agricultural act of 2014 - iowa state universityplc & arc basic program overview notice arcplc-4...

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July 21, 2014Chad Hart

Associate Professor/Crop Markets SpecialistIowa State University Extension and Outreach

[email protected](515) 294-9911

Kevin McClureChief Program Specialist, Production AdjustmentUSDA Farm Service Agency – State of Iowa Office

[email protected](515) 254-1540 Ext. 1041

AGRICULTURAL ACT OF 2014

PLC & ARC BasicProgram

Overview

Notice ARCPLC-4

Notice ARCPLC-5

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The 2014 Farm Bill provides the following under the commodity title:

• A “one-time” decision to REALLOCATEbase acres

• A “one-time” decision to UPDATECC Yields on a farm

NOTE: Total Base Acres on the farm cannot increase above the amount of the total base acres in effect on September 30, 2013


Covered Commodities for ARC/PLC Program

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

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Authorizes a one-time, 5-year “Election” of programs:

• Price Loss Coverage (PLC) – offers price protection.

• Ag Risk Coverage-County (ARC-CO) – offers shallow loss revenue protection at a COUNTY level

• Ag Risk Coverage-Individual (ARC-IC) – offers shallow loss revenue protection at an individual farm level across all farms enrolled in the state


Price Loss CoveragePayments made when effective price is less than the reference pricefor 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

Reference Price is set by statute and remains the same through 2018

Payments made on 85% of base acres of the covered commodity

Payments are made regardless of the planting of the covered commodity

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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 (Yield) is used, not individual farm or producer Yields.

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.


Agriculture Risk Coverage – County (ARC-IC)

Payments are made when the ARC-IC Actual Revenue is less thanthe ARC-IC Guarantee for ALL covered commodities on ALLfarms enrolled in ARC-IC in the state for the producer.

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.

Payments made on 65% of “TOTAL” base acres of all covered commodities on the farm.

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ARC/PLC Program Process has three PARTS:

1. Update: Producer can “reallocate” base acres and/or “update” CC Yields

2. Election: Once Base Acres and Yields are set, then the Election of PLC or ARC takes place on the farm.

3. Enrollment: Once Election has been completed then Enrollment takes place on the farm.


Update Process for ARC/PLC Program

BASE OPTIONS1. Retain Current Base Acres

OR

2. Reallocate Base Acres Crop Acreage of planted/considered planted Covered Commodities: 2009 – 2012

Note: This option is available to for producers and farms regardless of program election – PLC/ARC-CO/ARC-IC

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BASE REALLOCATION EXAMPLE #1

Farm #2566Cropland: 160.0 acresCorn Base: 70.0 acresSoybean Base: 70.0 acresOats Base: 20.0 acres

CROP HISTORY

CROP 2009 2010 2011 2012

Corn 80.0 69.5 80.0 69.5

Soybeans 69.5 80.0 69.5 80.0


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BASE REALLOCATION EXAMPLE #2

Farm #1032Cropland: 149.5 acresCorn Base: 74.7 acresSoybean Base: 74.8 acres

CROP HISTORY

CROP 2009 2010 2011 2012

Corn 74.5 74.5 74.5 74.5

Alfalfa 75.0 75.0 75.0 75.0


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Update Process for ARC/PLC Program

YIELD OPTIONS

1. Retain Current CC Yields

OR

2. Update Yields (90% of Planted Yield history)Acres planted of covered commodities, 2008 – 2012, using simple average

Note: This option is available PER Crop for producers and farms regardless of program election – PLC/ARC-CO/ARC-IC


Payment Yield Update Option Example #15 Year average of Planted acreage

(151+165+155+180+122=773/5=155)

Farm #1 Corn CC Yield: 142/buCrop

Corn

2008 2009 2010 2011 2012 Total Average Yield

PLC Yield (90%)

151 165 155 180 119 773 155 139/bu

Average CO Yield (75%)

122 122 122 122 122

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Payment Yield Update Option Example #23 Year Average of Planted acres

(178+180+122=480/3=160)

Farm #2 Corn CC Yield: 130/bu

Crop

Corn

2008 2009 2010 2011 2012 Total Average Yield

PLC Yield (90%)

Zero Plant

Zero Plant

178 180 119 480 160 144/bu

Average CO Yield (75%)

122 122 122 122 122


Owner and Operator Acreage History Letters

• The first part of August, all owners and operators will receive the following:

1. Letter that provides basic background of base acreage “Reallocation” and “Update” of the CC Yield option.

2. “Summary Acreage History Report” which shows the acreage of covered commodities reported to FSA, 2008 through 2012 per farm.

NOTE: This report also include the “Base” acres and “CC Yield” as of 9/30/2013.

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IF THENOwner and Operator receives Acreage History Letter AND all information is accurate /up to date

There is nothing additional at this time, for the producer or County Office, to complete until the Reallocation/Yield Software becomes available in early fall of 2014.

Owner or Operator contacts the County Office and states there is no history recorded for a particular year within the history period

County Office will complete the acreage history research and load the missing data into the Farm Bill Acreage History software. Once the information is updated, no additional action is required at that time until the Reallocation/Yield Software becomes available in early fall of 2014.

Owner or Operator requests to update their CC Yield for a crop(s) on the farm upon receipt of their Acreage History Letter

County Office can inform the Owner or Operator to compile the yield per crop per year, 2008 through 2012 for which the crop was planted. Once the “Yield” software becomes available, producers will be informed as to the method for which the yield information can be submitted to the County Office. Yield software becomes available in early fall of 2014


Election of PLC / ARC

Elect PLC, ARC-CO or ARC-IC on each FSA Farm Number: (PLC or ARC-CO may be elected by Covered Commodity Base Acres on each farm)

A: Producers will make the 1 time election per farm for years 2014 through 2018.

B: Failure to make an election will result in PLC election starting in 2015 through 2018 and NOpayments will be made for 2014.

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Enrollment of ARC/PLC

Annual Enrollment Contract to Participate on a farm:

An enrollment period will be held for:

• 2014 & 2015 completed simultaneously.• Completed for each year 2014 – 2018.• Producers can “participate OR not participate”

year by year


ARC / PLC Approximate Timeline

Mid-Summer -2014

Late Summer -2014

Winter 2014 Early 2015

Producers receive letters notifying them of current bases and yields and 2008 to 2012 planting history.

Owners have opportunity to update yields and reallocate bases for ARC/PLC purposes.

(Update Process)

ARC & PLC online tools become available from Universities.

Final Base & YieldNotices issued

ARC/PLC one-time Election occurs.(Election Process)

ARC/PLC sign-up for 2014 and 2015 starts.(Enrollment Process)

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In Summary:

• Important for Owners and Operators to communicate and discuss the “Update” options and then the “Election” options available for their respective farms.

• Local FSA County Offices can assist owners and operators with an explanation of the basic provisions of PLC, ARC-CO & ARC-IC.

• More specific details will be announced as decisions are made over the next several months.


In Summary:

• Owners and Operators can visit: WWW.fsa.usda.gov

• Next two slides show “screen shots” of the Website information.

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Select ARC/PLC Program


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NEW 5-YEAR FARM PROGRAM (2014-2018)

Marketing Loan National Rates:$1.95/bu Corn

$5.00/bu Soybeans

PLC INSTEAD OF CCP Price-based support program

Reference prices establish targets

Works like CCP

Payment rate = Max(0, Reference price –Max(MYA price, Loan rate))

Payment = Payment rate * Payment yield * Payment acres

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PLC: Corn 2014 Payment Potential

Notes: PLC payments are made on 85% of base acres.

Marketing Year Price ($/bu)

PLC Payment Rate ($/bu)

PLC Payment ($/base acre)

$3.10 $0.60 $76.50

$3.20 $0.50 $63.75

$3.30 $0.40 $51.00

$3.40 $0.30 $38.25

$3.50 $0.20 $25.50

$3.60 $0.10 $12.75

$3.70 $0.00 $0.00

Reference Price = $3.70 per bushelPayment Yield = 150 bushels per acre

PLC: Soybean 2014 Payment Potential

Notes: PLC payments are made on 85% of base acres.

Marketing Year Price ($/bu)

PLC Payment Rate ($/bu)

PLC Payment ($/base acre)

$7.20 $1.20 $42.84

$7.40 $1.00 $35.70

$7.60 $0.80 $28.56

$7.80 $0.60 $21.42

$8.00 $0.40 $14.28

$8.20 $0.20 $7.14

$8.40 $0.00 $0.00

Reference Price = $8.40 per bushelPayment Yield = 42 bushels per acre

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ARC INSTEAD OF ACRE Revenue-based support program

Revenues based on 5-year Olympic average yields and prices

Yields and prices have cups (County T-yields and reference prices)

Triggers at county or individual farm level, instead of state level

ARC PAYMENT RATE Payment rate = Max(0,

Min(10% of Benchmark revenue,Actual crop revenue – ARC guarantee))

So the basic payment structure is the same as it was under ACRE

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ARC-CO: 2014 Corn Revenue Guarantee

Notes: Howard County, Iowa actual corn yields. Revenue Guarantee equals 86% of Benchmark.

Year Yield MYA Price ARC Price

2009 163.4 $3.55 $3.70

2010 184.1 $5.18 $5.18

2011 174.2 $6.22 $6.22

2012 133.2 $6.89 $6.89

2013 146.3 $4.45 $4.45

Oly. Ave. 161.3 $5.28

Benchmark Revenue = $852.20 per acreARC Revenue Guarantee = $732.89 per acre

ARC-CO: 2014 POTENTIAL CORN PAYMENT

Price: $3.50 $4.00 $4.50 $5.00

Yield: 100 $72.44 $72.44 $72.44 $72.44

125 $72.44 $72.44 $72.44 $72.44

150 $72.44 $72.44 $49.21 $0.00

175 $72.44 $27.96 $0.00 $0.00

200 $27.96 $0.00 $0.00 $0.00

ARC Revenue Guarantee = $732.89 per acreARC Max Payment Rate = $85.22 per acreBut ARC-CO is paid on 85% of base acres

and 85% of $85.22 is $72.44

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ARC-CO: 2014 Soy Revenue Guarantee

Notes: Howard County, Iowa actual soybean yields. Revenue Guarantee equals 86% of Benchmark.

Year Yield MYA Price ARC Price

2009 43.3 $9.59 $9.59

2010 54.5 $11.30 $11.30

2011 51.1 $12.50 $12.50

2012 45.7 $14.40 $14.40

2013 40.1 $13.00 $13.00

Oly. Ave. 46.7 $12.27

Benchmark Revenue = $572.85 per acreARC Revenue Guarantee = $492.65 per acre

ARC-CO: 2014 POTENTIAL SOY PAYMENT

Price: $9.00 $10.00 $11.00 $12.00

Yield: 35 $48.69 $48.69 $48.69 $48.69

40 $48.69 $48.69 $44.76 $10.76

45 $48.69 $36.26 $0.00 $0.00

50 $36.26 $0.00 $0.00 $0.00

55 $0.00 $0.00 $0.00 $0.00

ARC Revenue Guarantee = $492.65 per acreARC Max Payment Rate = $57.28 per acreBut ARC-CO is paid on 85% of base acres

and 85% of $57.28 is $48.69

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ARC-IC: 2014 Corn & Soybean Combined Revenue Guarantee

YearCorn Yield

ARC Price Revenue

Soy Yield ARC PriceRevenue

2009 163.4 $3.70 $604.58 43.3 $9.59 $415.25

2010 184.1 $5.18 $953.64 54.5 $11.30 $615.85

2011 174.2 $6.22 $1083.52 51.1 $12.50 $638.75

2012 133.2 $6.89 $917.75 45.7 $14.40 $658.08

2013 146.3 $4.45 $651.04 40.1 $13.00 $521.30

Oly. Ave.$840.81 $591.97

In 2014, if the farm is planted 60% to corn and 40% to soybeans, thenBenchmark Revenue = $741.27 per acreRevenue Guarantee = $637.49 per acre

ARC-IC : 2014 Potential Corn & Soybean Combined Payment

Actual 2014 farm yields: Corn 150 bushels per acreSoy 45 bushels per acre

Marketing year prices: Corn $4.00 per bushelSoy $10.50 per bushel

Calculated revenues: Corn $600.00 per acreSoy $472.50 per acre

ARC Revenue: 60%*$600.00 + 40%*$472.50 = $549.00

ARC-IC is paid on 65% of base acres

ARC-IC Payment = $48.18 per acre (65% of $637.49-$549.00)

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SUPPLEMENTAL COVERAGE OPTION (SCO)An additional policy to cover “shallow losses”

Shallow loss = part of the deductible on the producer’s underlying crop insurance policy

SCO has a county-level payment trigger

Indemnities are paid when the county experiences losses greater than 14%

Premium subsidy: 65%

Starts in 2015

Can’t have ARC and SCO together

RPRPHPE

YP

SCO

SUPPLEMENTAL COVERAGE OPTION (SCO)

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THREE CHOICES PLC + SCO

Price protection with top-up county-level insurance protection

ARC-County County-level revenue protection based on

historical averages

ARC-Individual Farm-level revenue protection based on historical

averages

Choice holds for 2014-2018 crop years

The red line is the ARC-County payment trigger. ARC payments are triggered when the combination of price and yield is below and to the left of the red line.

Neither pay

Both pay

PLC pays, ARC does not

ARC pays, PLC does not

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ANY QUESTIONS?

IOWA STATE UNIVERSITY FARM BILL WEB SITE:

AG DECISION MAKER:

WWW.EXTENSION.IASTATE.EDU/AGDM/INFO/FARMBILL.HTML

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