2014 Farm Bill Summary & Decision Aid Tool Levi A. Russell Assistant Professor & Extension Economist Joe L. Outlaw Professor & Extension Economist Co-Director, AFPC Coastal Bend Extension Training September 24, 2014

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FSA Crop History Summary 11/13/2018

We want actuals or the Rate Yield In We want actuals or the Rate Yield

Price Forecasts 21 Covered Commodities USDA FAPRI Midsession review from this summer for 2013-2018 2013 and 2014 updated monthly from WASDE Not sure about coverage FAPRI Special analysis done monthly after WASDE published I have files for most crops from January and all 21 starting in July

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Covered Commodities Wheat, Oats, Barley, Corn, Grain Sorghum, Long Grain Rice, Medium Grain Rice, Pulse Crops, Soybeans, Other Oilseeds and Peanuts Other Oilseeds Sunflower seed, Rapeseed, Canola, Safflower, Flaxseed, Mustard Seed, Crambe, Sesame Seed, or any oilseed designated by the Secretary Pulse Crops Dry peas, Lentils, Small Chickpeas and Large Chickpeas

Yield Updating Year Corn Wheat 2008 DNP 30 2009 15 2010 22 2011 100 2012 150 32 75% T Yield 70 18 (100 + 150)/2*.9 =112.5 (30 + 18+22+18+32)/5*.9 =21.6 Could Update to:

Yield Updating Year Corn Wheat 2008 DNP 2009 2010 2011 2012 150 75% T Yield 70 18 150*.9 =135 18*0.9 = 16.2 Could Update to:

Base Reallocation One time base reallocation 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 does not affect the amount of base. The planted acres of covered commodities only affects the proportion of base acres that you will reallocate among commodities

Base Reallocation Example   Corn Sorghum Soybeans Wheat Total Base 1,000 Plantings 2009 500 250 2010 2011 2012 Average Share 50% 25% 0% Reallocated Base Source: House Agriculture Committee Staff

Base Reallocation Example With a Non-program Crop   Corn Sorghum Soybeans Wheat Alfalfa Total Base 1,000 n/a Plantings 2009 600 100 200 2010 2011 2012 Average Share 75% 12.5% 0% Reallocated Base 750 125 Source: House Agriculture Committee Staff

Base Reallocation Example With Cotton   Cotton Corn Sorghum Soybeans Wheat Total Base a/ 500 1,000 Plantings 2009 200 600 100 2010 2011 2012 Average Generic Base Share 75% 12.5% 0% Reallocated Base 375 62.5 Source: House Agriculture Committee Staff

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 (other than loan protection against very low prices) 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 commodities Example: 100 total acres on farm 50 acres of wheat base and 50 acres generic. If farmer plants 50 acres of wheat and 50 acres of sorghum they would have 75 acres of base for wheat and 25 acres of base for sorghum crops for that year. If planted all wheat then would have 100 acres of wheat base for that year. If planted all cotton then in Washington terms the generic base is idle for that year. (see following examples)

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 Generic Base to Wheat Allocated Generic Base to Sorghum Farmer has protection on 75 acres of wheat and 25 acres of GS

Allocated Generic Base to Wheat 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 100 acres of wheat Original Wheat Base Allocated Generic Base to Wheat Farmer has protection on 100 acres of wheat

Generic Base Idled for Year 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

Allocated Generic Base to Wheat 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 50 acres of wheat and 50 acres of cotton Original Wheat Base Allocated Generic Base to Wheat Farmer has protection on 100 acres of wheat

Generic Base 100 Acre Farm – Base Acres: 50 Wheat and 50 Generic If farmer plants 1 acre of wheat and 99 acres of cotton Original Wheat Base Generic Base Idled for Year Allocated Generic Base to Wheat Farmer has protection on 51 acres of wheat

Choice Between ARC and PLC Flow Chart of Title I Producer Choices for Covered Commodities (Does Not Include Upland Cotton) Title I Title XI County Choose ARC Crop Insurance Choice Between ARC and PLC Individual Can choose to Update Payment Yield Base Reallocation Decision Choose PLC LANDOWNER DECISION OR TENANT IF P.O.A. LANDOWNER DECISION TENANT (CASH) OWNER/TENANT (SHARE) Beginning in 2015 can choose SCO insurance option This decision is on a crop by crop basis for each farm unless the producer chooses individual ARC then it is for all the crops on that farm. If all parties cannot agree on a choice then the farm would not be enrolled in ARC or PLC for the 2014 crop and the farm would automatically be enrolled in PLC for the 2015 crop and beyond.

Who Makes The Decisions? Base reallocation As soon as practicable after the date of enactment of this Act, the Secretary shall provide notice to the owners of a farm regarding their opportunity to make an election Yield Update At the sole discretion of the owner of a farm, the owner of a farm shall have a 1-time opportunity to update, on a covered commodity-by-covered-commodity basis, the payment yield that would otherwise be used in calculating any price loss coverage payment for each covered commodity on the farm for which the election is made. ARC/PLC What the bill says: IN GENERAL.—The term ‘‘producer’’ means an owner, operator, landlord, tenant, or sharecropper that shares in the risk of pro- ducing a crop and is entitled to share in the crop available for marketing from the farm, or would have shared had the crop been produced.

Who Makes The Decisions? (Cont) ARC or PLC For the 2014 through 2018 crop years, all of the producers on a farm shall make a 1-time, irrevocable election to obtain— (1) price loss coverage under section 1116 on a covered commodity-by-covered-commodity basis; or (2) agriculture risk coverage under section 1117. IN GENERAL.—The term ‘‘producer’’ means an owner, operator, landlord, tenant, or sharecropper that shares in the risk of pro- ducing a crop and is entitled to share in the crop available for marketing from the farm, or would have shared had the crop been produced. This decision stays with the farm for the life of the farm bill

Guess at the Sign-up Timeline August 2014 June 2015 Sept Oct Nov Dec Jan Feb March April May Fix Planted Acres with FSA Choice Between ARC & PLC Reallocate Bases & Update Yields Annual Sign-up Wheat Signup (SCO Sept 30) Cotton Transition Pmt (Oct 7)

Ind. Coverage Indemnity Crop Insurance Expected Revenue Example of Price Loss Coverage (PLC) Plus SCO How useful will SCO be? Depends on the relative size of the deductible and the cost If buying 85% coverage level not as exciting Select counties for corn, soybeans, wheat, sorghum, cotton, and rice starting with the 2015 crop year Deductible 40% Loss 14% SCO Indemnity 26% Insurance Guarantee Insurance Price X 10 Year Average (APH) Yield Ind. Coverage Indemnity Example: 60% coverage Actual Price X Yield + Any PLC Benefits

Producers applying for SCO for the 2015 winter wheat crop may withdraw coverage on any farm where they have elected, or where they intend to elect, ARC for winter wheat by the earlier of their acreage reporting date or Dec. 15, without penalty. This allows producers additional time to make an informed decision related to whether to elect to participate in either the ARC or Price Loss Coverage (PLC) programs for their winter wheat. If producers withdraw SCO coverage for a farm by the earlier of their acreage reporting date or Dec. 15, they will not be charged a crop insurance premium. In order to withdraw coverage without penalty, producers must notify their agents of their intended election for ARC by the earlier of their winter wheat acreage reporting date or Dec. 15.

Flow Chart of Title XI Decisions for Upland Cotton STAX Coverage from 90% to 70% or underlying coverage level whichever is higher Area-wide policy Premium Subsidy – 80% Protection Factor 80 to 120% Loss and indemnity determined by county data Choice of STAX with or without crop insurance or SCO with underlying insurance policy Can’t have both on same acres SCO Coverage from 86% to underlying coverage level Area-wide policy Premium Subsidy – 65% Loss determined by county data, indemnity by individual APH

Illustration of Government Support for Wheat Under PLC Insurance Base Price – $7.02 Revenue per bu 86% of benchmark Reference Price – $5.50 Paid on base acres x .85 PLC Loan Rate – $2.94 MLG/LDP Supplemental Coverage Option Market Price Market Receipts Crop insurance coverage

Illustration of Government Support for Wheat Under ARC-County Revenue per bu Revenue Benchmark 86% Revenue Guarantee 76% [paid on base acres x .65 (individual) or .85 (county)] Loan Rate – $2.94 MLG Market Price Market Receipts Crop insurance coverage

Producer Price Outlook a Factor in ARC/PLC Decision (Corn Ex.) Yields could also offset FAPRI Price Projections

Producer Price Outlook a Factor in ARC/PLC Decision (Wheat Ex.)

Producer Price Outlook a Factor in ARC/PLC Decision (Grain Sorghum Ex.)

Major Insurance Provisions A new area-wide insurance program (SCO) will be available to all producers to purchase beginning in 2015 that is designed to protect them against losses that would normally fall within their insurance deductible range. Must have individual policy. Up to 86% revenue guarantee. 65% premium subsidy 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. Must create a revenue policy for peanuts in time for the 2015 crop Requires conservation compliance to receive premium subsidy Don’t Count on This For Next Year Enforcement Starts Next Year

Discussion of NAAFP Decision Aid National Association for Agriculture and Food Policy (NAAFP) has been working on the decision aid for nearly 2 years AFPC at Texas A&M FAPRI at University of Missouri-Columbia Applied for and received funding from USDA-FSA to develop nation-wide decision aid Available today at: https://www.afpc.tamu.edu/models/decisionaid.php Available soon on the USDA-FSA website 11/13/2018

Overview of NAAFP Farm Bill Decision Aid Register as a producer or multi client user Email address and password protect your data Email address allows us to contact user when FSA changes rules or new price projections are available Enter data for all FSA Farm and Tract Numbers All Crops and their Practices by Tract number Types not critical to FSA but important to RMA for SCO, STAX, and insurance Analyze yield update, base reallocation, ARC-IC, ARC-CO, PLC, SCO, STAX, and insurance options 11/13/2018

Overview of NAAFP Farm Bill Decision Aid Producers’ data are stored in the decision aid Data accessed by a user name and password We encourage producers to enter their data now and run the tool for each decision Presently farmers should be using the tool to analyze Yield Update decision Next farmers can consider the interaction between Base Reallocation and PLC, ARC-CO, ARC-IC Election This decision should be tested with multiple price scenarios Before final election, farmers can re-run the analysis to see if updated price outlooks in the Spring changed their preferences 11/13/2018

Preparation for Using NAAFP Decision Aid Information needed for the Decision Aid are available from two primary sources FSA Reported Commodity Crop History Summary (letter from FSA to producers, August 2014) FSA farm number Base Acres and CCP Yield for covered crops Planted Acres Crop Insurance Actual Production Report Historical yields and planted acres Ten years of yields preferred but 2008-2013 is essential 11/13/2018

First Step Is to Register 11/13/2018

Producer data is Saved, Email to Notify Regarding FSA Updates 11/13/2018

Producer and Multi Client Users 11/13/2018

Create Client Records & Switch Clients 11/13/2018

Farm with Two Crops and One FSA Number 11/13/2018

Yield Update Analyzer 11/13/2018

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. 11/13/2018

Select the Base Acre Reallocation & PLC/ ARC Decision Aid 11/13/2018

Base Reallocation Options Calculated Directly, Next Analyze their Impacts on Payments by Program 11/13/2018

Three Choices for Testing Alternative Price Scenarios 11/13/2018

Output for Base Reallocation, PLC, ARC-IC, and ARC-CO 11/13/2018

Whole Farm Decision: All Crops Elect the Same Program 11/13/2018

Crop-by-Crop Results for Each Program Election Option 11/13/2018

Crop-by-Crop Results for Each Program Election Option 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO 11/13/2018

Crop Insurance Analysis Interacts with ARC/PLC+SCO Net revenue for the “best” combination of ARC/PLC and Insurance is presented. Result here is ARC, with Revenue Protection at 85%. 11/13/2018

Summary Decision Aid available on AFPC website since June 20th More than 2,000 testers so far Will be on FSA website when officially released All 21 covered commodities plus cotton available in the official release version Changes we expect after the official release: Monthly updates of price projections by FAPRI USDA price projections updates as available Tool will be updated as FSA updates rules Accessible by smart phones, tablets, iPads, anything that can access the internet Helpdesk available 7 am to 7 pm after official release