2014 FARM BILL: COMMODITY PROGRAMS Jody Campiche Assistant Professor & Extension Economist Oklahoma State University

Livestock/Forage Programs

LFP and LIP Payments

Covered Commodity Programs

Eliminated Programs

New Programs CROP INSURANCE 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

Choices 2014: 1. Retain or update base acres (landowner) 2. Retain or update payment yields (landowner) 3. Enroll in PLC or ARC (individual or county) (landowner/producer) 4. Choose individual insurance policy (RP, YP, other) coverage (producer) 2015: 1. If enrolled in PLC, option to enroll in SCO (producer) 2. Choose individual insurance policy (RP, YP, other) coverage

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 – 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 ARC not tied to payment yields Updated payment yield will be 90% of the average of the yield per planted acre for the crop years If the yield for any of the crop years is < 75% of the average of the county yields, a yield plug of 75% of the avg 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 fall 2014 or early 2015 (for remainder of 2014 farm bill) All owners and tenants must make same choice (or default to PLC with no payments until the 2015 crop year)

PLC vs. ARC PLC – price protection Payment if actual price* < reference price Payment rate = (reference price – actual price 1 ) * payment yield * 85% * base acres ARC – revenue protection Option to choose farm or county level coverage Farm paid on 65% of base County paid on 85% of base

PLC Crop2008 FB CCP Target Price PLC Reference Price Barley Corn Cotton0.7125NA Grain Sorghum Peanuts Oats Rice Soybeans Wheat

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 PLCARC County Guarantee Reference PriceCounty Revenue Benchmark YieldFSA program yields5 yr Olympic Average county yield Benchmark PriceReference Price5 yr Oly Avg max (MYA Price, Reference Price) Benchmark Guarantee Reference Price86% * Benchmark Price * Benchmark Yield Actual YieldNACounty yield Actual RevenueNACounty yield * MYA Price Payment Acres85% * base acres85% * base acres (30% of PP) Maximum Payment None (except for $125K combined payment limit) 10% * Benchmark Revenue (and $125K combined payment limit)

SCO  Shallow loss insurance program that covers county-wide 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  Not available for acreage enrolled in ARC  65% subsidy

RMA – SCO questions…  What if I decide I want to enroll into the ARC program after I've selected SCO coverage for winter wheat?  Producers who enroll their winter wheat in SCO may elect to withdraw from SCO prior to their acreage reporting date without any penalty. This allows producers additional time to make an informed decision related to whether to enroll in the ARC or PLC. If they choose ARC, they will not be charged a crop insurance premium so long as they withdraw from SCO prior to their acreage reporting date.

RMA – SCO questions…  Will I be able to purchase SCO for the 2015 crop year?  It depends. RMA is making every effort to offer SCO to as many producers as possible. SCO will be available for corn, grain sorghum, rice, soybeans, spring wheat, and winter wheat in selected counties for the 2015 crop year. Program details and eligible counties will be made available in the early summer of 2014.

RMA – Beginning farmer/rancher questions…  I have heard that the farm bill has provisions that will both help new and beginning farmers purchase crop insurance and enhance the crop insurance beginning farmers already have.  Yes, a beginning Farmer and Rancher will be exempt from paying the $300 fee for CAT coverage policies, and receive premium subsidy assistance for additional coverage policies that is 10 % points greater than what is otherwise available.

RMA – Beginning farmer/rancher questions…  It defines a “beginning farmer and rancher” to be a person who has not actively operated and managed a farm or ranch with a bona fide interest in a crop or livestock as an owner- operator, landlord, tenant or sharecropper for more than 5 years. In addition, in certain instances, a beginning farmer may use the production history of another farm operation they were previously involved with in the decision making or physical involvement in the production of the crop.  If the beginning farmer experiences a poor yielding crop, they may replace the poor yield in their yield history for determining next year’s guarantee with 80 percent of the county T-Yield, which is 20 percentage points higher than they previously would have received.

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

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

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

OSU/KSU Decision Tool

Results

FSA Timeline

Implementation