Minding Ag's Business

Q+A on Farm Bill Choices

We've been busy answering questions from the more than 1,000 people registered for our August webinar on "ARC or PLC: What's the Right Farm Bill Option for You?" You can still listen and download powerpoints from a free one-hour rebroadcast with economists Gary Schnitkey of the University of Illinois and Carl Zulauf of Ohio State University at http://tinyurl.com/…. But here are some of the most common questions attendees posed to us:

Question: I am confused by the terminology “owner,” “renter,” “producer.” We have cash rented acres; does the owner have to agree with our decision and then submit separate paperwork etc?

Gary Schnitkey, Univ. of Ill.: Each Farm Service Agency (FSA) farm will have the same set of decisions. If it is rented, the farmer and land owner will have to agree on the decisions.

Marcia Taylor, DTN: If there's no agreement, Production Loss Coverage (PLC) becomes the default option, but the farm potentially will be ineligible for payments in 2014. Based on recent price projections, that could be a big penalty for typical Midwest corn producers who (at this stage in seasonal price projections) could collect up to $79/base acre in 2014-crop Agriculture Risk Coverage-County (ARC-CO)payments.

Question: If an FSA farm changes operators during the life of the Farm Bill, is the new operator locked in to choice of the previous operator—or does the new operator bring his current choices to the new farm?

Gary Schnitkey, Univ. of Ill: Yes, decisions will follow the farm and will last the life of the farm bill.

CROP INSURANCE

Question: I don’t see the need to purchase Supplemental Coverage Option (SCO) at all. To me it seems that using the $ to buy an extra 5% or 10% crop insurance coverage would be better. Sound okay?

Gary Schnitkey, Univ. of Ill.: SCO has very little risk management benefits when the COMBO product (RP, RP with Exclusion, YP) has an 85% coverage level. Essentially the same benefits can be obtained with the COMBO product at an 85% coverage level. When the COMBO product does not have an 80% and 85% coverage level, there may be risk management benefits from SCO.

Marcia Taylor, DTN: Gary, that jibes with what I'm hearing. Some of the most enthusiastic SCO supporters are from the Delta or Texas where federal crop insurance is not offered above 75% levels for some crops, or their APHs have been so eroded by repeated drought, they say the ARC payment formula doesn't work as well for them.

REFERENCE PRICES

Question: What price is used to set the ARC reference price for wheat? Chicago futures? Is there a range of time used to determine the year’s results?

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Gary Schnitkey, Univ. of Ill.: ARC has benchmark prices, which equal the Olympic average of the five previous market year average (MYA) prices. Market Year Average prices are calculated by National Agricultural Statistical Service, an agency of USDA.

Marcia Taylor, DTN: You can find those NAAS estimates with updates in USDA's monthly World Agricultural Supply and Demand estimates at http://www.usda.gov/…

For example, the latest corn estimate for the 2014 crop is $3.60/bu. in the September 2014 report.

BASE AND YIELDS

Question: How are base yields updated, from insurance records or does farmer have to prove bushels for each year/farm?

Gary Schnitkey, Univ. of Ill.: Updates yields will be based on farm yields from 2008 through 2012. FSA has not released the types of documentation that will be required for yield updating. Farmers and land owners likely will self certify yields. Documentation will be required if the self-certified yields are audited.

Question: What will I have to prove my yields for 08-12? Will my crop insurance APH be good or will I have to bring in all of my elevator delivery slips? What if I don’t buy crop insurance?

Gary Schnitkey, Univ. of Ill.: Required documentation has not been released by FSA.

Marcia Taylor, DTN: According to Todd Jennison, a farm program consultant with Kennedy and Coe, you can start your documentation by asking for your actual yields and planted acres from your crop insurance company. "Your current base and yield can be obtained from your local FSA office via the 156 EZ form," he says. "If you had yields that fell below 75% of the average of the 2008-2012 county yield, you can substitute a plug yield obtained from the FSA national webpage or from USDA's National Agricultural Statistics Service. They are based on the county yield averages estimated each year by USDA." For more background, see Minding Ag's business from 7/31/14 http://www.dtnprogressivefarmer.com/…

Question: Does the counter-cyclical yield update only affect the PLC program?

Gary Schnitkey, Univ. of Ill.: ARC does not use program yields to calculate payments. PLC will use program yields. Even if ARC is selected, consider updating yields if updated yields are higher. Program yields may impact payments in future farm bills

Question: Do you need to plant a crop to be paid on base acres?

Gary Schnitkey, Univ. of Ill.: No. ARC-Co and PLC will make payments using base acres. Planted acres do not impact payments.

Question: Our farm has been in alfalfa from 08-12. What then?

Gary Schnitkey, Univ. of Ill. Rules have not been released.

CALCULATORS

Question: Where and when are calculators available?

Gary Schnitkey, Univ. of Ill.: A University of Illinois calculator will be available September 25.

Marcia Taylor, DTN: So we should watch http://www.farmdoc.illinois.edu/… for links to the Illinois calculator. Texas A&M's tentative farm bill calculator is available, with the caveat that since many rules have not yet been announced, results could change. It is not the official calculator that will be released in conjunction with FSA. In the meantime, go to https://afpc.tamu.edu/…

Follow me on Twitter@MarciaZTaylor

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