2002 Farm Bill

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2002 Farm Bill
Provisions and Impacts
Don Shurley Economist- Cotton University of
Georgia
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http//www.agecon.uga.edu Click on
Extension Click on Farm Bill 2002 Click on
Presentations
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Producers Have Two Important Decisions To Make
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? POPs/LDPs
or Marketing Loan Gains (MLG) are the only
payments tied to actual production. If you are
likely to reach the payment limit- can you
produce without an LDP? If so, which crop(s)?
If payment limit will not be a problem, then
remember you are producing for cashLDP or the
loan rate.
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Hypothetical Example of Payments on Base Acres
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Let Your Agronomic and Economic Comparative
Advantage
Be Your Guide The future is unknown. We
will have a 6-year farm bill. What about after
that? Economics and farm bill issues are
unpredictable and uncertain. Think about what
farm enterprises we in Georgia have a comparative
advantage in producing and think about desirable
crop rotations. It may be to your long-term
advantage to keep as much base in these crops as
possible.
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Summary of Significant Commodity Provisions

• Is a 6-year Bill -- 2002-2007.
• Provides increased income safety net by
  institution of
• new counter cyclical payment.
• Will allow producers to update base acres and
  payment
• (program) yields.
• Continues POP/LDP and MLG provisions and the
  use of
• marketing certificates.
• Establishes a new peanut program.
• Continues favorable payment limits and use of
  3-entity rule.

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New Terminology
Direct Payment
Timing of Payments For 2002 as soon as
practical for any or all 2002 AMTA payments
already received, 2002 DP will be reduced for
2003-2007 not before October 1 of the year
harvested, up to 50 in advance beginning Dec
1 of the year before harvested.
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New Terminology
Target Price
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New Terminology
Counter Cyclical Payment Target Price - Direct
Payment - max(loan, 12-mo. avg mkt price)
Example _at_
40-cent cotton 72.4 - 6.67 - 52.0 13.73
cents/lb
Timing of Payments as soon as practical after
the end of the 12-month marketing year for the
commodity. PARTIAL PAYMENTS 1st payment- not
earlier than Oct 1, not later than Oct 31 of the
harvest year, may not exceed 35 2nd
payment not earlier than Feb 1, may not exceed
70 minus amount of 1st payment.
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Comparison Of Base Payments _at_ 40-Cent Cotton
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Payment Base and Payment Yield
Bases Producers may (1) keep bases as they
currently are under the 1996 farm bill and add
oilseed base OR (2) may update ALL bases to
the average of acres planted from 1998-2001. This
would include ZERO years. If you have no current
(old) base for a crop, you still qualify for
updated base (your 1998-2001 average). DP and
CCP will be made on 85 of the base.
Yield IF BASES ARE UPDATED, producers may also
elect to update the farms Payment Yield. Your
options are (1) keep current yield, (2) the 70
Option, or (3) the 93 ½ Option. DP will be
made only at the current (old) yield level. CCP
will be made at the elected yield. If you do not
currently have an established yield, one will be
established for you.
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Timing of Base and Yield Election as soon as
practical . Secretary shall provide notice to
owners of farms provided only once the
manner in which the election must be made and the
time periods . must be submitted by the
Secretary
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Example of CCP Payment Yield Update Options
Current (1996 Farm Bill) Payment Yield 600
lbs/ac 1998-2001 Payment Yield 800 lbs/ac

• Option 1 Retain old yield
• 600 lbs
• Option 2 Old yield 70 of the Difference
• 200 x 70 740 lbs
• Option 3 93 ½ of 1998-2001 Yield
• 800 x 93 ½ 748 lbs

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Base/Yield Alternatives You must elect a single
option for all bases and payment yields.
You cannot update base on some crops and not
update others. You cannot update CCP yield
unless bases are updated. You cannot choose one
CCP yield option for one crop and a different
option for other crops.
Excluding peanuts.
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Payment Limitations
Double payments received as part of financial
assistance legislation
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Base Acres Needed To Reach 40,000 DP Limitation
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Base Acres To Reach 65,000 CCP
Limitation Payments on 85 of Acres Shown
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Acres of Cotton Needed To Reach LDP/MLG Limit
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Payments Per Acre of Base At Various Cotton
Prices LDP/MLG On Actual Acres Harvested 650 Lb
DP Yield, 720 Lb CCP Yield, and 750 Lb Actual
Yield
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Comparison of 2002 Farm Bill To 96 Bill _at_
40-Cent Cotton, Updated Base and Yield
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Net Returns With and Without Payments At 40-Cent
Cotton
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Price Outlook

• Acreage very likely lower in 2002
• Possible large crop if weather cooperates will
  keep lid on prices
• Foreign acreage and production likely down
• A-Index should hold at current levels or
  improve
• US prices probably 35-50 cents per pound
• Total money still around 58-60 cents with LDP