Paul Goeringer, Extension Legal Specialist,
Women in Ag Wednesday Webinar
Nov. 20, 2014

• George Turner, USDA-FSA
• Steve Connelly, MDA
• Howard Leathers, AREC, AGNR, UMD
• This powerpoint uses slides from slideshows developed by these individuals.

Individual Farm Level Details are available from a crop insurance agent
(list available at: www.rma.usda.gov/tools/agent.htm)

http://www.facebook.com/MDCropInsurance

https://www.arec.umd.edu/extension/cropinsurance/2014-farm-bill

• Jan. 7 – Wor-Wic Community College
• Jan. 8 – St. Mary’s County UME Office
• Jan. 9 – Washington County UME Office

• I’m going to use a few terms and acronyms that may be new to you.
• Good resource to help with this is Glossary of Farm Bill
Terms from K-State’s Agmanager.info
http://agmanager.info/events/FarmBill/Agents/Glossary_F armBillTerms.pdf

• Complexity of farm programs has lead the
‘14 Farm Bill to be dubbed:
• “The Full Employment for Ag Economists Act”

Updating Base Acres and Payment Yields
• Farm Bill provides one time opportunity to reallocate base acres and update payment yields.
• Payments for Agricultural
Risk Coverage and Price
Loss Coverage will be based on base acres (not planted acres)
• Price Loss Coverage will use payment yields to calculate the payment (not actual yield)

Updating Base Acres and Payment Yields
• Owners have a one-time opportunity to update current payment yields established under the 2008 farm bill to
90% of 2008-2012 average yields.
• Done crop by crop
• If 90% of 2008-2012 average yields higher than current payment yield then update

Updating Base Acres and Payment Yields
• Landowners also have a one-time opportunity to reallocate their current base acres to reflect their cropping pattern in 2009-2012
• Number of base acres can not be increased, but mix of acres can change.
• Landowners can choose to keep their current base acres or reallocate their current base acre total according to the mix of crops in 2009-2012.

Updating Base Acres and Payment Yields
• Why am I not showing you the math involved?
• Answer is simple, decision tools available to help you with this decision
• Deadline to do both is by Feb. 27th

Price Loss Coverage (PLC) and
Agricultural Risk Coverage (ARC)
• Price Loss Coverage
(PLC) and
Agricultural Risk
Coverage (ARC) replace the Direct and
Counter Cyclical
Programs – Eliminates
Direct payments

Price Loss Coverage (PLC) and
Agricultural Risk Coverage (ARC)
ARC - provides revenue loss coverage at 2 different levels
• ARC- County (CO) – provides revenue loss coverage at the county level for selected covered commodities on a farm
• ARC-Individual (IC) – provides revenue loss coverage at the farm level, which is considered the sum of the producer’s interest in all of the producer’s
ARC-IC farms in the state

Price Loss Coverage
• Payments are issued when effective price of a covered commodity is less than the reference price established by the Farm Bill
• The payment is equal to 85% of the base acres of the covered commodity times the difference between the reference price and the effective price times the program payment yield for the covered commodity
• Made after OCT 1 - completion of the marketing year for the covered commodity

PLC calculation:
Payment = 85% x Base Acres X (Reference
Price-Effective price) x program payment yield
Effective price means the higher of the market year average (MYA) price during the 12-month marketing year for the covered commodity or the national average loan rate for the covered commodity.

Agricultural Risk Coverage
County (ARC-CO)
Agricultural Risk
Coverage - County
ARC-CO
• Payments are issued when the covered commodity’s
• actual county crop revenue < ARC-CO guarantee
• based on county data, not farm data

Agricultural Risk Coverage
County (ARC-CO)
• The ARC-CO guarantee is set by multiplying the 5-year moving
Olympic average MYA price by the 5-year moving Olympic average County Yield and then by 86% (to factor in the 14% deductible).
• Actual county revenue is determined by the current year’s MYA price multiplied by the current year’s county yield.
• The payment (if any) = ARC-CO guarantee - actual county revenue * 85% of base acres.
• Payments may not exceed 10 percent of the benchmark county revenue (ARC guarantee price times ARC county guarantee yield)

Agricultural Risk Coverage - Individual ARC-IC
• Payments are issued when the covered commodities
•
• actual Individual crop revenue < Individual ARC guarantee based on farm data (producer’s interest in all farms in the state)
• Payment is equal to
• 65% of the base acres of the covered commodity X ( individual guarantee revenue - actual individual crop revenue for the covered commodities)
• using planted acres for both the individual guarantee and actual revenues
• Individual ARC Guarantee = 86% of the farm’s ARC Individual benchmark
Guarantee [ ARC Guarantee price X ARC Individual Yield ]

Price Loss Coverage (PLC) and
Agricultural Risk Coverage (ARC)
• Before we discuss the programs, I need to stress a point.
• These programs are not designed to make a payment every year
• Certain criteria has to be met (as we will discuss).

All of the producers on a farm must make a one-time, unanimous election of:
• PLC/ARC-CO on a covered-commodity-by-coveredcommodity basis
• ARC-IC for all covered commodities on the farm.
Decision must be made by March 31, 2015.
If the producers on the farm elect PLC/ARC-CO, the producers must also make a one-time election to select which base acres on the farm are enrolled in PLC and which are enrolled in ARC-CO

• The election between ARC and PLC is made in
2014/2015 and is in effect through the 2018 crop year
• If an election is not made in 2014/2015 , the farm may not participate in either PLC or ARC for 2014 and the producers on the farm are deemed to have elected PLC for subsequent crop years
• But must still enroll their farm to receive coverage

Paul, How Do I Decide Which Program is
Better?
• Going to need to have previous years cropping data on each farm (yield and acres planted).
• Will also need crop insurance history
• Then use one of the decision tools

• The total amount of payments received, directly and indirectly, by a person or legal entity (except joint ventures or general partnerships) for Price Loss Coverage, Agricultural Risk
Coverage, marketing loan gains, and loan deficiency payment may not exceed $125,000 per crop year.
• For the livestock disaster programs, a total $125,000 annual limitation applies for payments under the Livestock Indemnity
Program, the Livestock Forage Program, and the Emergency
Assistance for Livestock, Honey Bees and Farm-Raised Fish program.
• A separate $125,000 annual limitation applies to payments under the Tree Assistance Program.

Adjusted gross income (AGI) provisions have been simplified and modified. Producers whose average AGI exceeds $900,000 during a crop, fiscal, or program year are not eligible to participate in most programs administered by FSA and the Natural Resources
Conservation Service (NRCS). Previous AGI provisions distinguished between on-farm and nonfarm AGI.

• Conservation compliance for highly erodible lands and wetlands is now required when purchasing crop insurance.
• Failure file a form 1026 at FSA by
June 1, 2015 certifying compliance means being ineligible for any portion of the crop insurance policy premium that is paid by FCIC (i.e. you will pay for 100% of the premium) beginning with the 2016 crop year.
• Shouldn’t be an issue here since
Maryland requires conservation plans that are more stringent than USDA requires.

Beginning Farmers(first 5 years) crop ins.
• Exemption from CAT and additional coverage policies fees;
• Additional 10 percentage points of premium subsidy for additional coverage policies that have premium subsidy;
• Use of the production history of farming operations that you were previously involved in the decision making or physical activities; and
• An increase in the substitute Yield
Adjustment, which allows you to replace a low yield due to an insured cause of loss, from 60 to 80 percent of the applicable transitional yield (T-Yield).

Supplemental Coverage Option (SCO)
• A county level revenue or yield based optional endorsement that covers a portion of losses not covered by the same crop’s underlying crop insurance policy.
• Indemnities will be payable once a 14 percent loss has occurred in the county.
Individual payments for revenue or yield loss and coverage levels will depend on the underlying policy selected by producers.

Supplemental Coverage Option (SCO)
• SCO is only available to producers who select PLC and has purchased an underlying Revenue or
Yield protection policy.
• Not available to those that select ARC
(County or Individual)

Supplemental Coverage Option (SCO)
• For the 2015 crop year, the SCO endorsement is not available in all Maryland counties.
• For corn and soybeans, SCO is available in all counties but Garrett and Alleghany counties.
• For wheat, SCO is available in Caroline, Carroll,
Dorchester, Frederick, Kent, Queen Anne’s, Talbot, and
Worcester counties.

• 2014 Farm Bill changed coverage option:
• Prior to 2014 FB, coverage 50% of expected production
• Changed now to allow buy-up coverage at 5% increments from 50% to
65%

• Lesser of $250/crop or
$750/producer/county,
$1,875 Max.
• Farm Bill changed premium of 5.25 percent of liability.
• Beginning (first 10 years), limited resource and socially disadvantaged farmers.
Waiver of service fee and
50% premium discount (CAT level of NAP is free and buyup costs 2.63%.

• ‘14 Farm Bill changed payment limitation amount to $125,000 per entity
• This amount is separate from other commodity program payments you may also receive.

How Good is your Risk Management Plan ?
What do you want your
Crop Insurance Based
Risk Management Plan to do For YOU
• Protect crop value $ ? A.
• Protect input cost $ ? A.
• Protection to secure operating loan (security) $?
• $$ To replace livestock feed $?
• $$ Buy-out preharvest sales contracts $?
• Strengthen the business plan and avoid an income interruption $?
At what percent of crop damage do you need a loss claim to trigger?_____%

Risk Management Check Up
(Increasing Input Costs, Prices & Weather Volatility)
Individual farm details available from crop ins. agents, list available at: www3.rma.usda.gov/apps/agents/

The alternative to having crop ins. & NAP

Contact info:
Website: http://www.arec.umd.edu/extension/crop-insurance
Phone: 301-405-3541
Twitter: @AgLawPaul
Facebook: Facebook.com/MDCropInsurance
Email: lgoering@umd.edu