2014 Farm Bill update - Department of Agricultural Economics

Report
2014 FARM BILL COMMODITY
PROGRAM UPDATE
Jody Campiche
Eric DeVuyst
Department of Agricultural Economics
Oklahoma State University
Disclaimer




This information is based on my reading of the 2014 farm
bill and discussions with Congressional Agriculture
Committee staff
I know there will likely be differences in my interpretation
and the final rules and regulations
This information is intended to be for educational purposes
only
Additional information will be available before most
decisions need to be made
Covered 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
Eliminated Programs
New Programs
COMMODITY PROGRAMS
CROP INSURANCE
Important Points


Distinction between programs tied to base acres and
programs tied to planted acres
 This part gets a bit confusing
Payment limits exist for commodity programs but not for crop
insurance programs



As the program is currently specified, cotton producers would no
longer be subject to payment limits since both STAX and SCO
would have no payment limits
Combined payment limit for ARC/PLC/MLG/LDP – could have
different implications for different regions
SCO and STAX cost money!
Important Points


The decision to enroll in ARC/PLC varies by crop,
region, farm size, etc…
SCO may not be an attractive option for some
crops/regions/farms
Farm Program Choices
Plant a different crop than base crop
Farm Program Choices

Interaction between programs

Choices will all take place at different times

This may be particularly confusing for ARC/PLC and SCO
 No SCO for 2014 crop year
 SCO
sign-up for the 2015 crop year will occur before
ARC/PLC sign-up for the 2014 crop year (for fall planted
wheat)
 For
other crops, producers may enroll in 2014 ARC/PLC
prior to 2015 SCO enrollment
Farm Program Choices
2014 crop year:
1. Retain or update base acres – fall 2014
2. Retain or update payment yields – fall 2014
3. Enroll in PLC, ARC county, or ARC individual – late 2014/early 2015
2015 crop year:
1. Option to enroll in SCO (producer) – fall 2014 for winter wheat or
spring 2015

Not an option for crops/farms enrolled in ARC
2. Choose individual insurance policy (RP, YP, other) coverage – fall
2014 or spring 2015
Important note: SCO enrollment for 2015 fall planted wheat will occur in
Sept. 2014
Important Program Details
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 reallocated
 Can 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 base
 In 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 bill but the update is
separate from the ARC/PLC decision
 ARC 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 late 2014 or early 2015 (for
remainder of 2014 farm bill)
PLC
 PLC – price protection
 Payment if actual price < reference price
 Similar to CCP in 2008 farm bill
 Key difference:
 Higher reference prices
PLC
Crop
2008 FB CCP
Target Price
2.24
PLC Reference
Price
4.95
Corn
Cotton
Grain Sorghum
2.63
0.7125
2.57
3.70
NA
3.95
Peanuts
Oats
Rice
495
1.44
10.50
535
2.40
14.00
Soybeans
Wheat
5.80
3.92
8.40
5.50
Barley
ARC
 ARC – revenue protection
 Option to choose farm or county level coverage
 Farm paid on 65% of base (includes whole farm revenue)
 County paid on 85% of base
 Similar to ACRE in 2008 farm bill
 Key differences:
 County level trigger (ACRE had a STATE/farm trigger)
 Payment limited to 10% of the benchmark revenue (ACRE
payment limited to 25% of benchmark)
 Huge difference for OK wheat ($45-$60 ACRE payment
compared to $16-$20 ARC payment)
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
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)
Guarantee
SCO




Shallow loss insurance program that covers countywide 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
65% subsidy
SCO



County-level policy endorsement that is in addition to
an underlying crop insurance policy
Covers a portion of losses not covered by the same
crop’s underlying policy
Producers who elect to participate in ARC are not
eligible for SCO for the crop and farm participating
in ARC
SCO – Winter Wheat


Producers applying for SCO for the 2015 winter
wheat crop may withdraw coverage on any farm
where intend to elect ARC for winter wheat by the
earlier of their acreage reporting date or Dec. 15,
without penalty (and will not be charged a crop
insurance premium)
Allows producers additional time to make an
informed decision about ARC or PLC for winter wheat
SCO Covered Commodities:
2015 crop year

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Corn
Cotton
Grain sorghum
Rice
Soybeans
Spring barley
Spring wheat
Winter wheat
SCO – OK Counties (Winter Wheat)
Alfalfa
Beaver
Beckham
Blaine
Caddo
Canadian
Cimarron
Comanche
Cotton
Custer
Dewey
Ellis
Garfield
Garvin
Grady
Grant
Greer
Harmon
Harper
Jackson
Kay
Kingfisher
Kiowa
Logan
Major
McClain
Noble
Oklahoma
Ottawa
Payne
Roger Mills
Texas
Tillman
Wagoner
Washita
Woods
Woodward
SCO Expected Area Yields
Alfalfa
Beaver
Beckham
Blaine
Caddo
Canadian
Cimarron
Comanche
Cotton
Custer
Dewey
Ellis
Garfield
Garvin
Grady
Grant
Greer
Harmon
Harper
35.3
27.3
21.7
27.5
30.5
30.9
20.7
23.7
24.0
28.5
26.5
21.5
33.2
31.9
28.1
32.5
24.2
26.6
25.4
Jackson
Kay
Kingfisher
Kiowa
Logan
Major
McClain
Noble
Oklahoma
Ottawa
Payne
Roger Mills
Texas
Tillman
Wagoner
Washita
Woods
Woodward
27.2
30.6
30.2
26.7
31.3
30.3
31.7
25.4
33.2
33.1
26.5
24.5
33.5
26.2
31.7
27.6
31.8
26.5
SCO: Slightly Confusing
PLC/ARC Details

Example 1
 Producer
has 100 acres wheat base and enrolls the
wheat in ARC – plants 100 acres of wheat – CANNOT
enroll wheat in SCO

Example 2
 Producer
has 100 acres of wheat base, enrolls the
wheat in ARC - plants 100 acres of corn – CAN enroll
the corn in SCO
SCO/RP/YP/ARC/PLC Decisions

Is SCO offered for your crop/county for 2015?

Is ARC a better option for your crop/farm?

Is your base acreage different than your current planted acreage?

Will you reallocate base acreage?

What is your current RP/YP coverage level?

What is the cost of higher RP/YP coverage?

Do you have enterprise units?
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

SCO
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

80% subsidy
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

Different yields used in calculation?
OSU/KSU Decision Tool
Results
Questions?
Jody Campiche
[email protected]
405-744-9811

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