PROCRASTINATOR'S
FARM BILL UPDATE
Paul Goeringer, Extension Legal Specialist,
Women in Ag Wednesday Webinar
March 11, 2015
Individual Farm Level Details are available from a crop insurance agent
(list available at: www.rma.usda.gov/tools/agent.htm)
“Like” Us on Facebook
http://www.facebook.com/MDCropInsurance
https://www.arec.umd.edu/extension/cropinsurance/2014-farm-bill
DEADLINES
What deadlines do you need to be aware
of
Crop Insurance
• March 16th is sales
closing date deadline for:
• spring planted crops,
Commodity Title decisions
• March 31:
• Deadline for 1 time base
acre reallocation and
payment yield update
• whole farm crop insurance
coverage, and
• Deadline to elect ARC-CO,
ARC-IN, or PLC
• supplemental coverage
option on corn and soybeans
BASE ACRE REALLOCATION
AND PAYMENT YIELD UPDATE
Updating Base Acres and Payment Yields
• Farm Bill provides one
time opportunity to
reallocate base acres
and update payment
yields.
• Price Loss Coverage
will use payment yields
to calculate the
payment (not actual
yield)
Updating 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
Reallocating Base Acres
• 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 Mar. 31
Lets Look at an Example
NEW COMMODITY
PROGRAMS
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 (PLC)
• Payments are issued when Market Year Average (MYA)
Price of a covered commodity is less than the reference
price established by the Farm Bill
• PLC payment = (85% of the base acres of the covered
commodity) * reference price – MYA * Payment Yield
• PLC is Countercylical Payment Program with a new name.
Reference Prices for PLC
• Reference prices are:
• wheat, $5.50/bushel;
• corn, $3.70/bushel;
• grain sorghum,
$3.95/bushel;
• barley, $4.95/bushel;
• oats, $2.40/bushel;
• long grain rice,
$14.00/hundredweight
(cwt).;
• medium grain rice,
$14.00/cwt.;
• soybeans, $8.40/bushel;
• other oilseeds,
•
•
•
•
•
$20.15/cwt.;
peanuts $535.00/ton;
dry peas, $11.00/cwt.;
lentils, $19.97/cwt.;
small chickpeas,
$19.04/cwt.; and
large chickpeas,
$21.54/cwt.
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]
SO WHAT DO YOU NEED
TO BE FOCUSED ON?
Price Loss Coverage (PLC) and
Agricultural Risk Coverage (ARC)
• I need to stress a
point.
• These programs are
not designed to make
a payment every year
• Certain criteria has to
be met.
Market Year Average Price
• Corn and Soybeans:
• Sept. 1 to Aug. 31
• Roughly 5.5 months into
marketing year
• Wheat and Barley
• June 1 to May 31
• Roughly 9.5 months into
marketing year
Market Year Average
• You are walking into
decision making
process with good idea
of what price will be for
this year.
• What about 2016,
2017, 2018, and
possibly longer?
Market Year Average
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
LET’S WALK THROUGH AN
EXAMPLE
Election Requirement
All of the producers on a farm must make a one-time,
unanimous election of:
• PLC/ARC-CO on a covered-commodity-by-covered-commodity
basis for each FSA farm.
• 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
Election Requirement
• 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
CROP INSURANCE
DECISIONS TO CONSIDER
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.
Yield Exclusion
• YE allows for producers to exclude specific yields from
eligible years from their actual production histories (APH).
• This exclusion can have an impact on producers’ APHs
and crop insurance premiums.
• To be eligible, the county average planted acreage yield
must be 50 percent below the simple average for the
previous 10 consecutive crop years. When a county is
determined eligible for YE for a crop year, a contiguous
county will also be eligible for YE.
Yield Exclusion
• Exclusion of yields from eligible crop years will potentially
result in a higher approved yield, which will increase the
insurance guarantee, and increase an indemnity payment,
which will increase the producer’s premiums.
• No substitute yield will replace the excluded yield unless
the exclusion results in fewer than 4 years to calculate the
APH. If the exclusion results in fewer than 4 years to
calculate the APH, then the applicable transitional yield
will be substituted for the excluded crop years to reach a
minimum of 4 years.
YE for Soybeans
YE for Corn
YE Example
• Queen Anne’s farmer
with previous 10 years
of APH yield history.
• Notice potential impact
YE can have.
• Have to bear in mind
could potentially
increase premium
costs
TA-APH
YE Example
• Queen Anne’s farmer
with previous 10 years
of APH yield history.
• Notice potential impact
YE can have.
• Have to bear in mind
could potentially
increase premium
costs
Whole Farm Revenue Protection (WFRP)
• Beginning with the 2015 crop year (which began on
October 1, 2014), diversified specialty crop, mixed grain,
organic, or livestock producers will have the option of
using WFRP.
• WFRP is currently available in all Maryland counties.
• Coverage levels range from 50 to 85 percent, but
Catastrophic Risk Protection (CAT) coverage is not
available along with WFRP.
Whole Farm Revenue Protection (WFRP)
• WFRP will protect farms
against loss of expected
farm revenue from either:
• crops produced during the
insurance period (whether
sold or not),
• commodities bought for
resale during the insurance
period, and
• all commodities on the farm
but
• excludes timber, forest, forest
products, and animals for
sport, show, or pets.
Whole Farm Revenue Protection (WFRP)
• The insurance year for
WFRP will depend on
how you file your taxes.
• If you file your taxes on a
calendar year (January 1
to December 31) then you
will use a calendar year.
• If you use a fiscal year (Ex:
July 1 to June 30) to file
your taxes, then you will
use the fiscal year for
WFRP.
Whole Farm Revenue Protection (WFRP)
• Sales closing and
coverage modification
dates in Maryland will
be March 15 each
year. Finally, farm
operation reporting
deadlines will vary
among operations.
• Want more info? Link
to fact sheet available
in the tool bar
Conservation Compliance
• 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.
How Good is your Risk Management Plan ?
What do you want your
Crop Insurance Based
Risk Management Plan
to do For YOU
•
•
•
•
•
•
when disasters occur?
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
Will YOUR 2015
Risk Management Plan be
Adequate to Manage
2015 Risks?
(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
THANKS
ANY QUESTIONS?
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