1. Using the Farm Program Decision Tools
R. Brent Young, Ph.D.
Agriculture and Business Management Specialist
Colorado State University Extension
Jeff Tranel
Norm Dalsted
Jesse Russell
Dennis Kaan

2. Your Risk Management Toolbox
Public Tools: PLC, ARC-CO, ARC-IC, Crop Insurance
Private Sector Tools (things producers can do on their own):
Hedging commodities
Using options contacts (commodities & inputs)
Forward contracting commodities
Advance purchase of inputs
Collective Solutions (things producers do with help):
Forward pricing: cooperative or other buyer offers a fixed price contract for a future period and uses futures markets to protect their position.
It is important to note that the 2014 Farm Bill programs that we will be discussing today are only one of many tools a producer has to manage risk. Today we will discuss the public tools that are available, each producer also has several private and collective tools they can use.

3. Title 1 Farm Bill Process
The USDA FSA Website outlines the 4 step process producers will follow to decide what Title 1 program or programs will work best for their operation.

4. Evaluate your safety net options
Today you are working on step 2 as you are learning more about the 2014 Farm Bill. During this presentation, we will explore two online decision tools that you can use to help you decide which Title 1 Commodity Programs and Title 11 Insurance Programs are best for your operation.

5. Two Online Tools are Available
NCPE Illinois Program
The USDA has allocated $6 million to educate producers about the 2014 Farm Bill. The University of Illinois (lead for the National Coalition for Producer Education [NCPE]), along with the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri and the Agricultural and Food Policy Center (AFPC) at Texas A&M (co-leads for the National Association of Agricultural and Food Policy [NAAFP]) have received a total of $3 million to develop two online decision tools.
NAAFP
Texas A&M Program

6. National Coalition for Producer Education (NCPE)
decision-steps.html
Today we will start by taking a look at the NCPE tool. The URL needed to access this tool is listed on this slide.

7. Opening Screen
The NCPE tool from the University of Illinois is the more user friendly of the two tools. It will do a very nice job for producers with one or two FSA farms and up to 3 or 4 program crops. This tool takes the process of reallocating base acres, updating yields, and selecting Title 1 programs and breaks it down into 7 steps.

8. Step 1 Collect Information
Step 1 involves “Collecting Information”. Please note that you can look at a sample FSA letter and watch a couple of short videos about this step on this page.

9. Sample FSA Letter
You should have received a letter from the FSA in early August that looks like this sample.

10. Reported Commodity Crop History Summary
Attached to that letter was your “Reported Commodity Crop History Summary”. This summary contains information you will need to input into the NCPE tool. If you no longer have this letter you can visit your local FSA office and ask for a copy. You will also need yield information from This information can be gathered from crop insurance yield reports and/or elevator settlement sheets.

11. Step 2 Keep or Update Yields
The second step will help you decide to keep or update your current CC yields. This step includes a fact sheet and 4 online videos to guide you through the process. When you're ready to use the online tool just click the link marked “ Visit ASPS online tool now”.

12. APAS Online Tool
Once you’ve clicked on that link this screen will appear. Just click on the link highlighted by the blue arrow to go to the “Payment Yield Update Quick Calculator”.

13. Payment Yield Update Calculator
Once the Payment Yield Update Calculator appears you can enter your State, County, and crop. Once this information is entered the tool will automatically provide the minimum or “plug” yield for your county. Then just enter the yield from 2008 through Finally, click the calculate button.

14. Payment Yield Update Calculator
Please note in this example the county minimum or “plug” yield was inserted for 2010 where the actual yield was 95 bushels. In this example the producer could update the corn yield to 148 bushels/acre. If this updated yield is higher than the CC yield reported on the “Reported Commodity Crop History Summary” the producer would report this updated yield to their county FSA office.

15. Step 3 Retain or Reallocate Base Acres
The next step involves retaining or reallocating base acres. Again you'll find a fact sheet and 4 short videos to help you with this decision. Once your ready just click on the “Visit APAS tool online” link to get started.

16. Base Acre Reallocation Tool
Once you click on the Base Acre Reallocation Tool you will be able to input your existing base acres from the “Reported Commodity Crop History Summary and the planted acres for each of your Title 1 crops for the years 2009 through Clicking on the “Calculate Reallocated Base” button will tell you how your existing base could be reallocated.

17. Step 4 Compare ARC-CO and PLC
Step 4 provides an opportunity to compare the ARC –County and PLC Programs. As with the previous steps several videos are available to provide guidance for this step. Once you’ve learned more about this decision its time to go back to the APAS tool.

18. APAS Online Tool
For this step we will be utilizing the APAS Sample Farm function that is accessed by clicking on the button highlighted by the blue arrow in this slide.

19. APAS Sample Farm
The sample farm function allows you to look at an average farm in your county. This sample farm is comprised of the top 4 program crops grown in the county having a minimum of 2500 acres based on NASS data. This tool uses 2013 commodity prices to produce an acreage and commodity mix to approximate an annual revenue of $500,000. As you can see our sample farm in Logan County Colorado consists of 657 acres of corn, 24 acres of grain sorghum, and 992 acres of wheat.

20. All Crops
By selecting the “Expected Program Payments” button the tool displays a graph that compares the expected program payments for each of the Title 1 programs for the sample farm. The tallest bar to the left for each program represents the expected payment for 2014 whereas the shorter bar represents the average yearly expected payment for the years Please note in this view we are comparing the Title 1 programs for all crops on our sample farm. The two bars to the far right represent the combination of programs that would provide the highest payment for the sample farm. As you can see by the colors of the bar to the far right some combination of ARC-CO and PLC with SCO would result in the highest payment. At this point we could eliminate the ARC-IC program but we must look at this graph on a crop by crop basis to determine witch combination of ARC-CO and PLC would be best.

21. Prices
This tool utilizes three different price series to make its projections as to the best program selection. At any time in your evaluation process you can click on the “Show Prices” button highlighted here by the blue arrow to review those price series. As you can see from this slide the projected prices for the commodities grown on the sample farm are provided by the Congressional Budget Office (CBO), the USDA and the Food and Agricultural Policy Research Institute (FAPRI). In general the CBO prices tend to be the highest, USDA the lowest and FAPRI somewhere in the middle of the other two. The price series you select can have an impact on the expected payment for each Title 1 program. In the “Build Your Own Farm” section you can select one of the three provided price series or use your own prices.

22. Wheat
Based on the all crops view we decided to look at each crop individually. Looking at wheat for the sample farm it appears that PLC with SCO would be our best choice.

23. Grain Sorghum
For grain sorghum PLC works best.

24. Corn
ARC-CO is the best selection for corn. In summary the best outcome for the sample farm in Logan County Colorado using CBO prices and 70% crop insurance coverage would be PLC with SCO for wheat, PLC for grain sorghum, and ARC-CO for corn.

25. Build Your Own Farm
Now that you understand how the tool works, you can input your own data using the “Build Your Own Farm” option to determine what's best for your operation.

26. Build Your Own Farm
To use this option you will designate your farm location, add the program crops you grow, select from several scenarios that include various combinations of Title 1 commodity programs and Title 11 crop insurance programs, and finally analyze those decisions. You have the option to save the data you have entered earlier and load it when you return to the tool. The NCPE tool does not store your data on a remote server. All of your data is stored on your own computer so you will need to use the same computer to store and retrieve your personal data.

27. Step 5 Consider ARC-IC
The process for considering ARC-IC is outlined in step 5. You can make use of an online video and on screen guidance to help you make this decision. The online tool will also help.

28. All Crops
In order to determine if ARC-IC is right for you, the all crops view for YOUR OWN FARM should be utilized. The Optimized Program Payments columns on the far right would need to be all orange. Remember if you choose ARC-IC you can not participate in ARC-CO or PLC.

29. Step 6 Consider SCO
Step 6 would be necessary if you had selected PLC for some of your crops. As with the previous steps this tool provides a wealth of information to help you make this decision.

30. All Crops
In order to determine if PLC is right for you, the all crops view for YOUR OWN FARM should be utilized. If the color purple is found in the Optimized Program Payments columns on the far right you have at least one crop that might benefit from SCO. The crop by crop analysis will tell you which crop(s) will benefit from SCO.

31. Step 7 Sign-up
The final step is sign-up and this tool provides a reminder of the important deadlines.

32. NAAFP Decision Aid And at: www.afpc.tamu.edu
National Association of Agriculture and Policy (NAAFP) has been working on the decision aid for more about 2 years. NAAFP is led by
AFPC at Texas A&M
FAPRI at University of Missouri-Columbia
Applied for and received funding from USDA-FSA to develop a nation-wide decision aid
Available at:
And at:
The second tool available is the NAAFP Decision Aid.

33. Overview of NAAFP Farm Bill Decision Aid
Register as a producer or a multi-client user
address and password protect your data
address allows us to contact user when FSA changes rules and when new price projections are available
Enter data for all of the farm’s FSA Numbers
All Crops and their Practices by Type
Types not critical to FSA but important to RMA for SCO, STAX, and Insurance Decisions
Types of Analyses
Yield update
Base reallocation
ARC-IC, ARC-CO, PLC, SCO
STAX and SCO for cotton
Insurance options (Y, RP, RP-HPE, CAT, None)
This tool requires you to register using an address and a password. You can register as an individual producer or multi-client user for crop insurance agents or consultants. In general this tool is more complex, requires more data, and provides the user with more information than the NCPE tool.

34. Overview of NAAFP Farm Bill Decision Aid
Producers’ data are stored in the decision aid
Data accessed by a user name and password
Secured behind Texas A&M firewall, along with student grades and records
Producers can enter their data, run for alternative prices as updated by FAPRI monthly
Yield Update Decision
Next analyze the interaction between Base Reallocation and PLC and ARC-CO Election
Before final election, farmers can re-run the analysis for March price outlook
Run Insurance Analysis annually for next 5 years
This tool does store your personal data on a secured server at Texas A&M University. Prices are updated monthly and the tool will be available to run crop insurance analysis for the next five years.

35. Information Needed for the NAAFP Decision Aid
Information available from two primary sources
FSA Reported Commodity Crop History Summary (letter from FSA to producers, August 2014)
FSA farm number
Base Acres and CCP Yield for covered crops
Crop Insurance Actual Production Report
Historical yields and planted acres
Ten years of yields preferred but are essential
This tool requires the same general information from your “Reported Commodity Crop History Summary” but asks for ten years of yield data.

36. NAAFP Information Sheet
The tool provides a downloadable guide for entering your data that includes this handy worksheet.

37. First Step Is to Register
In order to use this tool you must first register. In order to register you must provide an address and develop a password consisting of a minimum of 8 characters.

38. Producer vs. Multi Client User
As you create your account you can register as a producer/farmer or multi-client user. A multi-client user could be a crop insurance agent or consultant.

39. Create Client Records & Switch Clients
The next step is to establish farm units.

40. A farm unit should be created for each unique FSA numbered farm, crop, or production practice combination on your farm.

41. In this example the farmer operates two FSA farms and grows two different crops on each farm so 4 new farm units will be established.

42. For each crop grown on each FSA farm unit ten years of data are needed.

43. Yield Update Analyzer
The first decision this tool will assist you with is yield analysis.

44. Verify Yield Data
Before the tool starts the analysis you are given the opportunity to check your data.

45. Yield Update Analyzer
In our example the producer would want to visit the local FSA office and update the yields for all crops on both FSA farms.

46. Base Acre Reallocation & PLC/ARC Decision Aid
The next step is to consider base reallocation and PLC/ARC. This tool combines these two decisions for a more robust analysis.

47. Verify Input for Base, PLC, ARC
Once again your asked to verify your data.

48. Verify Input for Base, PLC, ARC
You will need to verify the data you provided for each FSA farm. In this view the tool provides the potential reallocation for one FSA farm.

49. Mean Prices to Analyze
You will then be asked to input your outlook for prices and yields. The FAPRI and USDA projections are given as a guide or you can enter your own predictions. For this example we have used the USDA numbers. If you know the 2014 yield for a particular crop you can enter it or allow the tool to calculate an average.

50. This tool provides an analysis for each FSA farm
This tool provides an analysis for each FSA farm. The upper box looks at the decision on a crop by crop basis. The blue highlighted area represents the best Title 1 program selection with base reallocation the orange represents the best Title one selection without reallocation.
The lower box looks at these decisions on a whole farm basis. In this example the combination that would potentially net the largest payment for this FSA farm would be PLC with SCO for both crops and base reallocation.

51. Here are the results for the other FSA farm in our example.

52. Crop Insurance Interaction with Base Reallocation, PLC, and ARC
The NAAFP Decision Aid will also assist you in making crop insurance decisions.

53. Crops on the Farm Eligible for Insurance
The decisions are made on a crop by crop basis.

54. User’s Input Information for the Crop
Once again you are asked to verify the data you have entered.

55. Corn Example
This tool utilizes an easy to understand traffic light bar graph to analyze the various Title 1 Commodity Program and Title 11 Crop Insurance options. In this example we are comparing a reference scenario consisting of ARC-CO, Revenue Protection crop insurance at a 70% level with enterprise coverage with an alternative scenario consisting of PLC, Revenue Protection crop insurance at a 50% level with enterprise coverage and the Supplemental Coverage Option. As you can see from the traffic light bar graph the alternative scenario produces more “green” area and produces more average net revenue.

56. Top Five Crop Insurance and Farm Policy Combinations
The alternative scenario is chosen by the producer and this tool provides a list of suggested combinations for you to consider.

57. Wheat Example
Now for a wheat example.

58. User’s Input Information for the Crop
Again a chance to verify your data before you analyze the options.

59. Wheat Example
The alternative scenario is the best for the wheat example (notice the larger “green” area).

60. Top Five Crop Insurance and Farm Policy Combinations
Again the tool provides suggested good combinations for each crop.

61. A Few Things to Think About
All of the decisions required in the farm bill add to the producer’s ability to tailor the bill to fit their operations – not just add to complication
There will be plenty of time to gather needed info, analyze options, and make sign-up decisions – no reason to panic
Although the 2014 Farm Bill appears to be complex it does provided each and every producer the opportunity to custom design the program to meet the unique needs of their agricultural operation. It is also important to note that producers have time to learn more about the 2014 Farm Bill and to utilize both of the online tools presented today before a final decision must be made.

62. FSA Announced Sign-Up Timeline
August 2014
June
2015
Sept
Oct
Nov
Dec
Jan
Feb
March
April
May
Fix Planted Acres with FSA
Election Between ARC & PLC
17th
31st
29th
Reallocate Bases & Update Yields
27th
Mid
Annual Sign-up
The FSA timeline for your review.
2nd
28th
Dairy Margin Protection Program for 2014 and 2015

63. Your Risk Management Toolbox
Public Tools: PLC, ARC-CO, ARC-IC, Crop Insurance
Private Sector Tools (things producers can do on their own):
Hedging commodities
Using options contacts (commodities & inputs)
Forward contracting commodities
Advance purchase of inputs
Collective Solutions (things producers do with help):
Forward pricing: cooperative or other buyer offers a fixed price contract for a future period and uses futures markets to protect their position.
A final reminder of all of the tools in your Risk Management Toolbox!

64. References
Richardson, J. W. (2014, November). NAAFP Farm Bill decision aid, Farm Bill decision aid training. Meeting conducted by the National Association for Agriculture and Food Policy, Salt Lake City. UT.
This presentation can be found at the CSU ABM Website nings.shtml
This entire PowerPoint presentation including notes for each slide can be found on the CSU ABM website.

65. Questions

66. Thank you!!!
R. Brent Young, Ph.D. Agriculture & Business Management Specialist Ph