Outlook, Farm Bill, and Crop Insurance

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Outlook, Farm Bill, and Crop Insurance. ISUEO Farm Management In-Service Ames, Iowa May 8, 2012 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911. U.S. Corn Supply and Use. ?. Source: USDA-WAOB, 2012 Unofficial Projections. U.S. Soybean Supply and Use. - PowerPoint PPT Presentation

Transcript of Outlook, Farm Bill, and Crop Insurance

Slide 1Outlook, Farm Bill, and Crop Insurance
ISUEO Farm Management In-Service
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Budget Projections by Title
Budget Projections by Crop
Commodity Title
2012 Senate Proposal
Keeps marketing loan program
Extension and Outreach/Department of Economics
ARC instead of ACRE
Choice determines the % of land covered by the program
Extension and Outreach/Department of Economics
ARC Guarantees
Exception: farm-based price is 10-year average
Price is national season-average price
Yield is farm yield for farm-based coverage and county yield for county-based coverage
Yield is per planted (and prevented planted) acre
Guarantee = 89% * Ave. Price * Ave. Yield
Extension and Outreach/Department of Economics
ARC Set-up for Corn in 2013
10-year average
ARC Guarantees
Benchmark Revenue =
89% * $779.00/acre = $693.31/acre for county
89% * $618.28/acre = $550.27/acre for farm
Payments are triggered when actual revenues fall below these levels
Extension and Outreach/Department of Economics
ARC Actual Revenues
Price is set at the higher of the crop loan rate or the mid-season price
Loan rate for corn is $1.95/bu.
Mid-season price is the average price over the 1st 5 months of the marketing year
Extension and Outreach/Department of Economics
ARC Actual Revenues
Farm-based option uses actual farm yield
County-based option uses actual county yield
Actual Revenue = Price * Yield
ARC Payment Rate
The maximum payment rate is 10% of Benchmark Revenue
In my example, that’s $77.90/acre for the county-lever and $61.83/acre for the farm-level
Extension and Outreach/Department of Economics
ARC Acreage
Program is based on planted and prevented planted acres, but doesn’t pay on all of them
Acreage limit = average of 2009-12 plantings (and prevented plantings)
Treats planted and prevented planted acres differently
Extension and Outreach/Department of Economics
ARC Acreage
For farm-based option, you get paid on 65% of your planted acres and 45% of your prevented planting acres
For county-based option, you get paid on 80% of your planted acres and 45% of your prevented planting acres
Extension and Outreach/Department of Economics
ARC Payout Graph
ARC pays out
No ARC payments
Factors to Consider
Farm-based guarantee could be higher or lower than county-based guarantee
Farm-based option is generally more likely to pay out, but you get payments on 15% less acres
County-based option might not trigger when farm has a loss
Extension and Outreach/Department of Economics
Crop Insurance Title
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Crop Insurance
Can purchase area-based policy to cover deductible part of individual-based policy
Payments triggered when area suffers 10% loss
If you participate in ARC, you face a deductible of 21% for this option
What is the deductible if you do not participate in ARC?
70% premium subsidy for actuarially fair premium
Extension and Outreach/Department of Economics
Crop Insurance
Separate enterprise units for irrigated and nonirrigated land
Change t-yield percentage from 60% to 70%
Any renegotiation of the Standard Reinsurance Agreement shall be budget neutral
Extension and Outreach/Department of Economics
Crop Insurance
Allows premium subsidy of 60% or less
Waives CAT fee, adds 10% to premium subsidy rates, and sets yield bound at 80% of the t-yield for beginning farmers
Extension and Outreach/Department of Economics
Conservation Title
Not the Last Word on the 2012 Farm Bill
Senate proposal is just the start of the process
There will likely be several changes/modifications
ARC may or may not be in the final farm bill
But now we know the starting point for negotiations
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Price ($ per bu.)