1. Dr. Jody Campiche Oklahoma State University May 16, 2013 ACRE vs. DCP

2. American Taxpayer Relief Act extended the ACRE program for the 2013 crop year Deadline for ACRE enrollment: June 3, 2013 Deadline for DCP enrollment: August 2, 2013 Can enroll in ACRE or DCP (regardless of what you were previously enrolled in) Must re-enroll in either ACRE or DCP (even if you were in ACRE last year)

3.  Direct Payments  Paid on historical base acreage – not tied to current prices or production  Average $15/acre payment for wheat  CCP  Paid on historical base acreage and current prices  Target price program  No CCP payments on wheat  ACRE  Based on a state and farm level trigger  Payment based on state benchmark yield (not individual or county) 2008 Commodity Programs - Reminder

4. ACRE Details Alternative to the DCP program Designed to protect against short-term revenue loss (from a decrease in yield, price, or combination of both) Paid on planted acres (up to # of base acres) Enroll by FSA farm # Do not have to enroll all farms in ACRE State level revenue guarantee Based on the five-year state Olympic average yield and the two-year national average price

5. DCP vs. ACRE DCPACRE Direct Payments20% reduction in Direct Payments Counter-Cyclical PaymentsACRE Payments Marketing Assistance Loan30% reduction in Marketing Assistance Loan Rates

6. What is the ACRE Program? Two triggers must be met for an ACRE payment 1) State Trigger Actual State Revenue < State ACRE Guarantee 2) Farm Trigger Actual Farm Revenue < Farm ACRE Guarantee

7. State Trigger

8. State ACRE Guarantee 90% times Benchmark State Yield times ACRE Guarantee Price

9. Actual State Revenue Actual State Yield times 2013 MYA Price (not final until June/July 2014)

10. Farm Trigger

11. Farm ACRE Guarantee Benchmark Farm Yield times ACRE Guarantee Price plus Crop Insurance Premium (per acre)

12. Actual Farm Revenue Actual Farm Yield times 2013 MYA Price (not final until mid to late 2014)

13. Benchmark Farm Yield Olympic average of 2008-2012 farm yields Drop the highest and lowest and average the remaining three Example: 200840 200936 201045 (highest) 201120 (lowest) 201239 Farm Benchmark Yield = average (40,36,39) = 38.3

14. Benchmark Farm Yield Several options: Certify your own yield data If you certify yield data and it is higher than the county average, your yield will be used to calculate the benchmark farm yield Use 95% of the ACRE county plug yield Use a combination of both

15. Benchmark Farm Yield Can only prove yields back to the 1 st “break in continuity” What is a “break in continuity” Any year when yield evidence is not available excluding years when the crop was not produced on the farm For any years preceding the “break in continuity”, 95% of the ACRE plug yield will be used

16. Benchmark Farm Yield It is in the producer’s best interest to certify yields and establish a high benchmark yield Higher benchmark yield  Higher farm revenue guarantee  More likely to meet the farm trigger  Higher ACRE payment if the farm benchmark yield > state benchmark yield

17. Sequestration – Automatic Cuts 8.5% cut to 2013 direct payments

18. 2013 ACRE vs. DCP

19. 2009/10 Average U.S. Direct Payments

20. 2009/10 Average CCP Payments for Cotton

21. What do you lose in DP due to sequestration? Average payment 8.5% sequestration Loss DP Wheat$15.00$1.27$13.72 Sorghum$17.00$1.45$15.55 Soybeans$10.00$0.85$9.15 I Corn$32.67$2.78$29.89 NI Corn$16.33$1.39$14.94 I Cotton$50.00$4.25$45.75 NI Cotton$23.34$1.98$21.36 Peanuts$40.60$3.45$37.15

22. What do you lose in DP if you enroll in ACRE? Average payment 20% Loss (ACRE payment needed to break even) Remaining DP Wheat$13.72$2.72$11.00 Sorghum$15.55$3.11$12.44 Soybeans$9.15$1.83$7.32 I Corn$29.89$5.98$23.91 NI Corn$14.94$2.99$11.96 I Cotton$45.75$9.15$36.60 NI Cotton$21.36$4.27$17.09 Peanuts$37.15$7.43$29.72

23. 2013 Maximum ACRE payments CropMax base ACRE Payment (may be higher/lower if bench farm yield is higher/lower than state) Wheat$37 Oats$20 Sorghum$42 Irrigated Cotton$177 Non Irrigated Cotton$72 Irrigated Corn$162 Non Irrigated Corn$74 Peanuts$159 Soybeans$47 Canola$37

24. ACRE for Wheat OK State Wheat Yield ACRE Payment (per acre) Benchmark Revenue Guarantee 200921.9$46.84$187.36 201031.0$0.00$168.62 201118.3$19.27$151.76 201236.0*Probably $0.00$156.64 201330 or 25.4?$172.30

25. 2013 Wheat Estimates Total production Yield per acre NASS114,000,00030 OK Wheat Tour85,000,00024.5

26. ACRE vs. DCP for Wheat Breakeven Point (21.8 bu/acre)

27. ACRE vs. DCP for Wheat $2.72

28. ACRE vs. DCP for Wheat $2.72

29. 2013 Wheat 2013/14 MYA PriceState Yield Needed to Trigger ACRE and make at least $2.72 $8.2020.70 or lower $7.8021.75 or lower $7.5022.60 or lower $7.1023.90 or lower

30. ACRE vs. DCP for Irrigated Cotton OK State YieldACRE Payment (per acre) Benchmark Revenue Guarantee 20091232$0.00$472.27 20101097$0.00$517.55 201185$142.33$569.31 2012??$626.24 2013?? $699.60 (not final)

31. ACRE: Irrigated Cotton Breakeven Point (968 lbs/acre) $9.15 Max ACRE payment $171/acre

32. ACRE: Irrigated Cotton Breakeven Point (800 lbs/acre) $9.15

33. ACRE vs. DCP for Non-Irrigated Cotton OK State YieldACRE Payment (per acre) Benchmark Revenue Guarantee 2009367$0.00$221.42 2010503$0.00$209.91 201121$57.33$230.90 2012??$253.99 2013?? $278.30 (not final)

34. ACRE vs. DCP for Non-Irrigated Cotton Breakeven Point (390 lbs/acre) $4.17

35. ACRE vs. DCP for Non-Irrigated Cotton Breakeven Point (325 lbs/acre) $4.17

36. Enrolling in ACRE: Things to Consider Are you willing to give up 20% of your direct payments to potentially get an ACRE payment for the 2013 crop year Get the 2013 DP in October 2013 Get the 2013 ACRE payment in Oct/Nov 2014 Wheat producers will have a better idea of the state wheat yield after May 10

37. Enrolling in ACRE: Things to Consider When you put a farm in ACRE, every crop on the farm is enrolled in ACRE  Even if wheat may receive a 2013 ACRE payment, need to consider loss in DP for all crops on the farm

38. Enrolling in ACRE: Things to Consider For each FSA farm #, how many acres are you planting compared to your base? ACRE is only paid on planted acres May not want to enroll a farm in ACRE if you are planting much less than your base

39. ACRE Decision Tool http://agecon.okstate.edu/agpolicy/decisionTool_comm.asp

40. ACRE Decision Tool

41. Benchmark Yield

42. ACRE Decision Tool

44. 2013 House vs. Senate Farm Bill

45. House vs. Senate Commodity, Crop Insurance, and Livestock Programs ComponentSenateHouse Direct PaymentsNo CCP PaymentsNo ACRENo SURENo County Revenue ProtectionYes Farm Revenue ProtectionYesNo Price ProtectionYes STAXYes SCOYes Marketing LoansYes Livestock Disaster ProgramsYes

46. 2013 Senate vs. House Farm Bill No CCP payments, ACRE payments, or DP payments after 2013 (with the exception of cotton in the House bill) House phases out direct payments for cotton in 2014 and 2015 New revenue and price protection commodity programs Livestock Disaster Assistance – would cover 2012 and 2013 losses Senate bill combines Livestock Disaster Program and NAP

47. 2013 Senate vs. House Farm Bill New county based average yield insurance to supplement individual policy (SCO & STAX)

48. 2013 Senate vs. House Farm Bill Supplemental Coverage Option (SCO) Government subsidy – 65% (reduced from 70% in 2012 drafts) Stacked Income Protection Plan (STAX) for cotton Government subsidy -80% Coverage of revenue loss between 10%-30% House removed reference price that was included in 2012 draft

49. 2013 Senate Farm Bill Agriculture, Reform, Food and Jobs Act of 2013 Similar to 2012 draft – but added back in counter-cyclical payment program Choose between 2 commodity programs: (1) Agriculture Risk Coverage - ARC (revenue coverage) -individual (65% of planted acres) -county coverage (85% of planted acres) (2) Adverse Market Payments (price coverage)

50. 2013 Senate Farm Bill Agriculture, Reform, Food and Jobs Act of 2013 Adverse Market Payments Actual price = higher of national average marketing year price or loan rate Reference Price = target prices in 2008 farm bill (except rice and peanuts) Payment rate = reference price – actual price Payment amount = payment rate * payment acres * payment yield CropReference Price Wheat$4.17 Corn$2.63 Sorghum$2.63 Barley$2.63 Oats$1.79 Soybeans$6.00 Peanuts$523.77 Rice$13.30

51. 2013 Senate Farm Bill Agriculture, Reform, Food and Jobs Act of 2013 Agriculture Risk Coverage (ARC) Actual crop revenue < ARC guarantee Actual crop revenue = average yield (individual or county) * higher of (MYA price or reference price) Guarantee = 88% of benchmark revenue Benchmark revenue = Olympic average yield * Olympic average MYA price

52. 2013 Senate Farm Bill Agriculture, Reform, Food and Jobs Act of 2013 Agriculture Risk Coverage (ARC) Payment rate = lesser of: 10% of benchmark revenue ARC guarantee – actual crop revenue

53. 2013 Senate Farm Bill Agriculture, Reform, Food and Jobs Act of 2013 SCO If enrolled in ARC – deductible 22% Not enrolled in ARC – deductible 10%

54. 2013 House Farm Bill Draft Similar to 2012 farm bill draft – but dropped the reference price in STAX Choose between two commodity programs (1) Revenue Loss Coverage – RLC (revenue coverage) Not eligible for SCO (2) Price Loss Coverage – PLC (revenue coverage) Eligible for SCO

55. 2013 House Farm Bill Draft Price Loss Coverage (PLC) Payment when the effective price < reference price Effective price = higher of midseason price or loan rate Payment rate = reference price – effective price Payment amount = payment rate & payment yield * payment acres CropReference Price Wheat$5.50 Corn$3.70 Sorghum$3.95 Barley$4.95 Oats$2.40 Soybeans$8.40 Peanuts$535

56. Comparison of House vs. Senate Reference Prices CropSenateHouse Wheat$4.17$5.50 Corn$2.63$3.70 Sorghum$2.63$3.95 Barley$2.63$4.95 Oats$1.79$2.40 Soybeans$6.00$8.40 Peanuts$523.77$535.00 Rice$13.30$14.00

57. 2013 House Farm Bill Draft Revenue Loss Coverage (RLC) Payment when the actual county revenue < county revenue loss coverage trigger Actual county revenue = actual county yield * higher of midseason price or loan rate County revenue loss coverage trigger = 85% of benchmark county revenue Benchmark county revenue = Olympic average county yield * Olympic average MYA price (use reference price if MYA < reference price)

58. 2013 House Farm Bill Draft Payment rate = lesser of: 10% of benchmark county revenue County revenue loss coverage trigger – actual county revenue Payment amount = payment rate * payment acres

59. Questions from Webinar Q) What % of planted acres are ACRE payments paid on? A) ACRE payments are paid on 85% of planted + considered planted (up to the # of base acres). Prevented planted acres are counted as considered planted. Q) Are prevented planted acres included in the failed acre calculation? A) No, prevented planted acres are not included in the failed acre calculation. Q) Is the June 3 ACRE deadline for all crops? A) Yes.

60. Questions from Webinar Q) Are payment limitations for each program per individual/farm? A) No, payment limits are basically by individual (or ID #). Beginning in 2009, the 2008 Farm Bill established a system of “direct attribution” to match program payments with a natural person i.e., the total amount of payments must be attributed (linked) to an individual by taking into account the individual’s direct and indirect ownership interest in a legal entity while retaining the payment limits that applied to the entities themselves. Therefore, every payment made directly to a person is combined with that person’s pro rata interest in payments received by a legal entity in which the person has an ownership interest, and every payment made to a legal entity is attributed to those persons with an ownership interest in the entity.

61. Jody Campiche 528 Ag Hall 405-744-9811 jody.campiche@okstate.edu http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters