Look for this
Miscellaneous Farm Bill Details
2. Livestock Disaster Programs
3. Ag Risk Coverage (ARC)
Break – A word about Northstar Bank
4. Price Loss Coverage (PLC)
1.
 Supplemental Coverage Option (SCO)
Yield Update & Base Reallocation Options
6. ARC & PLC Comparison Spreadsheet
Review & Wrap-up
5.

Passed through House of Representatives 1/29/14

Direct Payments

Passed through Senate 2/4/14

Counter Cyclical Payments

Information is based on the Farm Bill language,
conference report and University Extension Resources

ACRE & SURE Programs
All Gone*

$125,000 per individual, $250,000 per couple
◦ Includes payments from ARC, PLC, LDP & Marketing
Loan Gains
◦ Limits within these programs was struck in final
version

AGI Limitation test set at $900,000

Wheat, oats, and barley

Corn, grain sorghum

Soybeans

Other oilseeds (sunflower seed, rapeseed,
canola, safflower, flaxseed, mustard seed,
crambe, sesame seed, or any oilseed
designated by the Secretary)
1

Term limit on FSA guaranteed loans is lifted

Current program repealed

Beginning Farmer Eligibility

Replaced with dairy margin program

Dairies may participate in Margin Protection
Program or Dairy Livestock Gross Margin (LGM),
but not both
Except for CAT coverage, beginning farmers &
ranchers receive 10 percentage points higher
subsidy than others
No AGI income eligibility means test
Conservation compliance is required for
premium subsidy
◦ Ownership limitation changed to 30 percent of
average acreage of farms in county. (Changed from
median acreage)

Real estate loan eligibility
◦ Owner-operator must own at least 75 percent of
entity

“Permanent” laws of 1938 and 1949 are not
repealed


Country of Origin Labeling (COOL) is left in
place


◦ USDA is instructed to conduct a study of the effect of
the final rule on consumers, producers & packers

Producer must implement conservation plan on
highly erodible land

Producers not previously subject to this
provision have 5 years to come into compliance

Producers already out of compliance have 2
years to come into compliance

Plug yields are increased from 60% to 70%

Producers may elect to exclude any recorded or
appraised yields in which yield in the county of
the producer was at least 50 percent below the
simple moving average of the 10 previous
years. (Appears to be delayed until at least
2016 crop year)
◦ Contiguous counties also qualify under this provision
2








Definition: “.. Farmer or rancher not actively
involved in a farm or ranch with a bona fide
insurable interest in a crop or livestock as
owner operator, landlord, tenant, or
sharecropper for more than 5 years”
Beginning farmer can replace yields with that
equal to 80 percent of T-Yield or higher of APH
of previous producer of the crop on the
acreage
CRP Acreage cap is reduced, but USDA is
encouraged to update rental rates to reflect
prevailing rental rates
CSP Cap is 10,000,000 acres annually with an
average rate of $18/acre through 2022. Pasture
land is added to list of eligible land. $200K
payment limit through 2018
EQIP is continued with a payment limit of
$450K through 2018

Enterprise Unit Subsidy is made permanent

Units available for irrigated and non-irrigated
crops separately starting with 2015 crop year

Fiscal year 2014, no more than 27,500,000 acres

Fiscal year 2015, no more than 26,000,000 acres

Fiscal year 2016, no more than 25,000,000 acres

Fiscal years 2017 & 2018, no more than 24,000,000
acres
Supplemental Ag Disaster Assistance is permanently
funded
Livestock Indemnity Program (LIP)
Producers are eligible that own livestock physically located in
a county rated by the US Drought Monitor as having a:
 D2 (Severe Drought) through D4 (Exceptional Drought)
◦ Losses from adverse weather or federally reintroduced animals
 Producers will receive payments for 2012 & 2013 losses
 1,
Livestock Forage Disaster Program (LFP)
◦ Losses from drought or fire
◦ Continued for 2012 and each succeeding fiscal year for losses
back to 10/1/2011
3, 4 or 5 monthly payments depending on length &
severity based on 60% of monthly feed cost
 Eligible
Livestock: Cattle, Sheep, Swine, Goats……..
 Signup
4/15/2014 through 1/30/2015
3
 2012
– D4 Drought > 4 weeks – Eligible for 5 monthly
payments.
Payment Example = Lesser of Qualified Animals or Stocking Rate at
15 acres/animal unit X ($51.81*60%*5 Months = $155.43/Hd)
 2013
– D3 Drought > 4 weeks – Eligible for 4 monthly
payments
more than 5 monthly payments will be made per animal
per year
Producers need to prove:
 Owned Animal Inventory 60 days prior to qualifying date
Animals < 500 lbs are not eligible
 Grazing leases
were in place corresponding with qualifying
date & county
Only year long arrangements are eligible
 No
 See
USDA LFP Fact Sheet & FSA Office for more details
Payment rates based on corn equivalent or lesser of stocking rate
at 15 acres/animal unit

2012
2013

Price Loss Coverage (PLC)
◦ Based on Reference Prices fixed through term of Farm Bill
 Similar to old Counter Cyclical Payment Program
 Payments limited to difference between reference price &
marketing loan rate
 Supplemental Coverage Option (SCO) optional coverage
available from 2015 onward
Payments limited to $125,000 from LFP, ELAP & LIP combined
per year

Ag Risk Coverage (ARC)
◦ Average Revenue Support Option
 Similar to old Average Crop Revenue Election program (ACRE)
 Payments limited to 10% of benchmark
2014
Both Choices use Marketing Year Average (MYA) price
to calculate payments
Optional
Decisions
Mandatory1
Decision
Base
Reallocation
Ag Risk
Coverage (ARC)
◦ 2014 Corn Marketing Year
 (September 1, 2014 – August 31, 2015)
Payments not made until October of FOLLOWING year
Price Loss
Coverage (PLC)
◦ 2014 Corn payments due in October of 2015
If no decision is made or decision is not unanimous, PLC
is the default and 2014 crop year payments are forfeited
1

Take home point: Neither program is a substitute for
crop insurance
County
Coverage
Individual
Coverage
(Whole Farm)
Yield Update*

1
Opportunity to
choose
Supplemental
Coverage Option
(SCO) starting in
2015
*Payment yields are only used for PLC, but Yield Update
option is worth looking at to see if it is a benefit
4

Producer options within each program:
◦ Ag Risk Coverage (ARC) = Price & Yield Driven
 County or individual coverage
 Individual ARC is whole farm policy, other options
can be signed up crop by crop
◦ Price Loss Coverage (PLC) = Only Price Driven


Payment acres for PLC & ARC (County
Coverage) are 85% of farm base acres.

Payment acres for ARC (Individual Coverage) is
65% of farm base acres

Base Acre Reallocation & Yield Update
If producers within a farm are not unanimous in
decision, 2014 crop year payments are forfeited
and PLC will be default coverage through 2018
ARC & PLC are split by practice
◦ Irrigation & Dryland production accounted for
separately if a “significant” amount of each is grown
in county


Base acres are the same as current base acres,
but farms can elect to reallocate base acres
among farm’s covered crops according to crop’s
average acres planted over the 2009 to 2012
crop years.
◦ September 29th, 2014 to February 27th, 2015

ARC/PLC Election
◦ November 17th, 2014 to March 31st, 2015

ARC/PLC Enrollment
◦ Mid-April 2015 to Summer 2015
*Updated 10/7/2014
2

“Shallow Loss Program” – Early losses before
crop insurance coverage kicks in are partially
covered by ARC
Revenue per acre
ARC Revenue Benchmark
86%


Payments due when revenue is <86% of rolling
5 year Olympic average until 76%. (Crop
insurance covers deeper losses)
Olympic Average = High and low price and
yields of previous 5 years are thrown out and
remaining 3 are averaged
76%
Ag Risk Coverage (ARC)
Crop Insurance
Pays on base acres @ following rates:
Individual Coverage = 65%
County Coverage = 85%
Crop Insurance Coverage %
Crop Revenue
5
Year
Yield
Actual Revenue
MYA Price
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
197
180
196
186
200
190
190
190
190
190
190
798
638
1,013
1,158
1,375
847
665
627
637
656
684
4.06
3.55
5.18
6.22
6.89
4.46
3.50
3.30
3.35
3.45
3.60
Theoretical Payments Given Above Yields & Prices
Benchmark
Year
ARC Yield
ARC Price
Revenue
2013
192.8
5.15
993.42
2014
190.6
5.29
1007.43
2015
191.9
5.29
1014.30
2016
190.0
4.73
898.07
2017
190.0
3.77
716.30
2018
190.0
3.43
652.33
PLC Reference Price
$
3.70
Only past year with PLC Payment
Actual Data
Projections
ARC
Guarantee
854.34
866.39
872.30
772.34
616.02
561.01
Actual Revenue
847.40
665.00
627.00
636.50
655.50
684.00
ARC
Payment*
6.94
100.74
101.43
89.81
0.00
0.00
PLC
Payment
0.00
27.95
55.89
48.91
34.93
13.97
* Payment is on payment acres (85% of base acres for county level coverage, 65% for individual level coverage
Year
Yield
Actual Revenue
MYA Price
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
197
180
196
186
200
190
190
190
190
190
190
798
638
1,013
1,158
1,375
847
665
627
637
656
684
4.06
3.55
5.18
6.22
6.89
4.46
3.50
3.30
3.35
3.45
3.60
Theoretical Payments Given Above Yields & Prices
Benchmark
Year
ARC Yield
ARC Price
Revenue
2013
192.8
5.15
993.42
2014
190.6
5.29
1007.43
2015
191.9
5.29
1014.30
2016
190.0
4.73
898.07
2017
190.0
3.77
716.30
2018
190.0
3.43
652.33
PLC Reference Price
$
3.70
Only past year with PLC Payment
Actual Data
Projections
ARC
Guarantee
854.34
866.39
872.30
772.34
616.02
561.01
Actual Revenue
847.40
665.00
627.00
636.50
655.50
684.00
ARC
Payment*
6.94
100.74
101.43
89.81
0.00
0.00
PLC
Payment
0.00
27.95
55.89
48.91
34.93
13.97
* Payment is on payment acres (85% of base acres for county level coverage, 65% for individual level coverage
3
Year
Yield
2008
2009
2010
2011
2012
2013
2014
197
180 L
196
186
200 H
190
190
Actual Revenue MYA Price
798
638
1,013
1,158
1,375
847
665
Theoretical Payments Given Above Yields & Prices
Benchmark
Year
ARC Yield
ARC Price
Revenue
2014
190.6
5.29
1,007
Step 1
2008-2012
Olympic Average
Step 8
Whole Farm Payment
Step 2
2008-2012
Olympic Average
Step 3
ARC Yield X
ARC Price
ARC Dryland Wheat Template
PLC Reference Price
$
4.06
3.55 L
5.18
6.22
6.89 H
4.46
3.50
3.70
Only past year with PLC Payment
Actual Data
Projections
ARC
Guarantee
866.39
Actual Revenue
665.00
Step 4
Benchmark
Revenue X 86%
Step 5
2013 Price X
2013 Yield
ARC Payment X 85% Payment Rate X Base Acres
$100.74 X 85% X 600 = $51,377
ARC
Payment*
100.74
PLC
Payment
27.95
Step 6
Step 7
Smaller of
(MYA (Benchmark
Reference
Revenue X 10%)
Price) X
or (ARC
Payment Yield
Guarantee X 85%
Actual Revenue)
* Payment is on payment acres (85% of base acres for county level coverage, 65% for individual level coverage
Year
Yield
Actual Revenue
MYA Price
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
22.90
39.40
42.90
43.60
33.40
24.50
35.00
35.00
35.00
35.00
35.00
155.26
191.88
244.53
315.66
259.52
168.32
206.50
152.25
150.50
155.75
161.00
6.78
4.87
5.70
7.24
7.77
6.87
5.90
4.35
4.30
4.45
4.60
Year
Yield
2008
2009
2010
2011
2012
2013
22.90 L
39.40
42.90
43.60 H
33.40
24.50
Year
2013
ARC Yield
38.57
Step 1
2008-2012
Olympic Average
Actual Revenue
155.26
191.88
244.53
315.66
259.52
168.32
MYA Price
6.78
4.87 L
5.70
7.24
7.77 H
6.87
Benchmark
ARC Price
Revenue ARC Guarantee
6.57
253.51
218.02
Step 2
Step 3
Step 4
2008-2012
ARC Yield X
Benchmark
Olympic Average ARC Price Revenue X 86%
PLC Reference Price
$
5.50
Only year from 2008-2013 with PLC Payment
Actual Data
Projections
Actual Revenue
168.32
Step 5
2013 Price X
2013 Yield
ARC
Payment*
25.35
Step 6
PLC
Payment
0.00
Step 7
Smaller of
(MYA (Benchmark Reference
Revenue X
Price) X
Step 8
ARC Payment X 85% Payment Rate X Base Acres
10%) or (ARC Payment
Whole Farm Payment
25.35 X 85% X 900 = $19,393
Guarantee - Yield X 85%
Actual
Revenue)
* Payment is on payment acres (85% of base acres for county level coverage, 65% for individual level coverage
PLC Reference Price
$
5.50
Only year from 2008-2013 with PLC Payment
Actual Data
Projections
Theoretical Payments Given Above Yields & Prices
Benchmark
ARC
ARC
PLC
Year
ARC Yield
ARC Price
Revenue Guarantee
Actual Revenue
Payment* Payment
2013
38.57
6.57
253.51
218.02
168.32
25.35
0.00
2014
38.57
6.60
254.67
219.01
206.50
12.51
0.00
2015
37.10
6.67
247.46
212.81
152.25
24.75
32.06
2016
34.47
6.67
229.89
197.71
150.50
22.99
33.45
2017
34.47
5.71
196.69
169.15
155.75
13.40
29.27
2018
35.00
4.90
171.50
147.49
161.00
0.00
25.09
* Payment is on payment acres (85% of base acres for county level coverage, 65% for individual level coverage
*Best estimate based on assumptions (Excludes PLC-SCO)
6
Stretch
&
Grab some refreshments
N
*Best estimate based on assumptions (Excludes PLC-SCO)

Only provides price protection

Payments due when Marketing Year Average
price (MYA) is less than Reference Price

PLC Payment = (Reference Price – Higher of
MYA or Marketing Loan Rate) X Payment Yield X
Payment Acres (Base Acres X 85%)

2014 Farm Bill Reference Prices
◦
◦
◦
◦

$5.50/bu – Wheat
$3.70/bu – Corn
$8.40/bu – Soybeans
$20.15/cwt – Other Oilseeds
Marketing Loan Rates
◦
◦
◦
◦
$2.94/bu – Wheat
$1.95/bu – Corn
$5.00/bu – Soybeans
$10.09/cwt – Other Oilseeds
4

Corn Example: $3.70 Reference Price – $3.50
Market Year Average Price (MYA) = $0.20

$0.20 X 180 bu/acre payment yield = $36

$36 X 130 Base Acres X 85% = $3,978 PLC Payment

Supplemental Coverage Option (SCO) available for those
that choose Price Loss Coverage from 2015 crop year
onward. (Not available with ARC Coverage)
◦ Coverage can’t be greater than difference between 86% and
coverage level of individual policy.
 Example: 70% Insurance policy = 86%-70% = 16% SCO Coverage
◦ SCO Subsidized at 65% of premium
 (Other policies subsidized at variable levels to maximum of 60%)

SCO losses calculated at county level
7

Producers who enroll their 2015 crop of winter wheat in
SCO may withdraw from SCO prior to their acreage
reporting date with no penalty.


 Revenue Protection (RP)
 Revenue Protection w/Harvest Price Exclusion (RP-HPE)
 Actual Production History (APH)
Acreage reporting date for 2015 wheat = November 15th, 2014


SCO withdrawn after this date will incur a penalty
5
SCO losses calculated at county level
Irrigated Corn Example
SCO Payments ($/Acre) with 75% Revenue Protection Policy w/Harvest Price Exclusion
Revenue or Yield
Expected Revenue (Yield X Price)
Insurance
Deductible
86% of Guarantee
SCO Coverage
Insurance Coverage Level
Insurance
Coverage
County Level
Harvest Price
County Yield
$3.25
$3.50
$3.75
$4.00
160
$102
$102
$102
$102
170
$102
$102
$102
$102
180
$102
$102
$102
$75
190
$102
$102
$82
$35
200
$102
$95
$45
$0
Assuming 200 bushel APH & $4.62 projected price
$4.25
$102
$72
$30
$0
$0
Farm Level
6
Irrigated Corn Example
SCO Payments ($/Acre) with 75% Revenue Protection Policy w/Harvest Price Exclusion
County Yield
$3.25
160
$102
170
$102
180
$102
190
$102
200
$102
Assuming 200 bushel APH & $4.62 projected price
Step 1
Step 2
Expected Revenue (200*$4.62) 86% of Guarantee
$924
$795
Step 5
86% - Coverage Level (75%)
11%
Mimics crop insurance coverage
$3.50
$102
$102
$102
$102
$95
Harvest Price
$3.75
$102
$102
$102
$82
$45
$4.00
$102
$102
$75
$35
$0
Step 3
Actual Revenue 180*$3.75
$675
Step 6
Maximum SCO Pmt (11%*$924)
$102
Dryland Wheat Example
SCO Payments ($/Acre) with 75% Revenue Protection Policy w/Harvest Price Exclusion
$4.25
$102
$72
$30
$0
$0
Step 4
Step 2 - Step 3
$120
Step 7
Final SCO Payment
(Smaller of Step 4 or 6)
$102
Harvest Price
County Yield
$4.90
$5.40
$5.90
10
$31
$31
$31
20
$31
$31
$31
30
$31
$31
$31
35
$31
$31
$31
40
$31
$29
$9
Assuming 40 bushel APH & $7.11 projected price
$6.40
$31
$31
$31
$21
$0
$6.90
$31
$31
$31
$3
$0
8
Dryland Wheat Example
SCO Payments ($/Acre) with 75% Revenue Protection Policy w/Harvest Price Exclusion
County Yield
$4.90
10
$31
20
$31
30
$31
35
$31
40
$31
Assuming 40 bushel APH & $7.11 projected price
Step 1
Expected Revenue (40*$7.11)
$284
$5.40
$31
$31
$31
$31
$29
Step 2
86% of Guarantee
$245
Step 5
86% - Coverage Level (75%)
11%
Harvest Price
$5.90
$31
$31
$31
$31
$9
$6.40
$31
$31
$31
$21
$0
Step 3
Actual Revenue 30*5.90
$177
Step 6
Maximum SCO Pmt (11%*$284)
$31
$6.90
$31
$31
$31
$3
$0
Step 4
Step 2 - Step 3
$68

Payment yields can be updated to 90% of farm’s
average planted yield over 2008 to 2012 crop
years

If any yield was <75% of county average, 75% of
county average yield is assigned

This OPTION should be closely considered
◦ Updating to a higher payment yield is possible
regardless of program, though ARC payments will not
be affected
Step 7
Final SCO Payment
(Smaller of Step 4 or 6)
$31
7
8
Corn
895
Barley
65
Actual Planted Acres
2009
2010
2011
2012
Average Acres
595
565
523
620
575.75
0
0
0
0
0
% of Total Acres
54.51%
Yield Update Example for Irrigated Corn in Colorado
Historic Base Acres
Year
2008
2009
2010
2011
2012
Average Yield
County
197
180
196
186
200
191.8
Yuma County
Farm
126
204
216
199
212
191.4
Farm Adjusted Yield
143.9
204.0
216.0
199.0
212.0
195.0
Plug Yield (75% of County Average)
Current Payment Yield (Available from FSA)
90% of Farm-Adjusted Yield (New Payment Yield w/Update Option)
143.9
164
Reallocated Base Acres
Oats
45
Wheat
126
Total
1,131
0
0
0
0
0
426
526
480
490
480.5
1,021
1,091
1,003
1,110
1,056
45.49%
616 = (54.51%*1,131)
515
1,131
175.5
9
ARC (County) & PLC Irrigated Corn Payment Estimates
Yuma County
197
180
196
186
200
190
190
190
190
190
190
Actual Revenue
$/Acre
796
638
1,013
1,158
1,375
903
798
627
637
656
684
2014-2018 Minimum Corn Price ($/Bushel)
MYA Price
$/Bushel
4.05
3.55
5.18
6.22
6.89
4.75
4.20
3.30
3.35
3.45
3.60
$2.50
2015 - 2018 MYA Price where PLC Payment = ARC Payment
given above assumptions = $3.10
800
2014 - 2018 Estimated Cumulative Payments
$/Acre
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Corn Reference Price = $3.70
600
500
400
ARC Total
PLC Total
300
Get Prepared
◦ Gather yield data & planting history for 2008-2012 (Crop insurance
records will suffice for Farm Service Agency (FSA)
◦ Look for signup dates from FSA newsletter & sign up for update emails (Gov Delivery) at FSA office to receive updates as they
happen
700
200

100
$2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
2015-2018 Marketing Year Average(MYA) Price
2015 -2018 price projections are from USDA Long-term Ag Projections to 2023:
www.usda.gov/oce/commodity/projections/
Update payment yields if it is in your favor
◦ Regardless of program, its always better to have higher yield
0

Gather all available information before signing up
◦ By signup deadline (Currently 3/31/15), 2014 yields and prices will be
mostly known and we may have an idea of 2015 prices as well
9
Advantages
 Revenue Based (Protects against lower yields & prices)
 Provides protection based on recent high prices
 Coverage kicks in at higher prices than PLC
Disadvantages
 With continued revenue shortfalls, coverage erodes over time
 Supplemental Coverage Option (SCO) is not available
 Trend gains in production can erode coverage
 Payments limited to 10% of guarantee
2014 - 2018 Farm Bill Reference Prices, Loan Rates and Maximum PLC
Payment Rates for selected Covered Commodities
Crop
Unit
Reference Price
Marketing Loan Rate
Maximum PLC Payment
Wheat
$/Bu
5.50
2.94
2.56
Corn
$/Bu
3.70
1.95
1.75
Grain Sorghum
$/Bu
3.95
1.95
2.00
Barley
$/Bu
4.95
1.95
3.00
Oats
$/Bu
2.40
1.39
1.01
Soybeans
$/Bu
Other Oilseeds
(Sunflowers, Canola, $/Cwt
etc.)
8.40
5.00
3.40
20.15
10.09
10.06
Access additional information on the 2014 Farm Bill website:
www.fsa.usda.gov/farmbill
Advantages
 No payment limits up to individual caps
 Supplemental Coverage Option (SCO) is available
 Continued low prices do not erode coverage
Disadvantages
 Protection based on price only
 Reference prices are significantly below current prices

Carl Zulauf, Professor, Department of
Agricultural, Environmental and Development
Economics at The Ohio State University

Jody Campiche, Oklahoma State University
Extension Economist

H.R. 2642, Federal Agriculture Reform and Risk
Management Act of 2013, aka “Farm Bill”

Conference Report to Accompany H.R. 2642
John Deering
Phone (970) 848-3838
E-Mail: [email protected]
Akron
345-2026
Otis
246-3456
Sterling
522-5151
Yuma
848-3838
For a full copy of today’s presentation, please contact your
local branch. I will work with your loan officer to get you
the most up to date Farm Bill information available.
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