Department of Economics SURE Farm Program North Central Iowa Crop & Land Stewardship Clinic Iowa Falls, Iowa December 30, 2009 Chad Hart Assistant Professor/Grain Markets Specialist

Department of Economics Supplemental Revenue Assistance Payments Program (SURE)  Part of the 2008 Farm Bill  Permanent disaster assistance  Provides payments to producers in disaster counties for crop losses  Run by the Farm Service Agency, USDA  Covers the crops

Department of Economics Supplemental Revenue Assistance Payments Program (SURE)  Based on crop insurance program, non- insured crop assistance program, and disaster declarations  Whole-farm revenue protection, not commodity-specific

Department of Economics SURE Triggers  Declared “disaster county” by Secretary of Agriculture or contiguous to one  Farm with losses exceeding 50% of normal production (value) in a calendar year  At least one crop must have a 10% (or greater) production loss

Department of Economics All Crops Must Be Covered  But there are some exceptions  Pasture  Crops with an expected value of less than 5% of the total expected value of production on the farm  Value = Crop insurance price X yield  Crops on which the producer has received a waiver

Department of Economics SURE Settings  Participation and revenue guarantee tied to crop insurance  Farm revenue, including some government payments, used to determine payment  Payments set as 60% of the difference between guarantee and actual revenue  Limited to $100,000 per producer  Payments not known or paid until the end of the marketing year

Department of Economics SURE Guarantee for 2008  Farm guarantee is the sum of  120%*Crop insurance price election*Crop insurance coverage level*Planted acres* Max(APH or CCP yield), for insurable commodities  125%*NCAP price election*Planted acres* Max(NCAP or CCP yield), for non-insurable commodities  For an individual crop, the guarantee can not be greater than 90% of the crop’s expected revenue  Crop insurance coverage level minimum = 70%

Department of Economics SURE Guarantee for 2009 and Beyond  Farm guarantee is the sum of  115%*Crop insurance price election*Crop insurance coverage level*Planted acres* Max(APH or CCP yield), for insurable commodities  120%*NCAP price election*Planted acres* Max(NCAP or CCP yield), for non-insurable commodities  For an individual crop, the guarantee can not be greater than 90% of the crop’s expected revenue

Department of Economics SURE Expected Farm Revenues  Expected farm revenue is the sum of  Max(APH or CCP yield)*Planted acres*100% of the crop insurance price for insurable commodities  100% of NCAP yield*100% of NCAP price*Planted acres for non-insurable commodities

Department of Economics

SURE Increases Guarantees  Adds 20% to value of crop insurance guarantee if signed up by March 2008; else 15%.  Minimum for 2008 is 80.5% (equivalent of 70% guarantee x 115%)  Maximum is 90% Crop insurance guarantee 2008 SURE guarantee SURE guarantee 65%80.5%74.75% 70%84%80.5% 75%90%86.25% 80%90% 85%90%

Department of Economics SURE Actual Farm Revenues  Actual farm revenue is the sum of  Harvested acres*Farm yield*National season- average price for all commodities  15% of direct payments  All CCP or ACRE payments  All marketing loan benefits  All crop insurance or NCAP payments  Net of premiums (to a minimum of $0)  Any other disaster assistance payments

Department of Economics 2008 SURE Map

Department of Economics 2009 SURE Map

Department of Economics SURE Payment  Guarantee minus actual revenue aggregated for all crops x 60%  Limit of $100,000 per year per payment limitation

Department of Economics Example  Crop insurance (RA)  75% guarantee  160 bu/acre APH yield  $5.40 indemnity price  $648 per acre guarantee for RA  $16 per acre premium  SURE guarantee  120% of $648 = $778 / acre guarantee  No additional premium

Department of Economics Example  Crop insurance  Actual yield was 140 bu. per acre (12% loss)  Harvest crop insurance price was $3.74  Actual revenue was $524 per acre  Crop insurance payment was $648 - $524 = $124 per acre

Department of Economics Example  SURE  Actual yield = 140 bu/acre  2008 marketing year price = $4.06/bu  Market revenue = 140*4.06 = $568.40/acre  Crop insurance benefit = $124 - $16 = $108  15% of direct payment = $3  Total revenues = $  Shortfall = $778 - $ = $98.60/acre  Payment = 60% * $98.60 = $59.16/acre

Department of Economics Will I get a SURE payment?  Are you in an eligible county or have a 50% or greater production loss  Do you have a 10% production loss on at least one crop  Price declines matter Corn $5.40 to $4.06 = 24.8% Soybeans $13.36 to $9.97 = 25.4% So, even higher yields, up to 120% of the APH yield, on other crops could still result in a SURE payment.

Department of Economics Source: Dr. William Edwards, ISU

Department of Economics SURE Payment per Acre for 2008 (50% corn, 50% soybeans) Insurance Guarantee 10% Yield Loss RA CRC 20% Yield Loss RA CRC 85%$ 7 $25$33 $46 80%$17 $35$43 $56 75%$27 $45$53 $66 70%$26 $44$51 $65 65%$36 $44$61 $75 Source: Dr. William Edwards, ISU

Department of Economics What to do?  Find out if you are in an eligible county for 2008 and 2009  Estimate potential payments  Ag Decision Maker calculator at  Watch for FSA announcements

Department of Economics Information Needed  Yields submitted for crop insurance, for all land farmed  Crop insurance payments received  USDA commodity payments received  RMA will turn over yield and acre data to FSA  FSA will aggregate data across farms

Department of Economics Summary of SURE  SURE provides 15 to 20% added coverage above the crop insurance guarantee (up to 90%).  All crops must be insured (except crops that are less than 5% of total crop value).  All crops and all farms per producer are added together to calculate coverage and losses.  Payment is 60% of loss.

Department of Economics Decision Points for SURE  If all crops will be insured anyway, there is no added cost for SURE.  If additional crops have to be insured, there is an added cost.  $300 per crop for catastrophic coverage  $250 per crop for NAP coverage  Standard APH or revenue insurance at a low level could be cheaper for small areas

Department of Economics How will SURE affect my crop insurance decision?  May have to insure minor crops  Higher or lower levels of crop insurance give a higher or lower SURE trigger  Producers who insure at the 80% or 85% level get less additional coverage due to 90% cap

Department of Economics How will SURE affect my crop insurance decision?  SURE is for all crops and all acres together  SURE pays only 60% of the revenue loss

Department of Economics 2008 SURE Map

Department of Economics 2009 SURE Map

Department of Economics SURE Sign-up  Sign-up for the 2008 crop year starts Jan. 4, 2010  See your local FSA office to sign-up  Sign-up will likely conclude by Mar. 1

Department of Economics Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: