2008 Farm Bill
Commodity Program Income Supports
Prepared by
Bruce L. Jones
Professor an Extension Farm Management Specialist
Dept of Ag Econ
UW-Madison, UWEX-CES
January 2009
Crop Income Support
Direct Payments
Counter-Cyclical Payments
ACRE Payments
Loan Deficiency Payments
SURE: Supplemental Revenue Assistance Payments
Dairy Income Support
Price Support
Milk Income Loss Contract
Direct payments
Direct payments available for producers with
eligible historic acreage of wheat, corn, barley,
grain sorghum, oats, upland cotton, rice,
soybeans, other oilseeds, and peanuts.
Direct payments
To receive payments on covered commodities
(wheat, corn, grain sorghum, barley, oats, rice,
upland cotton, soybeans, and other oilseeds), a
producer with eligible historic acreage enters into
an annual agreement.
Direct payments
An eligible farm's "payment amount" for a given
commodity is product of:
payment rate specified for the commodity
payment acres (83.3% of the farm's base acreage
for the covered commodity) and
payment yield for that commodity
Payment acres for direct payments were previously 85%
of base acres.
Direct Payment rates specified in 2008 Farm Act:
Wheat
Corn
Grain Sorghum
Barley
Oats
Soybeans
Other oilseeds
$0.52/bu
$0.28/bu
$0.35/bu
$0.24/bu
$0.024/bu
$0.44/bu
$0.80/cwt
Counter-Cyclical Payments (CCPs)
Available for producers with eligible historic
acreage of covered commodities whenever
effective price is less than the target price.
Counter-Cyclical Payments (CCPs)
Effective price equal to the sum of:
1. higher of national average farm price for the
marketing year or national commodity
program loan rate and
2. direct payment rate for the commodity
Target prices for CCPs
Wheat
Corn
Grain sorghum
Barley
Oats
Soybeans
Other oilseeds
CY 2008
$3.92/bu
$2.63/bu
$2.57/bu
$2.24/bu
$1.44/bu
$5.80/bu
$10.10/cwt
CY 2009
$3.92/bu
$2.63/bu
$2.57/bu
$2.24/bu
$1.44/bu
$5.80/bu
$10.10/cwt
CYs 2010-12
$4.17/bu
$2.63/bu
$2.63/bu
$2.63/bu
$1.79/bu
$6.00/bu
$12.68/cwt
Average Crop Revenue Election (ACRE)
Program
An optional revenue-based counter-cyclical
program, Average Crop Revenue Election
(ACRE) program, is available beginning with
2009 crop year, as an alternative to receiving
counter-cyclical payments.
Average Crop Revenue Election (ACRE) Program
Producers on a farm with covered commodities and/or
peanuts can elect to participate in the ACRE program for
all covered commodities and peanut acreage on the farm.
Once they elect to participate in ACRE, producers on the
farm must remain in the program for the duration of the
2008 Act.
For ACRE participants, direct payments are reduced by
20% and marketing assistance loan rates are reduced by
30% on enrolled farms
ACRE Program Guarantee
Participants are eligible for State-based revenue
coverage equaling 90% of product of:
* 5-year ACRE benchmark State yield
* 2-year ACRE program guarantee price
ACRE benchmark state yield
Average yield per planted acre for commodity in
the state in previous 5 years, dropping high and
low yields. “Olympic Average”
Secretary can assign yields if yields are not
available or are unrepresentative of average state
yields.
ACRE program guarantee price
Commodity-specific 2-year national average
market price received by producers.
ACRE national average market price
Greater of:
–the national average commodity market price
received by producers during the 12-month marketing
year; or
–the reduced marketing assistance commodity loan
rate.
ACRE actual state revenue:
Actual state yield per planted acre x the 12-month
ACRE national average market price.
ACRE actual state yield per planted acre:
Crop year commodity production (quantity) produced
in the state per planted
ACRE actual farm revenue:
Actual commodity farm yield per planted acre x the
ACRE national average market price.
ACRE benchmark farm revenue:
(5-yr Olympic average farm crop yield per planted
acre x ACRE program guarantee price) + crop
insurance premiums per acre
Farm-specific productivity ratio:
5-year Olympic average farm crop yield per planted
acre/ACRE benchmark state yield
Payment Acreage for ACRE
ACRE revenue payments are made on 83.3% of acreage
planted or considered planted to covered commodities or
peanuts in CY 2009-11 and 85% in CY 2012.
Total number of planted acres for which producers on a
farm may receive ACRE payments may not exceed total
base acreage for all covered commodities and peanuts on
the farm.
ACRE Payments
ACRE payments can be triggered by a decrease in state
yields or the national average market price.
Enrolled producers are eligible for ACRE payments if
ACRE actual state revenue for the covered commodity in
the state is less than ACRE program guarantee for crop
year AND ACRE actual farm revenue is less than the
ACRE benchmark farm revenue.
ACRE payments per commodity equal:
1) Lesser of: a) ACRE program guarantee – actual state
revenue OR b) 25% of ACRE program guarantee
x
2) Planted crop acres: 83.3% in CY 2009-11 and 85% in
CY 2012 of farm planted, or considered planted, crop
acres not to exceed total base acres
x
3) Farm-specific productivity ratio
ACRE payments are made beginning October 1,
or as soon as practicable after end of applicable
marketing year.
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
US Corn
MYA
2 Yr Avg
1.94
1.82
1.85
1.88
1.97
1.84
2.32
1.91
2.42
2.15
2.06
2.37
2.00
2.24
3.04
2.03
4.00
2.52
3.52
US Soybeans
MYA
2 Yr Avg
4.93
4.63
4.54
4.78
4.38
4.59
5.53
4.46
7.34
4.96
5.74
6.44
5.66
6.54
6.43
5.70
10.40
6.05
8.42
US Wheat
MYA
2 Yr Avg
2.65
2.48
2.62
2.57
2.78
2.55
3.56
2.70
3.40
3.17
3.40
3.48
3.42
3.40
4.26
3.41
6.65
3.84
5.46
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
WI Corn
WI Soybeans
WI Wheat
Actual 5 Yr Olympic Actual 5 Yr Olympic Actual 5 Yr Olympic
(Harvested)
Avg
(Harvested)
Avg
(Harvested)
Avg
134.40
118.17
47.00
39.50
53.80
49.93
133.80
130.80
46.00
43.50
58.90
54.83
136.90
123.97
40.00
44.33
61.00
54.73
138.20
131.33
37.00
43.33
64.10
51.43
129.30
134.17
44.00
43.33
60.00
58.67
142.20
133.70
28.00
46.67
68.30
56.87
160.40
130.23
34.50
41.00
55.60
62.80
148.00
139.10
44.00
37.17
56.40
61.70
149.10
142.80
44.00
38.50
76.20
57.53
151.10
142.13
40.50
40.83
68.00
61.57
153.90
147.47
36.00
37.50
64.50
64.23
WI Corn
Actual
5 Year
(Planted) Olympic
Ave
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
109
113
104
97
107
98
98
113
110
109
108
95
103
103
106
106
107
103
100
101
105
106
WI Soybeans
Actual
5 Year
(Planted) Olympic
Ave
45
44
39
36
43
27
33
43
44
40
33
39
42
43
42
42
42
39
36
38
40
39
WI Wheat
Actual
5 Year
(Planted) Olympic
Ave
52
56
59
60
55
58
52
49
70
63
62
47
52
52
53
56
57
58
57
55
55
58
Yield
Price
Other
Revenue
STATE GUARANTEE
5 Yr Olympic Avg – State
166
Ave- 2 Yr
4.50
Guarantee (90% of 747))
672
STATE ACTUAL
Actual
National MYA
Revenue – Actual
150
4.00
600
Yield
Price
Other
Revenue
FARM BENCHMARK
5 Yr Olympic Avg – Farm
175
Ave- 2 Yr
4.50
Crop Insurance Premium
20
Farm Guarantee
807.5
FARM ACTUAL
Actual
National MYA
Revenue – Actual
160
4.00
640
Marketing Assistance Loans and Loan Deficiency
Payments (LDPs) are available to minimize
potential commodity-secured loan forfeitures and
subsequent government accumulation of stocks
Nonrecourse commodity loans with marketing loan
provisions are authorized for 2008-12 crops.
Commodity loans are for up to 9 months.
Producers have to comply with conservation and wetland
requirements to be eligible for a loan.
Continues to allow repayment of loans at less than full
principal plus interest when prices were below loan rates.
Loan Deficiency Payments (LDPs)
To reduce administrative costs, loan deficiency
payments are available when market prices were
lower than commodity loan rates.
SURE: Supplemental Revenue Assistance Payments
• New comprehensive disaster program for crop
farmers
• Farms in declared disaster counties or adjacent
counties, or suffer 50% crop loss due to weather to be
eligible
• Whole farm revenue guarantee to supplement crop
insurance guarantees
SURE Program
• Whole farm revenue guarantee: If actual revenue falls
below guarantee—SURE pays up to 60% of the
difference
• Includes revenue from all crops: anything
mechanically harvested or grazed, in all counties &
states, small acreage exclusion
• Actual revenue includes other USDA payments (e.g.
ACRE) and crop insurance indemnities: not paid
twice for a loss
SURE Guarantee
• Guarantee equals sum of all crop insurance guarantees
increased by 15% to decrease farmer deductible
– 75% coverage becomes 75% x 1.15 = 86.25%
– Guarantee capped at 90% insurance guarantee
– If mostly a cash grain farm: Use SURE and not 80% or 85%
CRC
• Some adjustments for low yield history
– Based on APH yields, but sometimes use CCP yields,
replace yield “plugs” with higher yields
SURE Actual Revenue
• Actual yields x USDA marketing year average
price (Sept-Aug)
• Crop insurance indemnities (including replant
and prevented planting)
• 15% of DP’s, CCP’s, LDP’s, and ACRE
• Other disaster payments received
SURE Calculator
• This overview glosses over details
• FSA has SURE calculator on web for farmers to use
• www.fsa.usda.gov/Internet/FSA_File/sure_calculator.xls
•
www.fsa.usda.gov/Internet/FSA_File/sure_calc_instructions_v1.pdf
• Informational only—not binding, does not deal with
all possible scenarios (yet)
• FSA still finalizing SURE details—be patient
SURE Requirements
• Risk Management Purchase Requirement
• To eligible for SURE payments, you must have
all crops insured, including pasture
– SURE supplements crop insurance and SURE
guarantee depends on insurance guarantees
• APH, CRC, GRP, GRIP, AGR-Lite(?)
• CAT coverage acceptable or NAP policy
Commodity Program Limits
Eliminates payment limits on marketing loan benefits and loan
deficiency payments.
For direct payments, limit is $40,000/person. Direct payments
limit is reduced for participants in ACRE program.
For counter-cyclical payments, limit is $65,000/person. For ACRE
participants, sum of counter-cyclical payments and ACRE
payments is limited to $65,000 plus reduction in the direct
payment limit.
To be to be eligible for payments:
1. individual or entity must have been actively engaged in
farming
2. person must have made a significant contribution in the form
of capital, equipment, land, personal labor or active personal
management to the farming operation
3. contributions of the person must have been at risk
Plus
As long as 1 spouse is determined to be actively engaged, other
spouse is also considered to be actively engaged and is eligible
for payments.
Adjusted Gross Income Limitation
For direct payments, a person or legal entity with
adjusted farm gross income of over $750,000,
averaged over previous 3 years, is not eligible.
Adjusted Gross Income Limitation
For direct payments, counter-cyclical payments,
average crop revenue election, marketing loan
gains or loan deficiency payments, noninsured
crop assistance, milk income loss contract
program payments, or disaster assistance
payments or benefits, a person or entity with
average adjusted gross nonfarm income in excess
of $500,000 is not eligible.
Dairy
Three major Federal dairy programs remain in
place:
–Milk price support,
–Federal milk marketing orders, and
–Milk income loss contract payment.
Dairy price support was provided through purchase of products to
support milk price at $9.90 per CWT.
Now Secretary must purchase specific products at specific prices:
* cheddar cheese in blocks at not less than $1.13/lb
* cheddar cheese in barrels at not less than $1.10/lb
* butter at not less than $1.05/lb
* nonfat dry milk at not less than $0.80/lb
Prices Secretary pays for cheese, butter, or nonfat dry milk must
be uniform for all U.S. regions.
Secretary may make purchase price adjustments in order
to manage inventories held by CCC. Permissible
quantities and duration of price adjustments are
specified.
Commodities purchased by CCC can be sold back to
industry at market prices prevailing for that commodity
at the time of sale. The sell-back price may not be less
than 110% of specified minimum purchase price for the
commodity being sold back for unrestricted use.
Milk Income Loss Contract (MILC) Payments
Previous Farm Bill
Established a milk income loss contract (MILC) payments
program. Producers entered into contracts ending on Sept 30,
2005. A qualifying dairy farm operator could receive a monthly
direct payment when monthly Class I price in Boston (Federal
Marketing Order 1) was less than $16.94/cwt.
2008 Farm Bill continues program through Sept 30, 2012.
Milk Income Loss Contract (MILC) Payments
–From Oct 1, 2007-Sept 30, 2008, 34% of difference between
$16.94/cwt (as adjusted) and Class I price in the Boston milk
marketing order for the applicable month
–From Oct 1, 2008-Aug 31, 2012, 45% of difference between
$16.94/cwt (as adjusted) and Class I price in the Boston milk
marketing order for the applicable month
–For period starting Sept 1, 2012 and thereafter, 34% of
difference between $16.94/cwt (as adjusted) and Class I price
in the Boston milk marketing order for the applicable month
The $16.94 price will be adjusted by percentage
that National Average Dairy Feed Rations Cost
exceeds $7.35/cwt for any month for period from
Jan 1, 2008-Aug 31, 2012.
Target cost of feed rations increases to $9.50/cwt
beginning Sept 1, 2012.
Specifies cap on milk marketed that is eligible for
payments for 3 specific periods:
–For Oct 1, 2007-Sept 30, 2008, 2.4 million lbs for
the fiscal year
–For Oct 1, 2008-Aug 31, 2012, 2.985 million lbs for
each fiscal year
–Beginning Sept 1, 2012, 2.4 million lbs for each
fiscal year