Agricultural Extension Service
The University of Tennessee
View From the Trenches:
Farm Level Impacts of the Farm Bill
Tennessee Row Crop Perspective
Chuck Danehower
Area Specialist - Farm Management
Decisions, Decisions, Decisions
• Option of updating base acres and yields
– Confusion reigns
– 98-01 worst production years in recent history
– Producers need help in making decisions
• Timing of payments may affect cash flow
– First year most critical
• May be new opportunities for conservation
program participation
• Payment limits may affect decisions
• Sign-up decisions made under risk
• Farmers will have more marketing decisions to
make, not less
To Update Or Not To Update
• Tradeoffs, primarily because entire farm must
be updated, not selected commodities
• Updating often adds income for one commodity
at the expense of another
• Decision is extremely farm-specific
Estimating Impact
• University of Tennessee Cotton and Field Crop
Budgets – No Till .
• Finpack Computer Program.
– Used throughout Tennessee & U.S.
– Free service and information confidential.
– Assist farmers in developing farm financial plans.
Evaluates alternatives on the farm.
– Contact local County Extension office or call
1-800-345-0561 MANAGEment information line.
Assumptions
• 2000 acre farm.
Cotton & Grains
•
•
•
•
•
Cotton
Soybeans
Corn
Wheat
DC Soybeans
800 acres
700 acres
500 acres
-
• Land Cost.
– 25% of production and gov’t payments.
• Debt to Asset Ratio.
– 48%.
Grains
1000 acres
500 acres
500 acres
500 acres
Yields and Prices
• Yields
–
–
–
–
–
Cotton
Corn
.
Soybeans
DC Soybeans
Wheat
650 lbs.
115 bu.
35 bu.
30 bu.
50 bu.
• Prices
Loan rates-1996
2002
–
–
–
–
.52 lb.
2.07 bu.
5.46 bu.
2.69 bu.
.52 lb.
2.13 bu.
5.21 bu.
2.61 bu.
Cotton
Corn
Soybeans
Wheat
Current
.52 lb.
2.70 bu.
5.75 bu.
2.85 bu.
TN Cotton & Grain Example
1996 Farm Bill
2002 Farm Bill
Crop Market Receipts
PFC (AMTA) / DP
MLA (Double AMTA)
Oilseed Payments
Counter-Cyclical Pmt.
$
402,297 $
22,170
23,544
2,400
-
400,290
31,061
60,317
Crop Revenue
$
450,411
491,668
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
417,718
32,693
30,000
$
2,693
417,718
73,950
30,000
$
43,950
TN Grain Example
1996 Farm Bill
2002 Farm Bill
Crop Market Receipts
PFC (AMTA) / DP
MLA (Double AMTA)
Oilseed Payments
Counter-Cyclical Pmt.
$
344,457 $
14,467
18,296
5,250
-
336,169
28,339
27,658
Crop Revenue
$
382,470
392,166
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
321,436
61,034
30,000
$
31,034
321,436
70,730
30,000
$
40,730
TN Cotton & Grain Example
Current Prices
1996 Farm Bill 2002 Farm Bill
Crop Market Receipts
$
434,794 $
434,794
PFC (AMTA) / DP
22,170
31,061
MLA (Double AMTA)
23,544
-
2,400
-
-
43,414
Oilseed Payments
Counter-Cyclical Pmt.
Crop Revenue
$
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
482,908 $
509,269
417,718
417,718
65,190
91,551
30,000
30,000
35,190 $
61,551
TN Cotton & Grain Example
Current Prices- No MLA
1996 Farm Bill 2002 Farm Bill
Crop Market Receipts
$
PFC (AMTA) / DP
434,794 $
434,794
22,170
31,061
MLA (Double AMTA)
0
-
Oilseed Payments
0
-
Counter-Cyclical Pmt.
-
43,414
Crop Revenue
$
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
456,964 $
509,269
417,718
417,718
39,246
91,551
30,000
30,000
9,246 $
61,551
TN Grain Example
Current Prices – MLA, No CCP
1996 Farm Bill 2002 Farm Bill
Crop Market Receipts
$
385,501 $
385,501
PFC (AMTA) / DP
14,467
28,339
MLA (Double AMTA)
18,296
-
5,250
-
-
0
Oilseed Payments
Counter-Cyclical Pmt.
Crop Revenue
$
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
423,514 $
413,840
321,436
321,436
102,078
92,404
30,000
30,000
72,078 $
62,404
TN Grain Example
Current Prices – No MLA, No CCP
1996 Farm Bill 2002 Farm Bill
Crop Market Receipts
$
PFC (AMTA) / DP
385,501 $
385,501
14,467
28,339
MLA (Double AMTA)
0
-
Oilseed Payments
0
-
Counter-Cyclical Pmt.
-
0
Crop Revenue
$
- Expenses
= Net Cash Farm Income
- Depreciation
= Net Farm Income
$
399,968 $
413,840
321,436
321,436
78,532
92,404
30,000
30,000
48,532 $
62,404
Revenue Received Examples
Loan, DP, CCP
Cotton
Corn
"Old" Farm Program Yield
550 lbs
79 bu
18 bu
40 bu
Actual Yield
650 lbs
115 bu
30 bu
55 bu
Updated Farm Program Yield 613 lbs
108 bu
22 bu
51 bu
Soybeans Wheat
County Loan Rate
$.52/lb
$2.13/bu
$5.21/bu
$2.61/bu
Target Price
$.724/lb
$2.60/bu
$5.80/bu
$3.86/bu
Revenue per Acre
$442
$295
$170
$185
Revenue per Unit
$.68/lb
$2.56/bu $5.66/bu $3.36/bu
Revenue Received Examples
Current Prices
Cotton
Corn
Soybeans Wheat
"Old" Farm Program Yield
550 lbs
79 bu
18 bu
40 bu
Actual Yield
650 lbs
115 bu
30 bu
55 bu
Updated Farm Program Yield 613 lbs
108 bu
22 bu
51 bu
Current Price
$.52/lb
$2.70/bu
$5.75/bu
$2.85/bu
Target Price
$.724/lb
$2.60/bu
$5.80/bu
$3.86/bu
$442
$329
$179
$174
Revenue per Acre
Revenue per Unit
$.68/lb
$2.86/bu $5.97/bu $3.17/bu
Revenue Received Examples
Price Low at Harvest then
Increases
Cotton
Corn
Soybeans Wheat
"Old" Farm Program Yield
550 lbs
79 bu
18 bu
40 bu
Actual Yield
650 lbs
115 bu
30 bu
55 bu
Updated Farm Program Yield 613 lbs
108 bu
22 bu
51 bu
Harvest Price
$.55/lb
$2.25/bu
$5.30/bu
$2.85/bu
Target Price
$.724/lb
$2.60/bu
$5.80/bu
$3.86/bu
$389
$278
$166
$174
Revenue per Acre
Revenue per Unit
$.60/lb
$2.41/bu $5.52/bu $3.17/bu
Summary & Observations
• FSRIA 2002 increases income
– Greater increase in cotton than grains
• Risk to producers in harvest sales then
market rising, reducing CCP
• Production still king, if you don’t produce it
can’t sell it.
– Crop insurance and disaster assistance can’t
make it all up.
Educational Opportunities
• Signup decisions – likely economic
consequences of signup options
• Marketing tools – futures, options, forward
pricing, etc .
• Farm planning and management more
important than ever.