Agricultural Act of 2014 PLC (Price Loss Coverage) And ARC (Agricultural Risk Coverage) FSA 2014 Farm Bill Training Colorado Producer Meetings.

Agricultural Act of 2014 PLC (Price Loss Coverage) And ARC (Agricultural Risk Coverage) FSA 2014 Farm Bill Training Colorado Producer Meetings

Subjects to be covered at today’s meeting
Elimination of direct payments for 2014 and future years One-time opportunity to update FSA payment yields and reallocate base acreage Review the general provisions of the: - Price Loss Coverage (PLC) program - Agricultural Risk Coverage - County (ARC – CO) program - Agricultural Risk Coverage – Individual Coverage (ARC-IC) program During this meeting, we will discuss the changes that were made in the 2014 Farm Bill which will affect Montana producers. These include the following: The elimination of direct payments for 2014 and future years. DCP and ACRE are no longer authorized programs; there are no longer any direct or guaranteed program payments. The opportunity to update yields and reallocate base acres The option for producers to make a program election between PLC, which offers price protection, ARC-CO, which offers county-level revenue protection and ARC-IC, which offers individual level revenue protection. At the conclusion of today’s presentation, we hope that you have a good understanding of each of these subjects so that you can make informed decisions for your farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

Colorado Producer Meetings
Agricultural Act of 2014 Terms and Definitions Marketing Year Average – 12-month weighted average National Price (Please see handout for more information) Olympic Average – Previous 5 years’ data, excluding the highest and lowest value; average the remaining 3 values. CC Yield – The yield that existed on the farm under the previous farm bill which was used for the counter-cyclical program. Covered Commodities – The 21 commodities identified in statute for which base acres may exist on farms. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Terms and Definitions Payment Acres For PLC and ARC-CO – 85% of the base acres of each covered commodity. For ARC-IC – 65% of the farms Total Base Acres for all covered commodities. The 2014 farm bill provides for “Payment Acres” to be based on a certain percentage of the base acres associated with the farm. PLC and ARC-CO payments are based on 85% of each specific crop base acreage associated with the farm. PLC and ARC-CO payments are NOT associated with the crops planted on the farm (This provision is similar to the last farm bill) ARC-IC payments are based on 65% of the “total” base acres associated with the farm enrolled in ARC-IC. ARC-IC payments are associated with the covered commodities planted on the farm enrolled in ARC-IC. FSA 2014 Farm Bill Training Colorado Producer Meetings

Timeline for Actions Base Acre Reallocation and Yield Updates: September 29, 2014 through February 27, 2015 Election of ARC-CO, ARC-IC, or PLC for Program Years – November 17, 2014 through March 31, 2015 ARC/PLC Annual Enrollment for crop years – Proposed for Mid-April through Summer of 2015 This slide shows the deadlines which have recently been announced for ARC/PLC program actions. Base Acre Reallocation and Yield Update decisions must be made between September 29, 2014 and February 27, Please contact your county office to set up an appointment to complete these actions. Program Election must take place between November 17, 2014 and March 31, 2015. Enrollment for the 2014 and 2015 crop years will take place sometime from mid-April 2015 to Summer Exact dates TBD. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Payment Limitations $125,000 for ARC/PLC payments received directly or indirectly for all covered commodities except peanuts NOTE: Included in each of the $125,000 payment limitations are payments received through Marketing Assistance Loan gains and Loan Deficiency Payment (LDP) programs. The payment limitation for ARC/PLC is $125,000 for all payments received directly or indirectly. This limitation also includes any Marketing Assistance Loan Gains and any LDP payments earned by the producer. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) Overview This section provides a brief overview of each of the processes and programs authorized by the 2014 Farm Bill. Each of these will be discussed in much greater detail later in this presentation. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 3 Step Process Update (Base Reallocation and Yield Update) Elect (One-time program election) Enroll (Annual enrollment contract) The implementation of ARC/PLC is a 3-step process. The three steps are Update, Elect and Enroll. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Step 1: Update Review acreage history letter that was mailed in July to all producers. Ensure that planted and prevented planting credit is accurately listed for the crop years. This data will be used for base reallocation and yield updating. Gather crop yield records for crop years. As part of the Update step, a letter was mailed to all producers in July of This letter included all planting and considered planting history for on any farm for which the producer is an owner or operator IF THAT FARM HAS BASE ACRES. The history provided in this letter should be reviewed carefully for accuracy as it will be used for base reallocation and yield updating. If you have misplaced your letter, or don’t remember receiving one, please contact your local county office and they will provide you with a copy of your letter. As part of the update process, you should also begin to gather any crop yield records so you can certify your yields for crop years You also should begin to gather your crop yield records for for the purpose of yield updating. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Example Letter FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Step 1: Update Visit your local FSA office to make a final decision on Base Reallocation and Yield Updates: Once crop acreage is updated for years and yields are certified for crop years , a farm OWNER will make choice of base option and yield update option. When crop acreage has been reviewed for 2009 through 2012 and yields have been certified for 2008 through 2012, owners will have two decisions to make: Base Acre Decision to: Retain current base acres on the farm Reallocate base acres based on a proportion of the planted/considered planted acres from 2009 through 2012; or Yield Update Decisions (crop by crop basis) Update PLC yields using 90% of an average of the 2008 through 2012 certified yield; or Use the current CC yields as the PLC payment yields If the owner fails to make a decision by February 27, 2015, the current base acres and yields will be retained for the farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Step 2: Elect Elect PLC, ARC-CO or ARC-IC on each FSA Farm Number: CURRENT PRODUCERS with a share of the cropland on the farm will make a 1-time irrevocable program election per farm. Failure to make an election will result in a default PLC election effective 2015 through 2018 and NO payments will be made for 2014. After base and yield decisions have been made, all producers on the farm will make the one-time election to participate in PLC, ARC-CO or ARC-IC. If a unanimous election is NOT made by all producers on the farm, the farm will have a default PLC election and will only have the option of enrolling in PLC for 2015 through No payments will be issued to these farms for the 2014 crop year. NOTE: And IRREVOCABLE election means that the election CANNOT be changed once the election period has passed. That election remains in effect on that farm for the life of the farm bill, even if the farm does not enroll annually or if the is later sold. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Step 2: Elect Final Notice of Base, Yield and Election: Once the owner elects to update or retain current records, and all current producers make a program election, owners, operators and other tenants on the farm will receive the “Final” base, yield and election notice. Once the owner makes the decision to update or retain current records, or once the period to make a decision has expired, farm owners will receive the final base and yield notice. This notice will show the program election by farm and/or crop, the base acres for the farm, as well as the applicable crop yields; appeal rights will be provided. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Step 3: Enroll Annual Enrollment Contract to Participate on a farm: An enrollment period will be: Held for program years 2014 & 2015 simultaneously Mid-April 2015 – Summer 2015 Completed for each year 2014 – 2018. Even though an election is made for a farm (or a default PLC election has been applied to the farm), producers must annually enroll in the applicable program through This is similar to the annual enrollment process for DCP or ACRE. 2014 and 2015 enrollment will be completed simultaneously sometime mid-April 2015 through Summer of Exact dates will be published when they become available. No payments will be issued on farms for which enrollment does not occur for a specific crop year. FSA 2014 Farm Bill Training Colorado Producer Meetings

Additional Program Requirements
Agricultural Act of 2014 Additional Program Requirements Acreage & Production Reporting: Producers are required to annually report all cropland acres on enrolled farms on a FSA-578, same as in past programs Production Reporting required for ARC-IC only As part of the annual enrollment process, producers are required to complete a FSA-578 (acreage report) annually certifying ALL cropland on enrolled farms. Failure to certify all cropland on the farm will result in a loss of benefits for the applicable year. Annual production reports will be required for farms enrolled in ARC-IC Additional eligibility and compliance requirements must be met; contact your County Office for more information. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Payments 2014 payments will be issued after October 1, 2015 for PLC/ARC-CO/ARC-IC if triggered 2015 – 2018 payments are issued after MYA prices are determined and after October 1 of the subsequent year If payments are triggered under PLC, ARC-CO or ARC-IC, 2014 payments will be issued sometime after October 1, 2015. 2015 through 2018 program year payments are issued after Marketing Year Average prices are determined, but not before October 1 of the subsequent year. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Base Acres This section will explain the base acre reallocation process. FSA 2014 Farm Bill Training Colorado Producer Meetings

Base Acreage or “Covered Commodities”
Agricultural Act of 2014 Base Acreage or “Covered Commodities” Barley Canola Corn Crambe Flaxseed Garbanzo, Large Garbanzo, Small Grain Sorghum Lentils Mustard Seed Oats Peanuts Peas, Dry Rapeseed Rice, Long Grain Rice, Medium Grain Safflowers Sesame Seed Soybeans Sunflower Seed Wheat Covered Commodities for ARC/PLC are: Barley, Canola, Corn, Crambe, Flaxseed, Large Garbanzo Beans, Small Garbanzo Beans, Grain Sorghum, Lentils, Mustard Seed, Oats, Peanuts, Dry Peas, Rapeseed, Long and Medium Grain Rice, Safflowers, Sesame Seed, Soybeans, Sunflower Seeds and Wheat. These commodities are set in statute and cannot be changed. Covered Commodities authorized under the 2014 Farm Bill are included in Page 4 of the ARCPLC Fact Sheet included in your handouts. If you have read about the 2014 Farm Bill, you may have heard the term “generic base acres”. Generic base acres are acres that were previously base acres of Upland Cotton. Generic Base Acres are not applicable to Montana. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Reallocation of Base Acres
Producers may choose between two “Base Election” options for 2014 base acres on a farm: RETAIN base acres in effect as of Base acres may be adjusted for CRP - exit or enrollment. REALLOCATE base acres using planted/considered planted history, as reported on the FSA-578 (Base acres cannot INCREASE) NOTE: The decision to reallocate is made by an OWNER of the farm. Base acres used for PLC/ARC are the base acres in effect as of September 30, 2013. Farm owners have the option of reallocating their base acres using their 2009 through 2012 planting history; however, the total amount of base acres CANNOT increase. An owner of the farm is the only one that can make the decision to reallocate base acres; Operators do not have the option to make the reallocation decision unless a valid Power of Attorney form is on file. FSA 2014 Farm Bill Training Colorado Producer Meetings

Reallocation of Base Acres
Agricultural Act of 2014 Reallocation of Base Acres (continued) Reallocation of bases will result in the farm’s base acres being redistributed in the same proportion to the 4 year average of acres that were Planted and Considered Planted to covered commodities during the 2009 – 2012 crop years. Reallocation of bases will result in the farm’s base acres being redistributed in the same proportion to the 4-year average of P&CP acres of a covered commodity during the 2009 through 2012 crop years. We will go over some examples of this for clarification. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Reallocation of Base Acres (continued) Planted and Considered Planted (P&CP) history includes Initial, Initial Failed & Initial Prevent Plant. Reallocation of bases allows for a “Subsequent” crop provision. “initial covered commodity crop” is followed by a “subsequent covered commodity”, the owner of the farm may select EITHER crop to be used for base reallocation calculations. The P&CP acres for reallocation includes the initial crop (I, IP, IF). In cases where an initial covered commodity crop is followed by a subsequent covered commodity, the owner of the farm MAY select either crop to be used for base reallocation calculations, not both. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Reallocation of Base Acres (continued) EXAMPLE of Subsequent Crop Eligibility 2012: Farm #100, Tract #1000 60 acres of winter wheat – initial failed 60 acres of barley – subsequent crop The farm owner must select which crop to include in the reallocation of base decision, 60 acres if winter wheat or 60 acres of barley, BUT NOT BOTH. An example of the subsequent crop eligibility rule discussed on the previous slide is as follows: Farm 100 has a field of 60 acres that was initially planted to winter wheat, which failed. The producer subsequently planted barley on this field. The landowner has the option of choosing either wheat or barley to include in the acreage history, but NOT BOTH. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 BASE REALLOCATION EXAMPLE #1 Farm #3000
Wheat Base: acres Barley Base: acres Oat Base: acres TOTAL BASE: acres In this example, the farm has 500 acres of wheat base, 100 acres of barley base and 50 acres of oat base, for a total of 650 base acres on the farm. An equal amount of wheat and barley were planted during the period of 2009 through 2012. CROP HISTORY CROP 2009 2010 2011 2012 Wheat 250.0 Barley FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 BASE REALLOCATION EXAMPLE #1
This is an example of FSA’s base reallocation calculator. As you can see, we enter the base acres currently on the farm, and then enter the P&CP planting history for The calculator will calculate an average number of acres planted to each covered commodity for In this specific example, there was an average of 250 acres of wheat and 250 acres of barley planted during the base period. The calculator will also generate a “reallocation percentage” which is the percentage of each applicable covered commodity planted during the base period of the total covered commodities planted. In this example, 50% of the total covered commodities planted in on this farm was planted to wheat and 50% of the total covered commodities planted in was planted to barley. Therefore…the producer’s ONLY option for base reallocation is to reallocate 50% of the 650 base acres on the farm can be reallocated to wheat (325 acres) and 50% of the 650 base acres on the farm can be reallocated to barley; there would no longer be oat base acres on this farm. OR the owner could choose to retain the current base acres on the farm as of FSA 2014 Farm Bill Training Colorado Producer Meetings

Wheat Base: acres Barley Base: acres TOTAL BASE: acres CROP HISTORY CROP 2009 2010 2011 2012 Wheat 700.0 600.0 Alfalfa 150.0 In this example, farm 4000 has 500 base acres of wheat, 300 base acres of barley with a total of 800 base acres on the farm. The planting history from shows that the producer planted only wheat and alfalfa. Because alfalfa is not a covered commodity, that acreage history is irrelevant to the reallocation calculation. FSA 2014 Farm Bill Training Colorado Producer Meetings

As you can see on the base reallocation calculator, we will ONLY add the planted wheat as it was the only covered commodity planted. The average P&CP of wheat planted during is 650 acres, which is 100% of the covered commodities planted during that base period. Therefore, the owner’s ONLY option is to reallocate 100% of the base acres on the farm to wheat (800 acres) and lose his barley base acres, OR retain the base acres on the farm as of FSA 2014 Farm Bill Training Colorado Producer Meetings

Wheat Base: acres Barley Base: acres CROP HISTORY CROP 2009 2010 2011 2012 Wheat Barley Alfalfa 500.0 400.0 Dry Peas 100.0 This is the final base reallocation example. In this example, the entire farm was planted to Alfalfa for the years 2009 through 2011 and then in 2012, 100 acres of the was planted to dry peas, and the remaining 400 acres stayed in alfalfa. Please note, as in the previous example, Alfalfa is not a covered commodity so is irrelevant to the base reallocation calculation. FSA 2014 Farm Bill Training Colorado Producer Meetings

In the base reallocation calculator, we will only include 100 acres of dry peas planted in 2012 as that is the only covered commodity planted during the base period. This gives us an average of 25 acres of dry peas planted from , which calculates to be 100% of the total covered commodities planted on the farm. Therefore, the owner will have the option to reallocate all of the base acres on the farm to 100% dry peas, and lose his wheat and barley base, OR retain the base acres on the farm as of FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on Base Reallocation?
FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Yield Update Next, we will review the Yield Update Option… FSA 2014 Farm Bill Training Colorado Producer Meetings

Payment Yield Update Option
Agricultural Act of 2014 Payment Yield Update Option On a “Crop by Crop” basis the owner of a farm has the following options: Retain the farm’s/crop’s Counter-Cyclical (CC) yield from the 2008 Farm Bill (NOT Direct yield) Update the farm’s/crop’s yield based on 90% of the farms “average yield” per “planted” acre, excluding years of zero plantings/prevent plant. NOTE: 75% of County Average Yield will be “substituted” for years in which there is a low yield and/or no production/yield available for planted acres For farms or crops that currently have a counter-cyclical yield, farm owners have the option of: Retaining the current counter-cyclical yield for the crop to be rolled over as the PLC payment yield; or Update the yield for the farm or crop using 90% of the average certified yield per planted acre for the crop years 2008 through 2012 excluding years where the applicable crop was not planted or prevented from being planted. 75% of the county average yield will be used as a plug yield in low yield years or in years where no yield data is available (For example, if the land had a different owner/operator in previous years and the production data is not available). NOTE: The CC yields on your farm(s) was included on your producer letter mailed in July. NOTE: Separate yields are NOT calculated for Irrigated VS. Non-Irrigated crops. If you have both practices on your farm, there will be a blended yield calculated. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Payment Yield Update Option Example #1
1 Year average of Planted acreage (60/1=60) Farm # Wheat CC Yield: 35 bu/ac Crop Wheat 2008 2009 2010 2011 2012 Total Average Yield PLC Yield (90%) Zero plant 60 bu/ac Average CO Yield (75%) 30 Wheat was planted in ONLY ONE of the five years used in the yield update period of We exclude any years in which the crop was not planted when calculating the average; therefore we will only use ONE year in this example. So we use the one year yield of 60 bu/acre X 90% to come up with the Updated PLC Yield of 54 Bu/Acre. The previous CC Yield for wheat on this farm was 35 bu/acre, so updating the yield would be very beneficial for this producer. FSA 2014 Farm Bill Training Colorado Producer Meetings

Payment Yield Update Option Example #2 5 Year Average of Planted acres
Agricultural Act of 2014 Payment Yield Update Option Example #2 5 Year Average of Planted acres ( =186/5=37) Farm # Wheat CC Yield: 35 bu/ac Crop Wheat 2008 2009 2010 2011 2012 Total Average Yield PLC Yield (90%) 39 40 35 42 9 186 37bu/ac 33 bu/ac Ave. CO Yield (75%) 30 In this example, wheat was planted in each year. As you can see, the farm’s actual certified yield is HIGHER than the substitute yield in , but he had a bad year in 2012, so we will use the substitute yield for When calculating the average, we will use the actual yields of 39, 40, 35, 42 and the substitute yield of 30 DIVIDED BY the 5 years of planting history to come up with an average of 37 bu/acre. We multiply that average by 90% to come up with a calculated yield of 33 bu/ac. The current CC yield is 35, so the producer would keep the 35 yield which becomes the PLC yield FSA 2014 Farm Bill Training Colorado Producer Meetings

Payment Yield Update Option Example #3 4 Year Average of Planted acres
Agricultural Act of 2014 Payment Yield Update Option Example #3 4 Year Average of Planted acres ( =188/4=47) Farm # Wheat CC Yield: 38 bu/ac Crop Wheat 2008 2009 2010 2011 2012 Total Average Yield PLC Yield (90%) Zero Plant Planted No Evidence 54 52 188 47 bu/ac 42 bu/ac Avera ge CO Yield (75%) 30 In this example wheat was planted in 4 of the 5 years, 2008 through In year 2009 the producer did not or could not provide a yield certification, so 75% of the county average yield will be assigned for that year. The 4 year average would be calculated using the substitute yield of 30, and the actual yields of 54, 52, and 52 to come up with an average yield of 47; 90% would be 42. In this case, the updated PLC yield of 42 will exceed the current CC yield of 38, so the producer would choose his updated yield. FSA 2014 Farm Bill Training Colorado Producer Meetings

How to Update PLC Yields
Gather production records for the 2008 – 2012 crop years NOTE: Do NOT bring your production records to the County FSA Office at this time. We are NOT accepting this documentation from producers. Report your per/acre production figure on form CCC-859, which may be obtained from your local FSA office Make your yield update decision and certify to the applicable yields on the CCC-858 by February 27, 2015 Maintain records of production for the life of the farm bill, as FSA is required to spot-check PLC yield certifications. To update your crop yields, you must gather production records for (any years for which you are certifying yields), and report those yields to FSA by completing a CCC This form can be completed by an owner OR operator. However, once you return the CCC-859 to the County Office, you are not done. A farm OWNER must SIGN the CCC-858 CERTIFYING to the yield and base reallocation decision. This form MUST be completed by the February 27, 2015 deadline or the current base acres and CC Yields will be retained on the farm. ALL certified yields are subject to spotcheck, so all records to support those yields must be maintained through the life of the farm bill. (Crop insurance records ARE acceptable) FSA 2014 Farm Bill Training Colorado Producer Meetings

How to Update PLC Yields
NOTE: This is a ONE-TIME opportunity to update your crop yields at FSA, regardless of the program option that you choose. Please note…this is a ONE-TIME opportunity. Once the February 27 deadline has passed, owners will no longer have an opportunity to update their yields. Owners are encouraged to take advantage of this opportunity regardless of their program election choice. FSA 2014 Farm Bill Training Colorado Producer Meetings

Base & Yield Update - 4 Options:
Yield Options Base & Yield Update - 4 Options: Retain the farm’s bases and yields. Retain the farm’s bases and update one or more crop yields Reallocate the farm’s bases and retain all yields Reallocate the farm’s bases and update one or more crop yields. The question often comes up as to if you have to reallocate base acres if you choose to update your crop yields. NO. These two processes are independent of each other. Farm owner’s can choose to: retain the current base acres and yields on the farm Retain the current base acres on the farm and update one or more crop yields Reallocate the farm’s base acres and retain the yields currently on the farm Reallocate the farm’s base acres and update one or more of the crop yields. FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on Yield Updating?

Program Election FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Program Election All current owners, operators and tenants with an interest in the cropland on the farm MUST agree to the program ELECTION. The 2014 program Election remains in effect through 2018. Program Election remains ON THE FARM NOTE: Failure to make a unanimous program election during the designated election period of November 17, 2014 through March 31, 2015 will result in a default designation to PLC effective and THE LOSS OF ALL ARC/PLC payments for the farm in 2014. The farm bill Statute requires the operator, all owners and other tenants with an interest in the cropland on the farm to agree and sign to a program election of PLC, ARC-CO or ARC-IC effective for crop years 2014 through Once the election period has passed, the program election cannot be changed for the future years of 2015 through 2018. If the operator, owners and/or OT’s cannot agree on an election in 2014, then the farm will automatically be considered a PLC farm for the years 2015 through 2018 with NO payments on the farm in 2014. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Program Election ELECTION is Farm By Farm If ARC-CO or PLC is selected on a Farm: Each Covered Commodity will have a PLC or ARC-CO election option RMA’s SCO – is an option for crops with a PLC election Program election of PLC, ARC-CO or ARC-IC is made on a farm by farm basis. ARC-CO and PLC elections are made for each individual covered commodity for which base acres exist on a farm. So, some farms could have covered commodities in the PLC program, and other covered commodities on the farm in the ARC-CO program. If a producer wishes to enroll in the Supplemental Coverage Option (SCO) with crop insurance, then the farm’s only “election” option is PLC. ARC-CO is not an available election option for farms and crops that will enroll in the SCO program with crop insurance since SCO and ARC-CO are both revenue based programs. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Program Election (continued) If ARC-IC is selected on a Farm: All covered commodities planted on the farm are ARC-IC crops. PLC is NOT an option for the farm ARC-CO is NOT an option for the farm RMA’s SCO - is NOT an option for any crop on the farm If ARC-IC is elected for the farm, that election applies to ALL covered commodities on the farm. PLC and/or ARC-CO is not an option for the farm or crop bases on the farm, and SCO is not available for any crops on this farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on Program Election?

Agricultural Act of 2014 Price Loss Coverage (PLC) Now we will discuss the three different program options. PLC is the first program we will review. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Price Loss Coverage Payments made when effective price is less than the reference price for a covered commodity. Effective Price is the higher of Marketing year Average Price (MYA) for the crop or the National Loan Rate for the crop. Payments made on 85% of base acres of the covered commodity. Payments are made regardless of the planting of the covered commodity. Payments for Price Loss Coverage (PLC) are calculated at 85% of the base acres of the covered commodity regardless of the acres planted of the covered commodity, very similar to the Counter Cyclical payments under the DCP program. Payments are triggered when the effective price is less than the reference price for a covered commodity. The Effective price is the higher of the marketing year average price, (MYA) for the covered commodity or the National Loan rate for the covered commodity. The Reference price is stated in the statue. FSA 2014 Farm Bill Training Colorado Producer Meetings

PLC – Examples of Reference Prices
Agricultural Act of 2014 PLC – Examples of Reference Prices Wheat $5.50/bu Barley - $4.95/bu Corn $3.70/bu Lentils $0.1997/lb Dry Peas $0.1100/lb Safflower $0.2015/lb Large Chickpeas $0.2154/lb Small Chickpeas $0.1904/lb This slide shows the reference prices for many of the covered commodities planted in Montana. A complete list of reference prices is included on Page 4 of the ARCPLC Fact Sheet. Reference prices are set in statute and will remain constant through the life of the farm bill. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Price Loss Coverage Example
Farm #1: Barley Base: 1000 acres PLC Yield: 50 bu/ac Reference price for barley = $4.95/bu. Market Year Average (MYA) price = $4.50/bu (example only) The national average loan rate = $1.95/bu. PLC PAYMENT CALCULATION: $ $4.50 = $0.45/bushel payment rate. 1000 base ac x 85% x 50 bu PLC yield x $0.45 = $19,125 payment Farm #1 has a barley base of 1000 acres with a PLC yield of 50 bushels per acre. The reference price for barley is $4.95 per bushel The national loan rate for barley if $1.95 per bushel The Marketing Year Average (MYA) is $4.50 per bushel. Because the MYA price is higher than the National Loan Rate, the MYA price of $4.50 per bushel becomes the effective price. the PLC payment rate would $.45 per bushel, the difference of $4.95 reference price minus the $4.50 MYA. FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on PLC? FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agricultural Risk Coverage County Option ARC-CO Next, we will review Agricultural Risk Coverage – County Option FSA 2014 Farm Bill Training Colorado Producer Meetings

Agriculture Risk Coverage – County (ARC-CO)
Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO) Payments made when the ARC-CO Actual Revenue is less than the ARC-CO Guarantee for a covered commodity. County data is used, not individual farm data. The payment rate can be no higher than 10% of the ARC-CO Benchmark Revenue for the covered commodity. Payments made on 85% of base acres of the covered commodity. Payments are made regardless of the planting of the covered commodity. ARC-CO is a “revenue” based program that is calculated using “County” data, not individual farm data. Payments are made when the ACTUAL county revenue falls below the county GUARANTEE, which we will calculate in an example. Note: Payments will be capped at 10% of the ARC-CO benchmark revenue for the applicable covered commodity. ARC-CO payments are based on 85% of each applicable covered commodity’s base acres, not planted acres. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO)
Example: Farm #1: Wheat Base = 500 acres Step 1: Calculate county benchmark revenue for WHEAT Step 2: Calculate the county guarantee for WHEAT Step 3: Calculate actual county revenue for WHEAT Step 4: Determine of the county suffered a loss for WHEAT Step 5: Calculate Payment Farm number 1 has 500 base acres of Wheat. We will go through the following steps to determine the payment amount for this farm under ARC-CO. Remember, we are looking at COUNTY yields and NATIONAL prices in these calculations. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO) Step 1: Wheat ARC-CO Benchmark Revenue Calculation (County Data): Benchmark Yield = 5 year Olympic Average (40 bu/ac) Benchmark Price = 5 year Olympic Ave of the higher of MYA or the Reference Price ($6.60) WHEAT 2009 2010 2011 2012 2013 Yield 40 46 38 24 42 70% of T-Yield 26 MYA Price $4.87 $5.70 $7.24 $7.77 $6.87 Reference Price $5.50 First, we calculate the Benchmark Yield by calculating a 5-Year Olympic Average of the higher of the county yield OR the plug yield which is equal to 70% of the county T-yield. In this example, the T-yield is 26 bu/ac. As you can see, the actual county yield is higher than the plug yield in years 2009, 2010, 2011 and 2013, but we used the plug yield in 2012 when the actual county yield was low. We will drop the highest value of 46 in 2010 and the lowest value of 26 in 2012 and average the remaining three values to come up with an olympic average of 40/acre for the benchmark yield. Second, the Benchmark Price is calculated using a 5 Year Olympic Average using the higher of the MYA price or the published reference price for the applicable covered commodity : In this example, the MYA is higher than the Reference Price in every year except So we drop the high value of $7.77 and the low value of $5.50 and average the remaining values to come up with an olympic average of $6.60 for the benchmark price. Next, the calculated Benchmark Yield is taken times the Benchmark Price to determine the Benchmark Revenue PLEASE NOTE: The benchmark revenues are recalculated EACH YEAR using the previous five years’ data for the applicable year. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO) (continued) Wheat ARC-CO Benchmark Revenue Calculation: Benchmark Yield = 40 bu/ac Benchmark Price = $6.60/bu Benchmark Revenue = $ (40 X $6.60) Step 2: Wheat ARC-CO Guarantee Calculation: Benchmark Revenue ($264) X 86% = $227.04/acre Olympic Benchmark Yield was calculated at 40 bushels per acre. Olympic Benchmark Marketing Year Price was calculated at $6.60 per bushel. The Benchmark Yield times the Benchmark Price calculates to a Benchmark Revenue of $264.00 The ARC-CO Guarantee would be $227.04, which is 86% of the Benchmark Revenue ($264 X .86). FSA 2014 Farm Bill Training Colorado Producer Meetings

2014 CO Actual Yield (hypothetical)
Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO) Step 3: Wheat ARC-CO Actual Revenue: (35 bu/ac X $5.90/bu = $206.50/acre) NOTE: Use higher of MYA price or National Loan Rate CROP 2014 CO Actual Yield (hypothetical) 2014 MYA Price (hypothetical) National Loan Rate Actual Revenue WHEAT 35 $5.90 $2.94 $206.50/ac Next, the ARC-CO Actual Revenue must be calculated to determine current year revenue. The formula to determine current year revenue: Actual yield per acre of the covered commodity in the county X the higher of the Marketing Year Average (MYA) price or the National Loan rate for the crop. In this example to calculate ARC-CO actual revenue – the wheat yield in the county was 35 bu/acre; the MYA price of $5.90/bu is higher than the wheat national loan rate of $2.94/bu. ARC-CO wheat actual revenue for the county in the current year is $206.50/acre ( 35 bu/acre X $5.90/bu = $206.50). FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-CO) (continued) Step 4: ARC-CO Calculation: Wheat ARC-CO: Guarantee: $227.04 Actual Revenue: $206.50 Revenue Loss = $ /acre Note: Maximum Payment Rate would be $26.40 (Benchmark Revenue of $264/ac X 10%) Step 5: Payment computation for this example would be: Wheat base 500 acres X 85% X $20.54 = $ The formula to determine the ARC-CO payment rate per acre is determined by the ARC-CO Guarantee minus the ARC-CO actual revenue for the current year for the crop. The Wheat ARC-CO Guarantee is $227.04/acre The Wheat ARC-CO Actual revenue for the current year in the county is $206.50/acre. The Revenue loss for Wheat in the county is $20.54/acre. AKA the Payment Rate The maximum payment rate per acre is capped at $26.40/acre which is 10% of the ARC-CO benchmark revenue for the county of $264/acre. The ARC-CO payment rate is the lesser of $20.54 or the $26.40 payment cap. In this case the payment rate is $20.54/acre because that is less than the calculated payment cap. The ARC-CO payment for Wheat on this farm is $ (500 acres of Wheat Base X 85% (payment factor) X $20.54/acre of ARC-CO revenue loss). If the difference would have been zero or a negative number a payment would not have been earned. The payment rate per acre, if one is calculated, is applied to the applicable crop base on the participating farm to make an ARC-CO payment. The payment is issued using the calculated payment rate for the crop times the base acres of the crop. The ARC-CO payment is not dependent upon planting of the crop. FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on ARC-CO? FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Agricultural Risk Coverage Individual Option ARC-IC Finally, we will review the ARC-IC option, which is very different from the previous two program options. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agriculture Risk Coverage – County (ARC-IC)
Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-IC) Payments are made when the collective Actual Revenue of all covered commodities planted in the farming operation for the current year is less than the collective ARC-IC Guarantee for the farming operation. The payment rate is the difference in the ARC-IC Guarantee and the ARC-IC Actual Revenue, but can be no higher than 10% of the ARC-IC Benchmark Revenue for all covered commodities on the farm. Agricultural Risk Coverage – Individual (ARC-IC) provides revenue coverage at the farm level NOT the county level and is dependent on the planting of covered commodities for the specific year. ARC-IC payments will be made when the current year revenue for all covered commodities on the ARC-IC farm is less than the ARC-IC guarantee for all covered commodities for the ARC-IC farm. Current year plantings and production will be used to determine both ARC-IC guarantees and revenues. Revenue gains on one covered commodity can offset revenue losses for other covered commodities within the farm. ARC-IC payments are based on current year planted acres of the covered commodities. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agriculture Risk Coverage – County (ARC-IC)
Agricultural Act of 2014 Agriculture Risk Coverage – County (ARC-IC) The ARC-IC farm consists of all farms enrolled in ARC-IC within the state for the producer. The ARC-IC Revenues are calculated across ALL covered commodities planted on ALL farms If an ARC-IC payment is earned, the payment calculation will be as follows: Total base acres on the farm X 65% X ARC-IC payment rate X producer share When making the calculations for ARC-IC, we will include crops and revenues planted on ALL farms in which the producer has an interest in the state that has ENROLLED in ARC-IC for the applicable year. The payment calculation will the TOTAL base acres on the farm X 65% (to determine payment acres X calculated payment rate X the producer’s share of the farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC Highlights ARC-IC is the ONLY program option that can generate a payment based upon losses that are directly tied to the crops being produced in the farming operation. ARC-IC provides risk protection to producers that plant ANY of the 21 “covered commodities”, regardless of whether or not the farm has base acreage for that commodity. ARC-IC is the only program that actually requires the PLANTING of covered commodities to generate a payment. Producers can earn a payment if they plant ANY of the 21 covered commodities, even if they do not have base acres for that specific covered commodity. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC Overview FSA will compute benchmark revenue figures for each covered commodity crop that is planted in the current year, regardless of whether or not the producer has history of producing that crop. Current year revenue is determined based upon the production that is received from the ARC-IC farm, and does NOT include MPCI indemnities Benchmark revenues will be completed for any covered commodity planted during the current year, even if there is no history of that crop being planted on the farm. Current year revenue is based on the ACTUAL production received from the ARC-IC farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC-IC Payment Calculation - (Two Crops – One Farm): FSN 7400 Wheat Base: 1500 acres Barley Base: 500 acres Total Base Acres: 2000 Acres. Operator – 100% Share Planted Acres: Wheat: 1300 acres Dry Peas: 200 acres Example of a 2 crop farm – one 100% producer. Bases of wheat and barley total 2000 acres, but the crops planted are wheat and peas. ARC-IC benchmark revenue, guarantee and current year revenues will be calculated using wheat and peas, not wheat and barley. The total base acres on the farm to calculate a payment will be the 2000 acres of base on the farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC-IC Payment Calculation - (Two Crops – One Farm):
Covered Commodities On ACR-IC Farm PLANTED ACRES Planted / Total Planted Producer Weighted % Planted Acres across all Farms Wheat 1300 (1300 / 1500 86.67% Peas 200 (200/ 1500 13.33% Total 1500 First, we must calculate the “weight” of each crop on the farm. Which means, we must determined the percentage of planted covered commodities for each individual crop planted in the current year. In this example, we have planted wheat and peas. Wheat makes up 86.67% of the total planted covered commodities on the farm (1300 planted acres of wheat divided by 1500 total planted covered commodities). Peas makes up 13.33% of the planted covered commodities on the farm in the current year (200 acres of planted peas divided by 1500 total planted commodities) These calculations will be applied in future calculations. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC-IC Benchmark Revenue Calculation for Wheat – (Two Crops – One Farm): Wheat 2009 2010 2011 2012 2013 5-Year Olympic Average Revenue Producer Weighted %Planted Acres across all Farms Weighted 5-year Olympic Average Yield 52 55 58 8 44 70% of T 26 MYA $4.87 $5.70 $7.24 $7.77 $6.87 Reference Price $5.50 Revenue $286 $314 $420 $202 $302 $301 86.67% $261 Now we must calculate the weighted benchmark revenue for each crop. Here we calculate the benchmark revenue for each year and complete an Olympic average calculation for the revenue calculations. (This is different from the ARC-CO calculations where we calculated the olympic average price and the olympic average yield separately). So for EACH YEAR we take the higher of the individual’s actual yield OR 70% of the County T-Yield MULTIPLIED BY the HIGHER of the crop’s MYA price OR the crop’s reference price to determine the revenue for the year. We then take away the highest revenue year and the lowest revenue year, and calculate the average of the remaining 3. In this example, we remove the value of $420 and $202, and average the remaining values to come up with an olympic average revenue of $301. We THEN apply the percentage as determined on the previous slide for Wheat (86.67% to come up with the weighted olympic average of $261 per acre for Wheat. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC-IC Benchmark Revenue Calculation for Dry Peas - (Two Crops – One Farm): Dry Peas 2009 2010 2011 2012 2013 5-Year Olympic Average Revenue Producer Weighted %Planted Acres across all Farms Weighted 5-year Olympic Average Yield 705 1700 1800 2100 1300 70% of T 700 MYA $0.0898 $0.0977 $0.1530 $0.1570 $0.1460 Reference Price $0.1100 Revenue $72 $187 $275 $330 $190 $217 %13.33 $29 We must complete this same process for Dry Peas, because remember, we must calculate a benchmark revenue for each planted covered commodity for the applicable year. In this example, we dropped the high value of $330 and the low value of $72, average together the remaining values to come up with an Olympic Average of $217 for Dry Peas. We THEN apply the Dry Pea factor as determined earlier of 13.33% to come up with a weighted olympic average of $29 per acre for Dry Peas. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC IC Weighted ARC-IC Benchmark (BM): Wheat BM Revenue: ($301x 86.67%) = $261 Dry Peas BM Revenue: ($217 X 13.33%) = $ 29 Total Farm Benchmark = $290 Weighted Guarantee: ARC-IC Farm Guarantee: $290 X 86% = $249/acre The two weighted benchmarks are added together to calculate the ARC-IC farm benchmark, as weighted, or $290/acre. The producer guarantee as weighted is 86% of the farm benchmark or $249/acre. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC Actual Revenue $341,800 / 1500 Total Planted Acres
ARC-IC – Example ARC-IC - (Two Crops – One Farm) Current Year Revenue: CROP 2014 Total Production 2014 MYA Price National Loan Rate ARC-IC Total Revenue Wheat (40 bu/ac on 1300 ac) 52,000 bu $5.90 $2.94 $306,800 Dry Peas (1400 lbs/ac on 200 ac) 280,000 lbs $0.1250 $0.0540 $35,000 Total Revenue $341,800 ARC-IC Actual Revenue $341,800 / Total Planted Acres $228 Once all applicable data is available, we will calculate the actual revenue. In this example, we have total wheat production of 52,000 bu and 280,000 bu for dry pea production. We multiply the actual production by the HIGHER of the 2014 MYA price (hypothetical) OR the National Loan rate. (The MYA price is higher in this example). This gives us a revenue of $306,800 for Wheat and $35,000 for Dry Peas, with a total of $ for both crops. We must take that to a “per acre” figure, so we will divide the total revenue by 1500 total planted acres to come up with an actual revenue of $228 per acre. The revenue per acres is weighted to each producer on the farm. In this case, we have a 100% producer so this producer actual revenue is $228/acre. FSA 2014 Farm Bill Training Colorado Producer Meetings

ARC-IC – Example ARC-IC Payment Calculation: ARC-IC Guarantee: $249 ($290 X 86%) ARC-IC Actual Revenue: $228 $21/payment acre Note: Payment rate CAP no more than 10% of the ARC-IC Benchmark Revenue ($290) or $29 in this example. Total Base Acres 2000 X 65% X $21 = $27,300 Producer Payment Share: $27,300 X 100% = $27,300. Now we must calculate the producer’s payment rate. We subtract the actual revenue from the guarantee to come up with a loss of $21.00 per acre. Remember, the payment rate is capped at 10% of the benchmark revenue which $29 (10% of $290). The actual loss is less than the capped payment rate, so we will use the actual loss per acre in the payment calculation. To calculate the payment we take 2000 TOTAL base acres on the farm X 65% (to determine payment acres) X payment rate of $21 to come up with a total payment of $27,300. Because this producer has 100% share, he will receive this full payment. FSA 2014 Farm Bill Training Colorado Producer Meetings

Questions on ARC-IC?? FSA 2014 Farm Bill Training Colorado Producer Meetings

Summary Program Comparison

Agricultural Act of 2014 PLC ARC-CO ARC-IC Yield Comparison
Uses Price plus PLC Yield Uses Price Plus “County” Level Yield Uses Price Plus Producer’s yield on the farm(s) Base Acre Comparison Payment determined by individual covered commodity crop base acres Payment determined by planted covered commodities combined on the farm(s) in the State This table shows a comparison of all three programs. First, looking at the yield – PLC payments use the PLC yield which will be established by using the CC yield or the updated yield (this process will be described later). PLC is the only program that uses this yield. ARC-CO uses the county level yield uses the county yield, ARC-IC uses the individual farm yield. Base Acres- ARC-CO and PLC both use the individual covered commodity’s base acres on the farm to determine the payment ARC-IC uses the planted covered commodities on the farm(s) for the applicable year. The farm needs to HAVE base acres, but it doesn’t matter what those base acres are for in ARC-IC. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 PLC ARC-CO ARC-IC Payment Acre Comparison
Payments made on 85% of specific crop base acres on farm Payments made on 65% of TOTAL base acres on farm Production Reports Production report NOT required Requires annual Production report of all covered commodities planted As mentioned earlier ARC-CO and PLC both use 85% of the applicable covered commodity’s base acres in the payment calculation ARC-IC uses 65% of the TOTAL base acres on the farm in the payment calculation Production reports are not required for ARC-CO or PLC because these programs do not require the planting of covered commodities. ARC-IC DOES require an annual production report of all covered commodities planted on all farms enrolled in ARC-IC for the applicable year. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 PLC ARC-CO ARC-IC Requirement to Plant?
Planting of covered commodities NOT required Planting of covered commodities REQUIRED Program Election Comparison Elect by Covered Commodity Base Acres by farm May mix ARC-CO and PLC on same farm by base crop Elect on ALL Covered Commodities on the farm ARC-CO & PLC not eligible on farm As mentioned previously, producers are NOT required to plant any covered commodity to earn a PLC or ARC-CO payment. However, planting of covered commodities is required to earn a payment under ARC-IC. Producers can elect PLC and ARC-CO on a covered commodity by covered commodity basis. However, once an ARC-IC election is made for a farm, that election applies to ALL covered commodities on the farm. FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 PLC ARC-CO ARC-IC When Do Payments Trigger?
When effective price falls below reference price When ACTUAL county revenue falls below calculated benchmark guarantee revenue in the county. When ACTUAL farm revenue from enrolled farms falls below the calculated benchmark revenue for all enrolled farms in the state. FSA 2014 Farm Bill Training Colorado Producer Meetings

Web Sites These are USDA web sites. FSA 2014 Farm Bill Training Colorado Producer Meetings

FSA ARC/PLC Home Page FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 Questions ??? FSA 2014 Farm Bill Training Colorado Producer Meetings

Agricultural Act of 2014 PLC (Price Loss Coverage) And ARC (Agricultural Risk Coverage) FSA 2014 Farm Bill Training Colorado Producer Meetings.

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Agricultural Act of 2014 PLC (Price Loss Coverage) And ARC (Agricultural Risk Coverage) FSA 2014 Farm Bill Training Colorado Producer Meetings.

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Presentation on theme: "Agricultural Act of 2014 PLC (Price Loss Coverage) And ARC (Agricultural Risk Coverage) FSA 2014 Farm Bill Training Colorado Producer Meetings."— Presentation transcript:

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