ECON 337: Agricultural Marketing
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Transcript of ECON 337: Agricultural Marketing
ECON 337:Agricultural Marketing
Chad HartAssociate [email protected]
Lee SchulzAssistant [email protected]
Old vs. New Farm Bill
Direct Payments (DP) Countercyclical
Payments (CCP) Marketing Loans (LDP) Revenue
Countercyclical Payments (ACRE)
Countercyclical Payments (PLC)
Marketing Loans (LDP) Revenue
Countercyclical Payments (ARC)
New programs, but they have strong similarities to previous programs
What Stayed the Same?
Loan RatesSet by lawCorn $1.95Wheat
$2.94Soybean $5.00Sorghum $1.95Barley
$1.95Oats $1.39
Two Waves
First wave: Choice on base acreage and yield updatingProbably occurs late summer timeframe
Second wave: Choice on farm bill programsProbably late fall/early winterHarvest the crop and farm bill at the same time
Base Acres
Keep current base acres or do a one-time “reallocation” of base acres
Reallocation allowed to covered commodities planted between 2009 and 2012
Reallocation in proportion to the ratio of 4-yr average plantings/prevented plantings
Total number of base acres limited to total of existing base acres
Payment YieldsKeep current CCP payment yield or do a one-
time “update” of payment yield on a commodity-by-commodity basis
Update: 90% of 2008-2012 yield per planted acre on the farm
If the farm yield is below 75% of the 2008-2012 average county yield, then the farm yield is replaced by 75% of the 2008-2012 average county yield County yield: planted or harvested?
Payment Acres
For PLC and ARC at the county level, 85% of base acres
For ARC at the individual level, 65% of base acres
Producer Choice
Have one-time choice between:PLC or ARC (can pick by commodity)If ARC is chosen, pick between county and
individual coverageIf individual coverage is chosen, must be taken for
all covered commodities on the farm
2014-2018 crop years
Reference Prices
Reference PricesCorn $3.70Wheat
$5.50Soybean $8.40Sorghum $3.95Barley
$4.95Oats $2.40
Old Target PricesCorn $2.63Wheat
$4.17Soybean $6.00Sorghum $2.63Barley
$2.63Oats $1.79
PLC instead of CCP
Price-based support program
Reference prices establish targets
Works like CCP
Payment rate = Max(0, Reference price – Max(MYA price, Loan rate))
Payment = Payment rate * Payment yield * Payment acres
PLC vs. CCP and DP
ARC instead of ACRERevenue-based support program
Revenues based on 5-year Olympic average yields and prices
Yields and prices have cups (County T-yields and reference prices)
Triggers at county or individual farm level, instead of state level
ARC Payment RatePayment rate = Max(0,
Min(10% of Benchmark revenue,
Actual crop revenue – ARC guarantee))
So the basic payment structure is the same as it was under ACRE
Revenue Programs
ARC-County ARC-Individual
Benchmark revenue
5-yr OA county yield * 5-yr OA MYA price
Sum across crops of [5-yr OA (farm yield * MYA price) *crop acreage]
Actual crop revenue
County yield * Max(MYA price or loan rate)
Sum across crops of [Farm production * Max(MYA price or loan rate)] / Total planted acres of all covered crops
Revenue guarantee
86% of benchmark 86% of benchmark
Think of ARC-County as crop-by-cropThink of ARC-Individual as whole farm
Conservation Conservation Reserve Program
27.5 million acres in 2014 26 million acres in 2015 25 million acres in 2016 24 million acres in 2017 and 2018 Grassland enrollment capped at 2 million
acres
Supplemental Coverage Option (SCO)An additional policy to cover “shallow losses”
Shallow loss = part of the deductible on the producer’s underlying crop insurance policy
SCO has a county-level payment trigger
Indemnities are paid when the county experiences losses greater than 14%
Premium subsidy: 65%
Starts in 2015
Can’t have ARC and SCO together
Class web site:http://www.econ.iastate.edu/~chart/Classes/econ337/Spring2014/
Have a great weekend.
See you in lab on Tuesday.