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Farm Bill 2014

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Farm Bill 2014 Agricultural Act of 2014 Commodity Title Options Crop Insurance Changes for 2015 PROS & CONS OF SCO Pros Offers 1st time ever ability to insure ... – PowerPoint PPT presentation

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Title: Farm Bill 2014


1
Farm Bill 2014 Agricultural Act of 2014
Commodity Title Options Crop Insurance Changes
for 2015
2
disclaimer
  • The following information is provided utilizing
    the current understanding of recently passed
    legislation
  • As the rulemaking process has not been completed
    at this time, it needs to be understood that
    changes can occur once all rules are finalized
  • Farmers choices will be affected by
    implementation rules currently being developed

3
Farm bill overview
  • Signed into law February 7, 2014
  • 5 year bill
  • Covers crop years 2014 2018
  • Enrollment expected to begin fall of 2014
  • 956 billion total cost over 10 years
  • 79 (756 b) of expected cost in SNAP
  • Cut 8.6 billion from SNAP over 10 years by
    closing heating aid loophole-will not lead to any
    cuts in Illinois
  • Can double SNAP value at farmers markets

4
USDAs Estimated timeline
  • April 15 Livestock Indemnity Program signup
  • Fall publicize final program rules/regulations
    for PLC ARC this fall
  • End of 2014/early 2015 Enrollment for PLC ARC
  • End of 2014/early 2015 Farmers allowed to update
    yields bases
  • End of 2014 Implementation of beginning farmer
    provisions to make credit more easily available
  • End of 2014 Propose Actively Engaged definition
  • Early 2015 New crop insurance provisions
    implemented by RMA

5
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6
Key commodity title provisions
  • Eliminates Direct Payments
  • Modifies target price program
  • Replaces CCP with Price Loss Coverage
  • Modifies revenue safety net
  • Replaces ACRE with 2 Ag Risk Coverage (ARC)
    options
  • County ARC
  • Individual Farm ARC

7
Key commodity title provisions
  • Payment limits 125,000 for all payments
    combined (not including crop insurance claims)
  • Can double if married, joint operation
  • Eligibility 3 year Adjusted Gross Income of
    900,000
  • USDA has ability to modify Actively Engaged in
    Farming rules in rule making process-define
    significant contribution of active personal
    management

8
2 Update Options
  • Base Acreage One time choice to maintain or
    reallocate base
  • Not mandatory, voluntary option
  • Cannot increase total base
  • If updated, 2009-2012 crop years average planted
    acres on each farm for harvest, haying, grazing
    and silage
  • Also includes prevent plant acres
  • Failure to make election defaults to current base
    allocation
  • Base can be adjusted for acreage coming out of
    CRP

9
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10
2 Update Options
  • Payment Yields Used only in PLC
  • One time choice to
  • Maintain current payment yields used in 2008 farm
    bill for Counter-Cyclical Payment program
  • Update payment yields
  • 90 of 2008-2012 yields

11
Non-recourse marketing loans
  • Same loan rates as 2008 farm bill (except
    cotton)
  • 1.95 Corn (national average)
  • 5.00 Soybeans
  • 2.94 Wheat
  • Loan Deficiency Payments (LDPs)
  • Loans available regardless of PLC or
    ARC choice

12
Safety net options
  • For each FSA farm, safety net options include one
    time irrevocable choice of PLC (price) or ARC
    (revenue)
  • On a covered crop by covered crop basis
  • Price Loss Coverage (PLC)
  • Only choice if you want SCO
  • County level Ag Risk Coverage (ARC-County)
  • On a whole farm basis
  • Farm level Ag Risk Coverage (ARC-Individual)

13
Safety net options
  • ARC offers revenue coverage, county or farm
  • ARC choice must be unanimous amongst all farm
    partners
  • Default choice is PLC
  • If no choice is made, 2014 payments are forfeited
    and all commodities are in PLC beginning with
    2015 crop year

14
Price Loss Coverage (PLC)
  • Target price program in which prices are
    established for life of bill, do not change
  • Reference Prices
  • 3.70 corn
  • 8.40 soybeans
  • 5.50 wheat
  • 2.50 Oats
  • Payment rate 85 of base acres

15
Price Loss Coverage (PLC)
  • Payments occur when the higher of
  • crop years National Average Market Price, or
  • loan rate,
  • is below the reference price
  • NAMP average price received by producers during
    12 month marketing year for that crop (starting
    Sept. 1 for corn beans)

16
PLC example
  • NAMP 3.55/bushel for corn
  • Farms payment yield 150 bushels/acre
  • Corn base 100 acres
  • Payment rate .15/bu (3.70-3.55)
  • Payment 1,913 (.15 x 150 x 100 x .85)
  • Payment/acre 19.13

17
ARC - County
  • County level revenue protection
  • Benchmark revenue guarantee 86 of
  • Yield 5 year Olympic rolling average
  • (Individual yields cannot be less than 70 of
    t-yield)
  • Price 5 year Olympic rolling average of higher
    of NAMP or loan rate
  • (Individual prices cannot be less than reference
    price)

18
ARC - County
  • Actual county revenue
  • Final county yield, times
  • NAMP for that crop year
  • Payment rate
  • Benchmark Revenue Actual Revenue
  • 85 of farms base acres
  • Maximum payment 10 of benchmark revenue

19
ARC County Benchmark Revenue Calculation
2009 2010 2011 2012 2013 O. Avg.
County Yield 186 170 160 110 190 172
Price 3.70 5.18 6.22 6.89 4.50 5.30
  • NAMP was actually 3.55, replaced with minimum
    of 3.70
  • Benchmark Revenue 912/acre (172 x 5.30)
  • Max payment 91/acre (912 x 10)
  • Guarantee 784/acre (912 x 86)

20
ARC County Payment Example
  • NAMP 3.90 (USDA estimate)
  • Final county yield 180 (trend)
  • Corn base 100 acres
  • Actual revenue 702 (3.90 x 180)
  • Payment Rate 82/acre (784 - 702 82)
  • Payment 6,970 (82 x 100 x .85)
  • Payment/acre 69.70

21
ARC Individual (farm level)
  • Farm level revenue protection
  • Whole farm revenue
  • Sum of revenue from all covered commodities
    combined across all FSA farms in the state that
    you have a share in
  • Planted acres determine weighting in benchmark
    revenue
  • Payment rate 65 of base acres

22
ARC Individual (farm level)
  • ARC-Individual will make payments when a
  • farms actual revenue falls below 86 of
  • benchmark revenue
  • Benchmark revenue equals sum of each crops
    benchmark weighted based of planted acres
  • Actual revenue equals sum of each crops
  • revenue (NAMP x farm yield) weighted base of
    planted acres

23
ARC Individual example
  • In the following example one FSA farm with 100
    total base acres will be used
  • No other farms are enrolled in ARC Individual
    in this example
  • In 2014, the farm plants
  • 60 of acres in corn
  • 40 of acres in soybeans

24
ARC Individual example Each Crops Benchmark
Revenue
Corn Corn Corn Soybeans Soybeans Soybeans
Year Price Farm Yield Revenue Price Farm Yield Revenue
2009 3.55 186 688 9.59 54 518
2010 5.18 170 881 11.30 59 667
2011 6.22 160 995 12.50 56 700
2012 6.89 110 758 14.40 52 749
2013 4.50 190 855 12.50 54 675
  • Revenue equals maximum of NAMP or reference
    price (3.70 for corn, 8.40 for soybeans) times
    farm yield
  • Each crops benchmark revenue equals Olympic
    average of revenues
  • Corn 831 (881 758 855) / 3
  • Soybeans 681 (667 700 675) / 3

25
ARC Individual example Benchmark revenue
Guarantee
Benchmark Revenue weights each crops benchmark
revenue by proportion of program crop acres
planted on ARC-Individual farms Corn
Soybeans 831 x .60 681 x .40
771 Guarantee 86 of benchmark revenue 771
x .86 663 guarantee
26
ARC Individual example Actual revenue
  • A farms revenue equals each crops revenue
    weighted by proportion of acres
  • 3.90 NAMP corn price (USDA est.)
  • 180 bushel per acre corn yield (trend)
  • 9.65 NAMP soybean price (USDA est.)
  • 56 bushel per acre soybean yield (trend)
  • Actual Revenue 637
  • .6 x (3.90 x 180) .4 x (9.65 x 56)

27
ARC Individual example Payment rate
Payment rate equals guarantee minus revenue
663 Guarantee - 637 Revenue 26 Rate Rate
cannot be more than 10 of benchmark revenue
(771 x .10 77) Rate cannot be less than one
28
ARC Individual example Payment
  • Payment equals payment rate x 65 of base acres
  • 26 payment rate
  • 100 base acres
  • Payment 1,690 (26 x 100 x .65)
  • Payment/acre 16.90

29
Summary of choices
  • Price Loss Coverage
  • Fixed reference target price program
  • Max payment rate Reference price national
    loan rate
  • Payments on 85 of a crops base acres
  • ARC County
  • Revenue program 5 year Olympic avg. of county
    yields NAMP
  • Separate guarantee for each crop
  • Guarantee 86 of benchmark revenue
  • Max payment 10 of benchmark revenue
  • Payments on 85 of crops base acres
  • ARC Individual
  • Revenue program 5 year Olympic avg. of farm
    yields NAMP
  • Whole farm program for covered crops
  • Max payment 10 of benchmark revenue
  • Payment on 65 of total base acres

30
Changes to crop insurance
  • Going into effect in 2015
  • Enterprise unit subsidies made permanent
  • In 2015 separate enterprise units for irrigated
    vs. non-irrigated
  • Can have separate coverage levels for irrigated
    vs. non-irrigated
  • Yield plugs increase from 60 - 70
  • An individual years yield can be dropped from
    APH database if that years yield is at least 50
    below 10 year county average

31
Crop Insurance contd
  • Supplemental Coverage Option (SCO)
  • Available beginning in 2015
  • Coverage between 86 and crop insurance
    coverage level selected
  • Triggered only if losses exceed 14
  • SCO is county based coverage
  • Matches underlying crop insurance coverage (yield
    or revenue, HPO)
  • SCO only available with PLC, no SCO if ARC is
    chosen

32
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33
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34
Pros cons of SCO
  • Pros
  • Offers 1st time ever ability to insure part of
    crop insurance deductible
  • 65 subsidy level
  • Provides protection on planted acres as opposed
    to base (PLC ARC)
  • Not subject to payment limits
  • Not subject to AGI eligibility test
  • Cons
  • County based coverage, not popular in IL crop
    insurance usage
  • Eliminates ARC options
  • Will be tough to fully evaluate without knowing
    true cost
  • Normally crop insurance rates arent established
    and known until December and premiums until March
    and farm bill sign up will likely occur and end
    before that

35
Crop Insurance contd
  • Beginning farmers
  • Yield plug of 80 rather than 70
  • Extra 10 premium assistance
  • No AGI test
  • Conservation Compliance
  • Re-tied to crop insurance for first time since
    1996
  • Rules still being written

36
Conservation compliance
  • Most producers already in compliance
  • First timers
  • Highly erodible lands-5 reinsurance years to
    develop and comply with an approved conservation
    plan to remain eligible for insurance subsidies
  • Those determined to be in violation have two
    reinsurance years to develop and comply with an
    approved conservation plan

37
Conservation compliance
  • First timers, contd
  • Wetlands - 1 reinsurance year to begin to remedy
    a violation before being declared ineligible
  • However, if you convert a wetland to cropland
    from now on, you will be ineligible for a premium
    subsidy in future years unless you mitigate the
    conversion
  • New requirements are prospective rather than
    retrospective
  • What counts is what you do after start of new
    farm bill

38
Farm Bill webinars
  • Commodity Title Options
  • Wednesday, April 2 at 800 a.m., Doug Yoder
  • Marketing Loans
  • PLC
  • ARC County
  • ARC Individual
  • Crop Insurance Changes/Supplemental Coverage
    Option (SCO) Wednesday, April 9 at 800 a.m.,
    Doug Yoder
  • Dairy Provisions/Livestock Disaster Provisions
  • Late April, Jim Fraley
  • Check www.ILFB.org/farmbill, or FarmWeekNow.com
    for more information and to register
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