1. The 2014 Farm Bill Iowa Corn Growers and Iowa Institute for Coops
Des Moines and Ankeny, Iowa
Feb. 19, 2014
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. 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

3. 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

4. Two Waves First wave: Choice on base acreage and yield updating
Probably occurs June-July timeframe
Second wave: Choice on farm bill programs
Probably Sept-Oct
Harvest the crop and farm bill at the same time

5. 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

6. 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
County yield: planted or harvested?

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

8. 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

9. 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

10. 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

11. PLC vs. CCP and DP

12. 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

13. 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

14. 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

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

16. 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

17. Changes in Expected Spending
Source: CBO

18. Changes in Expected Spending
Source: CBO

19. Changes in Expected Spending
Source: CBO

20. Expected Spending
Source: CBO

21. 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: