Farm Bill Overview
General Overview of the 2014 AFPC Decision Aid Steve Amosson Regents Fellow, Professor and Extension Economist Farm Bill Implementation Meetings November – December, 2014
D1 Farm Program Series
Series Co-sponsors Texas Corn Producers Texas Sorghum Producers Texas Wheat Producers Plains Cotton Growers
Cotton Provisions
Cotton Base Becomes Generic Base • All Cotton base on the farm as of September 30, 2013 is renamed Generic Base -
-
-
-
Upland cotton no longer receives traditional commodity program payments In an attempt to resolve longstanding WTO dispute with Brazil, the only income support upland cotton will receive is through purchased insurance
On an annual basis, generic base acres can be assigned to other covered commodities based on the number of acres planted of the other covered crops Will need to make Commodity Program Choices on Generic Base
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 50 acres of wheat and 50 acres of sorghum
Original Wheat Base
Allocated Allocated Generic Base to Generic Base to Wheat Sorghum
Farmer has protection on 75 acres of wheat and 25 acres of GS
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 100 acres of cotton
Original Wheat Base
Generic Base Idled for Year
Farmer has protection on 50 acres of wheat
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic
Original Wheat Base
Allocated Generic Base to Wheat
If farmer plants 1 acre of wheat and 99 acres of cotton
Generic Base Idled for Year
Farmer has protection on 51 acres of wheat
Base Reallocation Example (With Cotton) Base Plantings 2009 2010 2011 2012 Average Generic Base Share Reallocated Base
Cotton 500
Corn 0
200 200 200 200 200
600 600 600 600 600
Sorghum Soybeans Wheat 0 0 500
100 100 100 100 100
100 100 100 100 100
0 0 0 0 0
500
Total 1,000
1,000 1,000 1,000 1,000 1,000 500
75% 375
12.5% 62.5
12.5% 62.5
0% 0
500
Source: House Agriculture Committee Staff
Insurance Provisions
Supplemental Coverage Option • A new area-wide insurance program (SCO) will be available to all PLC producers. It is designed to protect farmers against losses that would normally fall within their insurance deductible range. Must have an individual policy -
Up to 86% revenue guarantee, 65% premium subsidy Premiums are set by crop by county Partially Available For Next Year Sign up on an annual basis, based on current production
Insurance Price X 10 Year Average (APH) Yield
Crop Insurance Expected Revenue
Example of Price Loss Coverage (PLC) Plus SCO Loss 14%
Deductible 40%
SCO Indemnity 26% Insurance Guarantee Ind. Coverage
Example: 60% coverage
Indemnity
Actual Price X Actual Yield + Any PLC Benefits
Stacked Income Protection Plan (STAX) • “Expected” to be available beginning 2015 crop year • An area-wide insurance program only available to upland cotton producers to purchase beginning in 2015 (similar to GRIP plan) • Covers from 90% of revenue guarantee down to 70% or insurance coverage level (whichever is higher) in 5% increments. 80% premium subsidy and includes protection factor up to 120%
Insurance Price X 10 Year Average (APH) Yield
Crop Insurance Expected Revenue
Example of STAX
Loss 10% Deductible 40%
STAX Indemnity 20% Insurance Loss 10% Guarantee Ind. Coverage
Example: 60% coverage
Indemnity
Actual Price X Actual Yield
Area loss only
Other Insurance Provisions • Makes enterprise unit discount permanent. Allows enterprise units to be split out for irrigated and non-irrigated crops • Adjustment in actual production history to determine insurable yields. - A producer may choose to exclude any year from their APH if their yield in that year is less than 50% of the ten year county average. This also applies to contiguous counties and allows for the separation of irrigated and non-irrigated acres
AFPC Decision Aid
What have we learned so far???
Preliminary Decision Aid Results • 165 Farms have been Analyzed • Observations by Major Crops – Corn (60) – Sorghum (104) – Wheat (153)
• Crop Observations by Area – Eastern Panhandle (151) – Western Panhandle (198)
Base Reallocation
Base Reallocation Overview • One time base reallocation decision by FSA farm # - Two choices • Reallocate (cannot add base acres to a farm) • Retain existing base acres
- Reallocates bases other than cotton that were on the farm as of September 30, 2013. - Reallocation is in proportion to the ratio of: • The 4 year average of planted acres to each crop from 2009 to 2012 plus prevented planting/the 4 year average of all covered commodities planted plus prevent planting • Under planting or over planting does not affect the amount of base.
Base Reallocation Example With a Non-program Crop Corn Base
Sorghum Soybeans
Wheat
Cotton
Total
0
0
0
1,000
n/a
1,000
2009
600
100
100
0
200
1,000
2010
600
100
100
0
200
1,000
2011
600
100
100
0
200
1,000
2012
600
100
100
0
200
1,000
Average
600
100
100
0
200
1,000
Share
75%
12.5%
12.5%
0%
n/a
750
125
125
0
Plantings
Reallocated Base
Source: House Agriculture Committee Staff
1,000
Base Acre Reallocation Results Total Farm Base Acre Reallocation Decision
39% Yes Reallocate Do Not Reallocate 61%
General Observations & Thoughts • Generally, expected payments were higher if wheat base could be shifted to more sorghum and/or corn acres. • Thought ‐ ‐Expected payments look similar then reallocate base to better align your protection to what your actually planting
Yield Updating Decisions
Yield Update Overview Producers have the opportunity to update their payment yields to 90% of the 2008-2012 crop year averages. Yield data will come primarily from APH history, and be subject to spot checks. Decisions are made by crop, by farm. Year
Corn
Wheat
2008
DNP
30
2009
DNP
15
2010
DNP
22
2011
100
0
2012
150
32
75% T Yield
70
18
Could Update to:
(100 + 150)/2*.9 =112.5
(30 + 18+22+18+32)/5*.9 =21.6??
Farmer Jones On Farm 2 Yrs
Year
Corn
Corn
2008
DNP
No Records
2009
88
No Records
2010
120
No Records
2011
100
110
2012
150
120
Substitute Yield
70
70
2013 CC Yield
90
90
Could Update to:
Farmer Brown On Farm 3 Yrs Corn 95 100 120 130
Obtained From Prior Tenant
Farmer Smith On Farm 5 Yrs
FSA letter indicates 5 years of corn planted
Yield Updating
120 70 90
(88 + 120 + 100 + 150)/4 * .9 =103 (70 + 70 + 70 + 110 + 120)/5 * .9 =79 (95 + 100 + 120 + 130 + 120)/5 * .9 =102
Yield Analysis Results Texas Panhandle Yield Update Decision for All Commodities 27%
Update Do Not Update
73%
Yield Update Results by Region Eastern Texas Panhandle Yield Update Decision for All Commodities
Western Texas Panhandle Yield Update Decision for All Commodities 18%
38%
62% 82%
Update
Do Not Update
Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Corn
48% Update Do Not Update 52%
Yield Analysis Results by Region for Corn Western Texas Panhandle Yield Update Decision for Corn
Eastern Texas Panhandle Yield Update Decision for Corn
51% 38%
62% 49% Update
Do Not Update Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Sorghum 20%
Update Do Not Update
80%
Yield Analysis Results by Region for Sorghum Eastern Texas Panhandle Yield Update Decision for Sorghum
Western Texas Panhandle Yield Update Decision for Sorghum 9%
33%
91%
67%
Update
Do Not Update
Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Wheat 27%
Update Do Not Update
73%
Yield Update Analysis by Region for Wheat Eastern Texas Panhandle Yield Update Decision for Wheat
Western Texas Panhandle Yield Update Decision for Wheat 9%
45% 55%
91% Update
Do Not Update
Update
Do Not Update
General Observations • High probability that it will pay to update your corn yields • Not as obvious but a number of producers may be able to improve sorghum and wheat yields. • Dryland base but have introduced irrigation, will probably benefit from updating yields. • Irrigated base but have went dryland - -forget it!
Choosing Between PLC and ARC
Commodity Programs Overview Price Loss Coverage (PLC) • A “Deep Loss” program that Covers Losses in Income Due to Price Declines of Covered Commodity Below Established Reference Prices. Wheat -------------------- $5.50/bu Corn ---------------------- $3.70/bu Grain Sorghum ---------- $3.95/bu Soybeans ----------------- $8.40/bu Peanuts ------------------- $535/ton
• Sign up options by Crop by Farm
Illustration of Government Support for Corn Under PLC Revenue per bu Reference Price – $3.70
Paid on base acres x .85 Supplemental Coverage Option
Loan Rate – $1.95 Market Price
PLC
MLG/LDP Market Receipts
Crop insurance coverage
Commodity Programs Overview Agriculture Risk Coverage (ARC) • A “Shallow Loss” program that covers Losses in Income for a Covered Commodity Relative to a Revenue Guarantee. • ARC can be Selected at the County or Individual Level. County Payments are made when actual revenue for the covered commodity < ARC revenue guarantee. • Sign up option allows selection by crop by farm. Payment triggers will be by practice in selected areas.
Illustration of Government Support for Corn Under ARC Revenue per bu Revenue Benchmark Revenue Guarantee
86% 76% Loan Rate – $1.95 Market Price
MLG
[paid on base acres x .65 (individual) or .85 (county)]
Market Receipts Crop insurance coverage
ARC/PLC Results – Total Farm Total Farm ARC vs PLC Decision 8%
ARC PLC
92%
Prices Used for ARC/PLC Results
Prices Used for ARC/PLC Results
ARC/PLC Results - Corn Corn Farm ARC vs PLC Decision
41%
ARC PLC 59%
Producer Price Outlook a Factor in ARC/PLC Decision (Corn Ex.) 7 6.5 6 5.5 5.28
5.28
5
Oct. 2014 FAPRI Prices
$/bu
4.80
Benchmark Price
4.5 4
86% 4.06
3.97
76% Ref Price
3.5 3 2.5 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Prices Used for ARC/PLC Results
ARC/PLC Results - Sorghum Sorghum Farm ARC vs PLC Decision 2%
ARC PLC
98%
Producer Price Outlook a Factor in ARC/PLC Decision (Grain Sorghum Ex.) 6.50 6.00 5.50
$/bu
5.00
5.09
5.09
Oct. 2014 FAPRI Prices 4.73
Benchmark Price
4.50 4.00
86% 4.05
76% 3.95
3.50 3.00 2.50 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Ref Price
Prices Used for ARC/PLC Results
ARC/PLC Results - Wheat Wheat Farm ARC vs PLC Decision 6%
ARC PLC
94%
Producer Price Outlook a Factor in ARC/PLC Decision (Wheat Ex.) 8 7.5 7
$/bu
6.5 6
6.60
6.66
6.66
Oct. 2014 FAPRI Prices Benchmark Price
6.13 5.79
86% 76%
5.5
Ref Price
5 4.5 4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Alternative Crops
Prices Used for ARC/PLC Results
ARC/PLC Results Soybeans ARC vs PLC Decision (13) 23%
ARC PLC
77%
Producer Price Outlook a Factor in ARC/PLC Decision (Soybeans Ex.) 16.00
14.00
12.00
12.27
12.27
Oct. 2014 FAPRI Prices
11.82
$/bu
Benchmark Price 10.83
10.00
86% 9.92
76% Ref Price
8.00
6.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Prices Used for ARC/PLC Results
ARC/PLC Results Peanuts ARC vs PLC Decision (3)
0%
ARC PLC
100%
Producer Price Outlook a Factor in ARC/PLC Decision (Peanuts Ex.) 650
600
550
557.33 557.33 557.33
$/ton
535.00 535.00
Oct. 2014 FAPRI Prices Benchmark Price
500
86% 76% Ref Price
450
400
350 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average Payment Per Base Acre Average Payment Per Base Acre $700
$655
$600 $500 Corn
$400
Wheat Sorghum
$300
Soybeans $209
Peanuts
$199
$200
$163 $133 $90
$100 $28
$41
$51
$31
$0
ARC
PLC
General Observations • If enrolling the total farm or sorghum or wheat or peanuts‐ ‐ (PLC) appears to be the preferred option. • A slight majority of producers would benefit more from enrolling corn or soybeans in ARC. If you have multiple farms where corn is grown might want to consider splitting enrollment between ARC & PLC. • Relatively bullish on prices ‐ ‐ result outcomes will improve for ARC and decrease for PLC. • Relatively bearish on prices ‐ ‐ result outcomes will decrease for ARC and improve for PLC.
Farm Program Sign-up Timeline August 2014
Oct
Sept
Fix Planted Acres with FSA
Nov
Dec
Jan
Feb
17th
April
May
June 2015
31st
Choice Between ARC & PLC
29th
27th
Reallocate Bases & Update Yields
2nd
March
Dairy Margin 28th Protection Program for 2014 and 2015
Mid
Summer??
Annual Sign‐up
AFPC Decision Aid The tool is available at: https://afpc.tamu.edu or https://usda.afpc.tamu.edu
Producers Face MANY Sign Up Decisions Relating to the 2014 Farm Bill Title I
Title XI
Base Reallocation Decision
Choice Between ARC and PLC
Can choose to Update Payment Yield
County Choose ARC
Crop Insurance
Individual
Choose PLC
Beginning in 2015 can choose SCO insurance option
Base reallocation decisions occur by FSA farm number, whereas yield update and PLC/ARC program decisions are on a crop by crop basis for each FSA farm number.
Why Use It???? • There are a lot options and almost impossible to evaluate them all with a pad & pencil – Program options by Farm number, practice and crop – Calculations, yield plugs, yield variability already included • You will have to live with some decisions for the life of the program and maybe beyond magnifying results – Base reallocation – Yield updates – ARC versus PLC • General results are nice but specific analysis of your operation is a
whole lot better!!
Why Use It???? • Changes in the program will happen that may affect you – Easy to rerun the analysis • Easy to do “What if” analysis - - changing prices, future acreages, insurance coverages • It will really simplify program signup - - Print out the results and highlight what you want
What do you get out of the Decision Aid??
Sample Results for Yield Update
• •
Producer can print the FSA Yield Worksheet Print a separate form for each FSA number. Fill in the name and email address for contact person, farm number, historical yields, state code, and county code.
Base Reallocation Options are Calculated Directly, Then Utilized to Analyze their Impacts on Payments by Program
66
Whole Farm Decision: Output for Base Reallocation, PLC, ARC-IC, & ARC-CO
Whole Farm Decision: All Crops Elect Same Program
Crop-by-Crop Results for Each Program Election Option
Sample Insurance Results Net revenue for the “best” combination of ARC/PLC and Insurance is presented. Result here is ARC, with Revenue Protection at 85%.
Necessary Data for Running the AFPC Decision Aid • FSA Reported Crop History Summary Report • FSA 156EZ Form (only necessary if the farmer has cotton base) • 2014 Schedule of Insurance for ALL Crops • Insurance Actual Production History (APH) Report for ALL Crops • Basis Information – (Estimates Provided)
Decision Aid Help is Available
Decision Aid Help is Available
After Lunch • A walk through of the data entry and interpretation of the results from the Decision Aid model • Live (we hope) data entry demonstration of a farm into the Decision Aid model • Discussion of the help available
For Additional Information • This Presentation can be Downloaded at: http://amarillo.tamu.edu • Decision Aid Handout – Get it Now • AFPC Decision Aid Hotline for Texas Producers 800-361-6796 • FARM Assistance Facebook Page https://www.facebook.com/FARMAssistance
The End FOR NOW
D1 Farm Program Series
Series Co-sponsors Texas Corn Producers Texas Sorghum Producers Texas Wheat Producers Plains Cotton Growers
Cotton Provisions
Cotton Base Becomes Generic Base • All Cotton base on the farm as of September 30, 2013 is renamed Generic Base -
-
-
-
Upland cotton no longer receives traditional commodity program payments In an attempt to resolve longstanding WTO dispute with Brazil, the only income support upland cotton will receive is through purchased insurance
On an annual basis, generic base acres can be assigned to other covered commodities based on the number of acres planted of the other covered crops Will need to make Commodity Program Choices on Generic Base
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 50 acres of wheat and 50 acres of sorghum
Original Wheat Base
Allocated Allocated Generic Base to Generic Base to Wheat Sorghum
Farmer has protection on 75 acres of wheat and 25 acres of GS
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 100 acres of cotton
Original Wheat Base
Generic Base Idled for Year
Farmer has protection on 50 acres of wheat
Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic
Original Wheat Base
Allocated Generic Base to Wheat
If farmer plants 1 acre of wheat and 99 acres of cotton
Generic Base Idled for Year
Farmer has protection on 51 acres of wheat
Base Reallocation Example (With Cotton) Base Plantings 2009 2010 2011 2012 Average Generic Base Share Reallocated Base
Cotton 500
Corn 0
200 200 200 200 200
600 600 600 600 600
Sorghum Soybeans Wheat 0 0 500
100 100 100 100 100
100 100 100 100 100
0 0 0 0 0
500
Total 1,000
1,000 1,000 1,000 1,000 1,000 500
75% 375
12.5% 62.5
12.5% 62.5
0% 0
500
Source: House Agriculture Committee Staff
Insurance Provisions
Supplemental Coverage Option • A new area-wide insurance program (SCO) will be available to all PLC producers. It is designed to protect farmers against losses that would normally fall within their insurance deductible range. Must have an individual policy -
Up to 86% revenue guarantee, 65% premium subsidy Premiums are set by crop by county Partially Available For Next Year Sign up on an annual basis, based on current production
Insurance Price X 10 Year Average (APH) Yield
Crop Insurance Expected Revenue
Example of Price Loss Coverage (PLC) Plus SCO Loss 14%
Deductible 40%
SCO Indemnity 26% Insurance Guarantee Ind. Coverage
Example: 60% coverage
Indemnity
Actual Price X Actual Yield + Any PLC Benefits
Stacked Income Protection Plan (STAX) • “Expected” to be available beginning 2015 crop year • An area-wide insurance program only available to upland cotton producers to purchase beginning in 2015 (similar to GRIP plan) • Covers from 90% of revenue guarantee down to 70% or insurance coverage level (whichever is higher) in 5% increments. 80% premium subsidy and includes protection factor up to 120%
Insurance Price X 10 Year Average (APH) Yield
Crop Insurance Expected Revenue
Example of STAX
Loss 10% Deductible 40%
STAX Indemnity 20% Insurance Loss 10% Guarantee Ind. Coverage
Example: 60% coverage
Indemnity
Actual Price X Actual Yield
Area loss only
Other Insurance Provisions • Makes enterprise unit discount permanent. Allows enterprise units to be split out for irrigated and non-irrigated crops • Adjustment in actual production history to determine insurable yields. - A producer may choose to exclude any year from their APH if their yield in that year is less than 50% of the ten year county average. This also applies to contiguous counties and allows for the separation of irrigated and non-irrigated acres
AFPC Decision Aid
What have we learned so far???
Preliminary Decision Aid Results • 165 Farms have been Analyzed • Observations by Major Crops – Corn (60) – Sorghum (104) – Wheat (153)
• Crop Observations by Area – Eastern Panhandle (151) – Western Panhandle (198)
Base Reallocation
Base Reallocation Overview • One time base reallocation decision by FSA farm # - Two choices • Reallocate (cannot add base acres to a farm) • Retain existing base acres
- Reallocates bases other than cotton that were on the farm as of September 30, 2013. - Reallocation is in proportion to the ratio of: • The 4 year average of planted acres to each crop from 2009 to 2012 plus prevented planting/the 4 year average of all covered commodities planted plus prevent planting • Under planting or over planting does not affect the amount of base.
Base Reallocation Example With a Non-program Crop Corn Base
Sorghum Soybeans
Wheat
Cotton
Total
0
0
0
1,000
n/a
1,000
2009
600
100
100
0
200
1,000
2010
600
100
100
0
200
1,000
2011
600
100
100
0
200
1,000
2012
600
100
100
0
200
1,000
Average
600
100
100
0
200
1,000
Share
75%
12.5%
12.5%
0%
n/a
750
125
125
0
Plantings
Reallocated Base
Source: House Agriculture Committee Staff
1,000
Base Acre Reallocation Results Total Farm Base Acre Reallocation Decision
39% Yes Reallocate Do Not Reallocate 61%
General Observations & Thoughts • Generally, expected payments were higher if wheat base could be shifted to more sorghum and/or corn acres. • Thought ‐ ‐Expected payments look similar then reallocate base to better align your protection to what your actually planting
Yield Updating Decisions
Yield Update Overview Producers have the opportunity to update their payment yields to 90% of the 2008-2012 crop year averages. Yield data will come primarily from APH history, and be subject to spot checks. Decisions are made by crop, by farm. Year
Corn
Wheat
2008
DNP
30
2009
DNP
15
2010
DNP
22
2011
100
0
2012
150
32
75% T Yield
70
18
Could Update to:
(100 + 150)/2*.9 =112.5
(30 + 18+22+18+32)/5*.9 =21.6??
Farmer Jones On Farm 2 Yrs
Year
Corn
Corn
2008
DNP
No Records
2009
88
No Records
2010
120
No Records
2011
100
110
2012
150
120
Substitute Yield
70
70
2013 CC Yield
90
90
Could Update to:
Farmer Brown On Farm 3 Yrs Corn 95 100 120 130
Obtained From Prior Tenant
Farmer Smith On Farm 5 Yrs
FSA letter indicates 5 years of corn planted
Yield Updating
120 70 90
(88 + 120 + 100 + 150)/4 * .9 =103 (70 + 70 + 70 + 110 + 120)/5 * .9 =79 (95 + 100 + 120 + 130 + 120)/5 * .9 =102
Yield Analysis Results Texas Panhandle Yield Update Decision for All Commodities 27%
Update Do Not Update
73%
Yield Update Results by Region Eastern Texas Panhandle Yield Update Decision for All Commodities
Western Texas Panhandle Yield Update Decision for All Commodities 18%
38%
62% 82%
Update
Do Not Update
Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Corn
48% Update Do Not Update 52%
Yield Analysis Results by Region for Corn Western Texas Panhandle Yield Update Decision for Corn
Eastern Texas Panhandle Yield Update Decision for Corn
51% 38%
62% 49% Update
Do Not Update Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Sorghum 20%
Update Do Not Update
80%
Yield Analysis Results by Region for Sorghum Eastern Texas Panhandle Yield Update Decision for Sorghum
Western Texas Panhandle Yield Update Decision for Sorghum 9%
33%
91%
67%
Update
Do Not Update
Update
Do Not Update
Yield Analysis Results Texas Panhandle Yield Update Decision for Wheat 27%
Update Do Not Update
73%
Yield Update Analysis by Region for Wheat Eastern Texas Panhandle Yield Update Decision for Wheat
Western Texas Panhandle Yield Update Decision for Wheat 9%
45% 55%
91% Update
Do Not Update
Update
Do Not Update
General Observations • High probability that it will pay to update your corn yields • Not as obvious but a number of producers may be able to improve sorghum and wheat yields. • Dryland base but have introduced irrigation, will probably benefit from updating yields. • Irrigated base but have went dryland - -forget it!
Choosing Between PLC and ARC
Commodity Programs Overview Price Loss Coverage (PLC) • A “Deep Loss” program that Covers Losses in Income Due to Price Declines of Covered Commodity Below Established Reference Prices. Wheat -------------------- $5.50/bu Corn ---------------------- $3.70/bu Grain Sorghum ---------- $3.95/bu Soybeans ----------------- $8.40/bu Peanuts ------------------- $535/ton
• Sign up options by Crop by Farm
Illustration of Government Support for Corn Under PLC Revenue per bu Reference Price – $3.70
Paid on base acres x .85 Supplemental Coverage Option
Loan Rate – $1.95 Market Price
PLC
MLG/LDP Market Receipts
Crop insurance coverage
Commodity Programs Overview Agriculture Risk Coverage (ARC) • A “Shallow Loss” program that covers Losses in Income for a Covered Commodity Relative to a Revenue Guarantee. • ARC can be Selected at the County or Individual Level. County Payments are made when actual revenue for the covered commodity < ARC revenue guarantee. • Sign up option allows selection by crop by farm. Payment triggers will be by practice in selected areas.
Illustration of Government Support for Corn Under ARC Revenue per bu Revenue Benchmark Revenue Guarantee
86% 76% Loan Rate – $1.95 Market Price
MLG
[paid on base acres x .65 (individual) or .85 (county)]
Market Receipts Crop insurance coverage
ARC/PLC Results – Total Farm Total Farm ARC vs PLC Decision 8%
ARC PLC
92%
Prices Used for ARC/PLC Results
Prices Used for ARC/PLC Results
ARC/PLC Results - Corn Corn Farm ARC vs PLC Decision
41%
ARC PLC 59%
Producer Price Outlook a Factor in ARC/PLC Decision (Corn Ex.) 7 6.5 6 5.5 5.28
5.28
5
Oct. 2014 FAPRI Prices
$/bu
4.80
Benchmark Price
4.5 4
86% 4.06
3.97
76% Ref Price
3.5 3 2.5 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Prices Used for ARC/PLC Results
ARC/PLC Results - Sorghum Sorghum Farm ARC vs PLC Decision 2%
ARC PLC
98%
Producer Price Outlook a Factor in ARC/PLC Decision (Grain Sorghum Ex.) 6.50 6.00 5.50
$/bu
5.00
5.09
5.09
Oct. 2014 FAPRI Prices 4.73
Benchmark Price
4.50 4.00
86% 4.05
76% 3.95
3.50 3.00 2.50 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Ref Price
Prices Used for ARC/PLC Results
ARC/PLC Results - Wheat Wheat Farm ARC vs PLC Decision 6%
ARC PLC
94%
Producer Price Outlook a Factor in ARC/PLC Decision (Wheat Ex.) 8 7.5 7
$/bu
6.5 6
6.60
6.66
6.66
Oct. 2014 FAPRI Prices Benchmark Price
6.13 5.79
86% 76%
5.5
Ref Price
5 4.5 4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Alternative Crops
Prices Used for ARC/PLC Results
ARC/PLC Results Soybeans ARC vs PLC Decision (13) 23%
ARC PLC
77%
Producer Price Outlook a Factor in ARC/PLC Decision (Soybeans Ex.) 16.00
14.00
12.00
12.27
12.27
Oct. 2014 FAPRI Prices
11.82
$/bu
Benchmark Price 10.83
10.00
86% 9.92
76% Ref Price
8.00
6.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Prices Used for ARC/PLC Results
ARC/PLC Results Peanuts ARC vs PLC Decision (3)
0%
ARC PLC
100%
Producer Price Outlook a Factor in ARC/PLC Decision (Peanuts Ex.) 650
600
550
557.33 557.33 557.33
$/ton
535.00 535.00
Oct. 2014 FAPRI Prices Benchmark Price
500
86% 76% Ref Price
450
400
350 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average Payment Per Base Acre Average Payment Per Base Acre $700
$655
$600 $500 Corn
$400
Wheat Sorghum
$300
Soybeans $209
Peanuts
$199
$200
$163 $133 $90
$100 $28
$41
$51
$31
$0
ARC
PLC
General Observations • If enrolling the total farm or sorghum or wheat or peanuts‐ ‐ (PLC) appears to be the preferred option. • A slight majority of producers would benefit more from enrolling corn or soybeans in ARC. If you have multiple farms where corn is grown might want to consider splitting enrollment between ARC & PLC. • Relatively bullish on prices ‐ ‐ result outcomes will improve for ARC and decrease for PLC. • Relatively bearish on prices ‐ ‐ result outcomes will decrease for ARC and improve for PLC.
Farm Program Sign-up Timeline August 2014
Oct
Sept
Fix Planted Acres with FSA
Nov
Dec
Jan
Feb
17th
April
May
June 2015
31st
Choice Between ARC & PLC
29th
27th
Reallocate Bases & Update Yields
2nd
March
Dairy Margin 28th Protection Program for 2014 and 2015
Mid
Summer??
Annual Sign‐up
AFPC Decision Aid The tool is available at: https://afpc.tamu.edu or https://usda.afpc.tamu.edu
Producers Face MANY Sign Up Decisions Relating to the 2014 Farm Bill Title I
Title XI
Base Reallocation Decision
Choice Between ARC and PLC
Can choose to Update Payment Yield
County Choose ARC
Crop Insurance
Individual
Choose PLC
Beginning in 2015 can choose SCO insurance option
Base reallocation decisions occur by FSA farm number, whereas yield update and PLC/ARC program decisions are on a crop by crop basis for each FSA farm number.
Why Use It???? • There are a lot options and almost impossible to evaluate them all with a pad & pencil – Program options by Farm number, practice and crop – Calculations, yield plugs, yield variability already included • You will have to live with some decisions for the life of the program and maybe beyond magnifying results – Base reallocation – Yield updates – ARC versus PLC • General results are nice but specific analysis of your operation is a
whole lot better!!
Why Use It???? • Changes in the program will happen that may affect you – Easy to rerun the analysis • Easy to do “What if” analysis - - changing prices, future acreages, insurance coverages • It will really simplify program signup - - Print out the results and highlight what you want
What do you get out of the Decision Aid??
Sample Results for Yield Update
• •
Producer can print the FSA Yield Worksheet Print a separate form for each FSA number. Fill in the name and email address for contact person, farm number, historical yields, state code, and county code.
Base Reallocation Options are Calculated Directly, Then Utilized to Analyze their Impacts on Payments by Program
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Whole Farm Decision: Output for Base Reallocation, PLC, ARC-IC, & ARC-CO
Whole Farm Decision: All Crops Elect Same Program
Crop-by-Crop Results for Each Program Election Option
Sample Insurance Results Net revenue for the “best” combination of ARC/PLC and Insurance is presented. Result here is ARC, with Revenue Protection at 85%.
Necessary Data for Running the AFPC Decision Aid • FSA Reported Crop History Summary Report • FSA 156EZ Form (only necessary if the farmer has cotton base) • 2014 Schedule of Insurance for ALL Crops • Insurance Actual Production History (APH) Report for ALL Crops • Basis Information – (Estimates Provided)
Decision Aid Help is Available
Decision Aid Help is Available
After Lunch • A walk through of the data entry and interpretation of the results from the Decision Aid model • Live (we hope) data entry demonstration of a farm into the Decision Aid model • Discussion of the help available
For Additional Information • This Presentation can be Downloaded at: http://amarillo.tamu.edu • Decision Aid Handout – Get it Now • AFPC Decision Aid Hotline for Texas Producers 800-361-6796 • FARM Assistance Facebook Page https://www.facebook.com/FARMAssistance
The End FOR NOW
