1. Farm Bill Outlook and the Potential Impact on Agriculture
Urban Ag Academy
Ames, Iowa
July 14, 2017
Chad Hart
Associate Professor/Crop Marketing Specialist 1 1

2. Timing and Budget
Federal ag leadership hopes to pass the Farm Bill this year
Usual course of action is to avoid passage in election years
Reports of preliminary budget deal for the Farm Bill
House Ag and Budget chairpeople met in late June
But no firm numbers have been released
CBO baseline set the stage for a smaller budget
Faster Farm Bill passage = Fewer changes to current policy

3. President’s Budget Request
Source: OMB, 2018 Budget

4. USDA’s Budget
Source: USDA 2017 Budget

5. Proposed Adjustments in Nutrition Policy
Source: OMB, 2018 Budget

6. Proposed Adjustments in Farm Policy
Source: OMB, 2018 Budget

7. Federal Crop Insurance

8. PLC: Corn Payment Potential
Reference Price = $3.70 per bushel
Payment Yield = 150 bushels per acre
Marketing Year Price ($/bu)
PLC Payment Rate ($/bu)
PLC Payment ($/base acre)
$3.10
$0.60
$76.50
$3.20
$0.50
$63.75
$3.30
$0.40
$51.00
$3.40
$0.30
$38.25
$3.50
$0.20
$25.50
$3.60
$0.10
$12.75
$3.70
$0.00
For PLC, the payment rate is the difference between the reference price and the maximum of either the marketing year average price or the loan rate (if the difference is negative, then the payment rate is zero). Take the payment rate times the payment (or base) yield times 85% to get the PLC payment per base acre.
Notes: PLC payments are made on 85% of base acres.

9. ARC-CO: 2015 Corn Revenue Guarantee
Year
Yield
MYA Price
ARC Price
2010
162
$5.18
2011
163
$6.22
2012
157
$6.89
2013
135
$4.46
2014
168
$3.70
Oly. Ave.
161
$5.29
Here’s the 5 years of price and yield data for Story County, Iowa corn. The red numbers are the high and low ones that are not used in the Olympic average (remember the Olympic average throws out the high and low). Also, the price used in the average can not be below the reference price specified in the farm bill (in this case, $3.70 for corn). So as the black circle above shows, the price in 2009 was replaced by the reference price. So the 5-year Olympic average yield is bushels per acre. The 5-year Olympic average price is $5.32 per bushel. Combine the two to get the benchmark revenue of $ per acre. The ARC revenue guarantee is 86% of the benchmark, so it’s $ per acre.
Benchmark Revenue = $ per acre
ARC Revenue Guarantee = $ per acre
Notes: Revenue Guarantee equals 86% of Benchmark.

10. PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not
The choice depends on where you expect prices and yields to be over the next 5 years. There are price/yield combinations where PLC pays and ARC does not. There are also price/yield combinations where ARC pays and PLC does not.

11. Current Projected Payments
Source: CBO, June 2017

12. Mix of Projected Payments
Source: CBO, June 2017

13. Ag Productivity and Usage
Using corn as an example
Source: USDA

14. Ag Prices
Using corn as an example
Source: USDA

15. Net Farm Income
Source: USDA

16. Farm Debt
Source: Federal Reserve

17. Ag Economic Summary
Agricultural production and consumption has grown rapidly over the past several years.
But when production exceeds consumption, prices fall.
Crop revenues peaked in , while livestock revenues crested in , leading to record farm incomes.
Since then net farm income has been cut in half.
While the percentage loss in substantial, net farm income remains above levels from the early 2000’s.
Farmers and ranchers have partially compensated for the loss in income by taking on higher debt loads.
Farm and ranch balance sheets are eroding and financial stress is building for some producers, but the financial issues are not as severe as during the 1980’s.
If agricultural prices slowly improve (as projected), the squeeze on farm finances will improve as well. But for some producers, the squeeze may be too much.

18. Iowa Corn Prices vs. Costs

19. Thank you for your time. Any questions. My web site: http://www2. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: