres of generic base Example 1: Farmer plants 75 acres of peanuts. All 75 acres of generic base are assigned to peanuts. Example 2: Farmer plants 150 acres of peanuts. All 100 acres of generic assigned to peanuts. NOTE: The farmer cannot receive more than 100 acres of payments on generic base because he/she only has 100 acres of generic base. Example 3: Farmer plants 35 acres of peanuts and 35 acres of soybeans, for a total of 70 acres of covered commodities. Since that is less than the 100 acres of generic base, the farmer is paid on 35 acres of peanuts and 35 acres of soybeans.

Example 4: Farmer plants 80 acres of peanuts (50%) and 80 acres of soybeans (50%), for a total of 160 acres of covered commodities. Since 160 acres is in excess of the 100 acres of generic base, the farmer is paid on a pro-rata share. Since 50% of the covered commodity acres are in peanuts, 50% of the generic base (or 50 acres) goes to peanuts. Since the other 50% of the covered commodity acres are in soybeans, the other 50% of the generic base (or 50 acres) goes to soybeans.  

 

Yield UpdateOption to update payment yields

Only applies to PLC in the 2014 farm billARC not tied to payment yields

May still want to update yields even if enrolled in ARC Recent yields may be higher than historic yields

Payment yields could be used in future farm bill programs

Yield UpdateUpdated 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

One time irrevocable decision in 2014 (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 – need to agree and make the decision in 2014!)

Program choice follows land (in case the land is farmed by a different operator in a later year)

PLC vs. ARC

Producers with cotton base will also choose ARC or PLC in 2014 in case they plant a crop other than cotton in a future year (even if they are planting cotton in 2014)

PLC: How does it work?Payment if actual price* < reference price

Payment rate = (reference price – actual price1) * payment yield * 85% * base acres

1use the higher of national marketing year price or loan rate – unlikely for price < loan rate

PLC: How does it work?PLC Reference Prices

PLC Payment on 85% of Base Acres

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

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)

ARC Individual

If ARC Individual is selected, election applies to all covered commodities on the farm

Calculations include the producer's planted acreage share in all farms for which Individual ARC has been selected

Payments triggered when actual revenue is less than the revenue guarantee 

Payments on 65% of base acres

ARC IndividualActual revenue is the weighted average of the actual revenues for each

covered commodity

Weights assigned by the amount of acreage planted to each crop in each crop year

Actual revenue for each commodity = yield * MYA price

Benchmark revenue 1. Annual benchmark revenue for each commodity = yield * MYA price

for each commodity for each year2. Calculate the 5-year Olympic average benchmark revenue for each

commodity (computed in #1)3. Use Olympic average benchmark revenue for each commodity

(computed in # 2) to compute a weighted average whole-farm revenue with weights based on planted acres of each commodity

Price Forecasts

USDA February 2014

2013/14 2014/15 2015/16 2016/17 2017/2018 2018/19

Wheat 7.00 4.90 4.35 4.30 4.45 4.60

Corn 4.50 3.65 3.30 3.35 3.40 3.60

Soybeans 12.15 9.75 8.85 8.90 9.05 9.25

Grain Sorghum 4.20 3.40 3.10 3.15 3.20 3.35

FAPRI March 2013*

2013/14 2014/15 2015/16 2016/17 2017/2018 2018/19

Wheat 7.12 6.19 5.95 6.01 6.11 6.28

Corn 5.18 4.69 4.73 4.79 4.83 4.88

Soybeans 11.49 11.25 10.98 11.22 11.47 11.67

Grain Sorghum 4.92 4.49 4.54 4.61 4.67 4.72

*New FAPRI forecast available in March 2014

Wheat

PLC vs. County ARC

Wheat PLC ARCCounty/Program Yield 42 30

5 Yr Oly. Avg Price/Reference Price 5.50 6.52100%/86% Coverage 5.50 5.61Revenue/Price Guarantee 5.50 168.302014/15 MYA Price 5.06 5.06Actual Yield NA 30Actual Revenue NA 151.80Guarantee - Actual 0.44 16.50Payment Rate 18.48 16.50Max Payment Rate NA 19.57Base Acres 100 100Payment Acres 85 85Payment $1,570.80 $1,402.67

PLC vs. County ARC

Wheat PLC ARCCounty/Program Yield 42 285 Yr Oly. Avg Price/Reference Price 5.50 6.52100%/86% Coverage 5.50 5.61Revenue/Price Guarantee 5.50 157.082014/15 MYA Price 6.45 6.45Actual Yield NA 22Actual Revenue NA 141.90Guarantee - Actual -0.95 15.18Actual Payment Rate 0.00 15.18Max Payment Rate NA 18.27Base Acres 100 100Payment Acres 85 85Payment $0.00 $1,290.46

PLC vs. County ARC - Wheat

MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)

4.85 30 27.30 19.57

5.00 30 21.00 18.30

5.50 30 0.00 3.30

6.00 30 0.00 0.00

PLC vs. County ARC - Wheat

MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)

5.00 25 21.00 19.57

5.50 25 0.00 19.57

6.00 25 0.00 19.57

6.50 25 0.00 19.57

6.75 25 0.00 0.00

Corn

PLC vs. County ARC - Corn

MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)

3.65 130 6.75 68.64

3.95 130 0.00 68.64

4.00 130 0.00 68.64

4.25 130 0.00 37.80

4.50 130 0.00 5.30

Soybeans

PLC vs. County ARC – Soybeans

MYA Price Yield PLC Payment ($/base acre) ARC Payment ($/base acre)

10.00 38 0.00 19.68

10.95 38 0.00 0.00

11.10 30 0.00 46.47

11.50 30 0.00 46.47

12.00 30 0.00 46.47

SCO STAX

Prices Projected Price = futures price at plantingHarvest price = futures price at harvest

County Revenue Expected county trend yield1 * higher of (projected price, harvest price)

Actual County Revenue Actual county yield * harvest price

Farm Revenue Farm APH yield * higher of (projected price, harvest price)

NA

Range of Coverage 86% - individual policy coverage level

Minimum of: 20% or 90% - individual policy coverage level

Maximum Payment Range of coverage * expected farm revenue

Range of coverage * expected county revenue * payment multiplier

Percent loss 86% - (actual county revenue/expected county revenue)

90% - (actual county revenue/expected county revenue)

Payment Minimum of: maximum payment or (% loss * expected county revenue)

Minimum of: maximum payment or (% loss * expected county revenue *

payment multiplier)

Premium Subsidy 65% (producer pays 35%) 80% (producer pays 20%)

Multiplier NA Up to 120%

1higher of expected county trend yield or 5 year moving avg county yield for STAX

Payment Limits/AGI$125,000 combined limit on ARC, PLC, MLG, LDP

New regulations to define “actively engaged”

One AGI Limitation of $900,000 for commodity and conservation programs (instead of separate farm/non-farm income limits)

Crop Insurance

Supplemental CoverageSupplemental Coverage Option (SCO)

Available for commodities enrolled in PLC and cotton65% subsidyAvailable in 2015

Stacked Income Protection Plan (STAX)Only available for cotton producers

80% subsidyAvailable in 2015

OtherPermanent higher subsidy for enterprise units

Separate enterprise units for irrigated/non-irrigated crops

Different coverage levels for irrigated/non-irrigated crops

Option to exclude certain yield history from APH databaseIf county suffers a 50% yield loss, farmers in the county

can exclude that year’s low yield out of their APH

Revenue insurance for peanuts

Beginning Farmer/RancherPremium assistance that is 10 percentage points higher

Beginning farmer/rancher previously involved in farming operation assigned a yield that is the higher of APH of previous producer on the acreage

Higher plug yield of 80% of applicable T-yield

NAPProducers may purchase NAP for crops/grasses used for

grazing (at the CAT coverage level)

Could also choose to enroll in the new Annual Forage (AF) insurance instead

Jody Campiche528 Ag Hall

405-744-9811jody.campiche@okstate.edu

http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters