1. Associate Professor/Crop Markets Specialist
The 2014 Farm Bill
Ag Credit School
Ames, Iowa
June 6, 2014
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. Farm Bill Titles Commodities IX. Energy
Conservation X. Hort. & Organic Ag.
Trade XI. Livestock
Nutrition XII. Crop Insurance
Credit XIII. Commodity Futures
Rural Development XIV. Miscellaneous
Research XV. Trade & Taxes
Forestry

3. Farm Bill Projected Spending
$489 Billion

4. Old vs. New Direct Payments (DP) Countercyclical Payments (CCP)
Marketing Loans (LDP)
Revenue Countercyclical Payments (ACRE)
Countercyclical Payments (PLC)
Marketing Loans (LDP)
Revenue Countercyclical Payments (ARC)
New programs, but they have strong similarities to previous programs

5. What Stayed the Same? Loan Rates Set by law Corn $1.95 Wheat $2.94
Soybean $5.00
Sorghum $1.95
Barley $1.95
Oats $1.39

6. Two Waves First wave: Choice on base acreage and yield updating
Probably occurs late summer timeframe
Second wave: Choice on farm bill programs
Probably late fall/early winter
Harvest the crop and farm bill at the same time

7. Base Acres
Keep current base acres or do a one-time “reallocation” of base acres
Reallocation allowed to covered commodities planted between 2009 and 2012
Reallocation in proportion to the ratio of 4-yr average plantings/prevented plantings
Total number of base acres limited to total of existing base acres

8. Payment Yields
Keep current CCP payment yield or do a one-time “update” of payment yield on a commodity-by-commodity basis
Update: 90% of yield per planted acre on the farm
If the farm yield is below 75% of the average county yield, then the farm yield is replaced by 75% of the average county yield

9. Payment Acres For PLC and ARC at the county level, 85% of base acres
For ARC at the individual level, 65% of base acres

10. Reference Prices Old Target Prices Reference Prices Corn $2.63
Wheat $4.17
Soybean $6.00
Sorghum $2.63
Barley $2.63
Oats $1.79
Reference Prices
Corn $3.70
Wheat $5.50
Soybean $8.40
Sorghum $3.95
Barley $4.95
Oats $2.40

11. 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))
Payment = Payment rate * Payment yield * Payment acres

12. PLC vs. CCP and DP

13. ARC instead of ACRE Revenue-based support program
Revenues based on 5-year Olympic average yields and prices
Yields and prices have cups (County T-yields and reference prices)
Triggers at county or individual farm level, instead of state level

14. ARC Payment Rate Payment rate = Max(0, Min(10% of Benchmark revenue,
Actual crop revenue – ARC guarantee))
So the basic payment structure is the same as it was under ACRE

15. Revenue Programs Think of ARC-County as crop-by-crop
ARC-Individual
Benchmark revenue
5-yr OA county yield * 5-yr OA MYA price
Sum across crops of [5-yr OA (farm yield * MYA price) *crop acreage]
Actual crop revenue
County yield * Max(MYA price or loan rate)
Sum across crops of [Farm production * Max(MYA price or loan rate)] / Total planted acres of all covered crops
Revenue guarantee
86% of benchmark
Think of ARC-County as crop-by-crop
Think of ARC-Individual as whole farm

17. Producer Choice Have one-time choice between:
PLC or ARC (can pick by commodity)
If ARC is chosen, pick between county and individual coverage
If individual coverage is chosen, must be taken for all covered commodities on the farm
crop years

18. The red line is the ARC-County payment trigger
The red line is the ARC-County payment trigger. ARC payments are triggered when the combination of price and yield is below and to the left of the red line.

19. 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 has a county-level payment trigger
Indemnities are paid when the county experiences losses greater than 14%
Premium subsidy: 65%
Starts in 2015
Can’t have ARC and SCO together

20. Supplemental Coverage Option (SCO)RP
RPHPE YP

21. Three Choices PLC + SCO ARC-County ARC-Individual
Price protection with top-up county-level insurance protection
ARC-County
County-level revenue protection based on historical averages
ARC-Individual
Farm-level revenue protection based on historical averages

22. Dairy
Source: futurefordairy.com

23. Conservation Conservation Reserve Program 27.5 million acres in 2014
24 million acres in 2017 and 2018
Grassland enrollment capped at 2 million acres

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