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sesame seed, or any oilseed designated by the Secretary) 1 Term limit on FSA guaranteed loans is lifted Current program repealed Beginning Farmer Eligibility Replaced with dairy margin program Dairies may participate in Margin Protection Program or Dairy Livestock Gross Margin (LGM), but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loan eligibility ◦ Owner-operator must own at least 75 percent of entity “Permanent” laws of 1938 and 1949 are not repealed Country of Origin Labeling (COOL) is left in place ◦ USDA is instructed to conduct a study of the effect of the final rule on consumers, producers & packers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. 10
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