2013 Farm Bill ISU Extension Farm Management In-service Nashua, Iowa May 20, 2013 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911 1 1

Farm Bill Progress? House and Senate have basically revived their packages from last year A couple of new wrinkles have been added to address specific crop concerns Like last year, the key will be the floor vote in the House (which didn’t happen last year)

Ideas on the Next Farm Bill Let’s look at the common features Both versions of the farm bill eliminate direct payments, countercyclical payments, ACRE, and SURE The marketing loan program would continue Livestock disaster programs would be reestablished

Reference Prices Senate: 55% of 5-yr Olympic average MYA price House: Set by law Corn $3.70 Wheat $5.50 Soybean $8.40 Corn $2.95 Wheat $3.62 Soybean $6.29

ARC or RLC instead of ACRE Revenue-based support program Revenues based on 5-year Olympic averages for yields and prices Yields and prices have cups (T-yields and reference prices)

Revenue Programs Senate House ARC-County ARC-Farm RLC Payment acres Planted and prevented (up to Base) 85% of Planted (up to Base) Benchmark revenue 5-yr OA county yield * 5-yr OA MYA price 5-yr OA farm yield * 5-yr OA MYA price Actual revenue County yield * Max(MYA price or loan rate) Farm yield * Max(MYA price or loan rate) County yield * Max(midseason price or loan rate) Revenue guarantee 88% of benchmark 85% of benchmark

Revenue Programs Senate House ARC-County ARC-Farm RLC Payment rate Min(Guarantee – Actual revenue, 10% of benchmark) Payment made on 80% of planted acres and 45% of prevented acres 65% of planted acres and 45% of prevented acres Payment acres

AMP or 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))

Price Programs Senate House AMP RLC Payment acres 85% of Base acres 85% of Planted (up to Base) Payment yield CCP yields CCP yields w/ updating

Dairy Dairy Producer Margin Protection Program Voluntary margin coverage, with the opportunity for supplemental coverage Dairy Market Stabilization Program Managed supplies when margins fall Packages are very similar across the House and Senate versions

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 is county-level yield or revenue policy Indemnities are paid when the county experiences losses greater than 10% of the expected yield or revenue level, but payments are not more than the original deductible

SCO Examples from Last Year’s Bills Source: Congressional Research Service

Thank you for your time. Any questions. My web site: http://www. econ Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/