Outline
• 2014 Farm Bill Decisions
• Univ. of Illinois Decision Tool
– fsa.usapas.com
• TAMU/FAPRI Tool
– https://decisionaid.afpc.tamu.edu
• USDA Decision Timeline
• Regional Meeting Schedule and Agendas
• Input From You
Economics
Outline
Economics
Base Reallocation Decision
• Can’t increase base – only reallocate
• Decision made by owner. Applies to all covered crops and is
in effect with the 2014 crop
• Choices are to retain base as of September 30, 2013 OR
reallocate proportional to planting & prevented planting from
2009-12
• If a crop was prevented from planting but planted to a
subsequent crop, you choose which acreage to count but can’t
count both
• Prevented has to be due to natural disasters
• Double cropped acres count IF an established practice
(USDA) for the area
• Base can’t exceed crop acres (except for double crop)
3
Base Reallocation Example
Base Acres
9/30/2013
Crop History
2009 2010 2011 2012
Average Reallocation
2009-12 Percentage
Corn
Soybeans
Wheat
50
35
15
70
30
0
75
25
0
60
40
0
65
35
0
67.5
32.5
0
Total
100
100
100
100
100
100
67.5%
32.5%
0.0%
Reallocation
Option
67.5
32.5
0
Payment Yield Update Decision
• One time, irrevocable option made by owner
• Made on covered crop-by-covered crop basis. Don’t have
to update all of the yields on a FSA farm
• Choices are to retain the 2013 counter-cyclical payment
yield OR update to 90% of the average yield for 20082012
• A year is excluded if no acres were planted to a crop
• If the farm yield is below 75% of the county’s 2008-12
average, use 75% of the county’s 2008-12 average
• Decision independent of the base reallocation decision
5
Farmer Brown
On Farm 2 Yrs
Farmer Smith
On Farm 5 Yrs
Farmer Jones
On Farm 2 Yrs
Year
Corn
Corn
Corn
2008
DNP
No Records
95
2009
88
No Records
100
2010
120
No Records
120
2011
100
110
130
2012
150
120
120
Substitute Yield
70
70
70
2013 CC Yield
90
90
90
Could Update to:
Obtained From Prior Tenant
Yield Updating
(88 + 120 + 100 + 150)/4 * .9 =103
(70 + 70 + 70 + 110 + 120)/5 * .9 =79
(95 + 100 + 120 + 130 + 120)/5 * .9 =102
Payment Yield Update Example
Yield per PA
75% of 2008-12
County average
Yield Used
2008
2009 2010 2011 2012
Planted no 165 155 No 35
evidence
Acres
107
107
107
165
107
155
Average
2008-12
Payment
Yield
134
90%
120
107 107
107
** It might be a good idea to update the payment yield even if you
are not going to enroll in PLC. You never know what future Farm Bills
will have for Title I programs or your ability to update your history.
Price Loss Coverage (PLC)
Reference
Prices
2014 Farm Bill
2008 Farm
Bill
% Change
from 2008
Wheat
$5.50/bu.
$4.17/bu.
+32%
Corn
$3.70/bu.
$2.63/bu.
+41%
Grain Sorghum
$3.95/bu.
$2.63/bu.
+50%
Barley
$4.95/bu.
$2.63/bu.
+88%
Soybeans
$8.40/bu.
$6.00/bu.
+40%
Rice
$14.00/cwt.
$10.50/cwt.
+33%
Peanuts
$535/ton
$495/ton
+8%
PLC Payment Calculations
(Reference Price – Effective Price) x Payment Yield x
Payment Acres
– Effective price = max(MYA Price, Loan Rate)
– Payment Yield is old CCP yield or update to 90% of 2008-12
average yield per planted acre
– Payment Acres is base acres
– Paid on 85% of Base Acres
Example: Farm has 100 acre corn base with payment yield of 150
bu/a MYA price is $3.50/bu.
PLC Payment = ($3.70 -$3.50) x 150 x 100 x 85% = $2550
Agriculture Risk Coverage, County
Coverage (ARC-C)
• Area-based revenue guarantee
• Guarantee based on 5-year Olympic average of county yield
and 5-year Olympic average of US MYA price
• Covers losses between 86% and 76% of benchmark revenue
• Paid on 85% of base acres
• Producers can choose to participate on a crop-by-crop basis
Agriculture Risk Coverage (Area Election)
Individual Crop
Program
For ARC Benchmark Revenue Based On 5-Year Olympic Average
County Yields/National MYA Prices (or Ref. Price)
Producer Loss
14% Loss
Coverage
between 86%
and 76% of
revenue
benchmark.
Revenue based
plan (paid out
on base acres)
ARC (85% Base Acres)
Crop
Insurance
Premium
Crop Insurance StandAlone
(66% for 75% RP)
ARC County Example
• Olympic Avg. MYA Corn Price = $5.30 and Olympic Avg.
County Yield = 151 bu/ac.
• Benchmark Revenue = $800 = ($5.30 x 151)
• Revenue Guarantee = $688 = ($800 x 0.86)
• Maximum ARC-C Payment = $80 = ($800 x 0.10)
• 100 base acres
• Actual County Yield = 160 bu/acre and Actual MYA price
= $4/bu.
• Actual County Revenue = $640 = (160 x $4)
• ARC-C Payment = $4,080 = ($688 - $640) x 100 x 85%
12
Agriculture Risk Coverage,
Individual Coverage (ARC-I)
• Multi-crop, multi-farm coverage
– Benchmark revenue is based on all covered commodities on a
farmers share across all farms in which the producer has an
interest
• Individual benchmark calculated as 5-year Olympic
average revenue (higher of reference price or US MYA
price) across all covered crops and farms, weighted by
current year plantings
• Covers losses between 86% and 76% of benchmark
revenue
• Paid on 65% of base acres
ARC – Individual Example – Part 1:
Determining the Revenue Guarantee
Total Acres
500
Corn
185
170
195
90
140
2009
2010
2011
2012
2013
Revenue
2009
2010
2011
2012
2013
$
$
$
$
$
Avg.
$ 722.45
2014 Plantings
Benchmark
14
657
881
1,213
620
630
200
$
Yield
Soybeans
65
60
68
45
48
$
$
$
$
$
Wheat
50
52
47
48
50
623
678
850
648
610
$
$
$
$
$
244
296
340
373
344
$ 649.78
$
326.73
200
614 Guarantee
100
$
$
528
61.42 max
2009
2010
2011
2012
2013
MYA Prices
Corn Soybeans Wheat
$3.55
$9.59 $4.87
$5.18
$11.30 $5.70
$6.22
$12.50 $7.24
$6.89
$14.40 $7.77
$4.50
$12.70 $6.87
ARC – Individual Example – Part 2:
Determining Payments
2014 Plantings
Benchmark
200
$
614 Guarantee
$
3.90
2014 Prices
2014 Yield
144
2014 Production
28,800
2014 Revenue
$ 112,320
2014 Rev / Acre
ARC-I Pmt. Rate
ARC-I Payment
15
200
$ 490.14
$ 38.11
$ 11,146
$
10.35
48
9,600
$ 99,360
100
$
$
528
61.42 max
$
6.30
$
53
5,300
33,390
Total Base Ac. 450
Total
$ 245,070
FARM PROGRAM DECISION TOOL
University of Illinois
fsa.usapas.com
Development & Outreach Coalition
•
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•
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University of Illinois
Watts & Associates
The Ohio State University
Michigan State University
Delaware State University
University of Arkansas-Pine Bluff
North Carolina A&T University
Montana State University
1
1
FARM PROGRAM DECISIONS
• Farm Bill Toolbox on farmdoc
• Walk farmers through decision
matrix and how best to use the APAS
tool
• Are 3 sets of decisions; 7 steps
towards making them
1
FARM PROGRAM DECISION MATRIX
Step 1: Collect Farm information
 Producers advised to collect necessary
information for each FSA farm
 FSA August letter: base, yields, acres
planted
 Yield history for 2008 to 2012; crop
insurance records count
2
FARM PROGRAM DECISION MATRIX
Step 2: Retain or Update Yields
 Landowner decision; keep current (FSA
letter) or update to 90% of 2008-2012
 Need cropping history; Crop Insurance
records count
 Crop-by-crop decision; generally, choose
the one that results in highest yield
2
UPDATE PAYMENT YIELDS
 Select state, county
and crop
 Producer needs yield
history for 2008 to
2012 crop years
 Enter historical yields
per planted acre
 Producer advised to
select the highest
yield
2
Let’s Try It!
• Handout has the farm yields (per planted
acre) for 2008-2012
• Notice that the decision tool automatically
substitutes the plug yield if the farm yield is
lower than the plug
– (75% of the county average yield from 200812)
Economics
FARM PROGRAM DECISION MATRIX
Step 3: Retain or Reallocate Base
 Landowner decision; all program crops on
farm; will not increase or decrease total
 Keep current or reallocate to ratio of
2009-2012 plantings of program crops
 Generally, look to increase base for crops
depending on potential for payments
2
REALLOCATE BASE ACRES
 Using information from FSA
letter for each farm
 Use “add a crop” menu for
each program crop with
base acres
 Enter existing base acres on
the farm for that crop
 Enter planted acres for each
crop on the farm, 2009 to
2012 crop years
 Compare reallocation to
current base acres for
decision
2
Let’s Try It!
• Handout has the farm planted acres from
2009-12 and the current base acres
• Notice that you have to enter zero’s for
crops that aren’t planted in 2009-12
• Reallocate to crops that are likely to payout
more frequently
Economics
FARM PROGRAM DECISION MATRIX
Step 4: Compare ARC-CO & PLC
 Landowner & producer; crop-by-crop decision
 ARC-CO: county revenue program; 5-year
Olympic average MYA prices & county yields
 PLC: price only; deficiency payment when MYA
price is below reference price
 APAS Sample Farms for quick, simple comparison
2
2
SAMPLE FARM
Estimated expected payments
available per acre by crop
Available on a one year horizon
or 5 year horizon
Because it is on a crop-by-crop
basis, ARC-IC is not shown
2
FARM PROGRAM DECISION MATRIX
Step 5: Consider ARC-IC
 Landowner & producer; all program crops
 Individual, farm-level revenue program using
farm’s yields for all program crops with base
 5-year Olympic average revenues, added together
and weighted by planted acres
3
0
SAMPLE FARM
Expected Program Payments
•
For all crops using the
sample farm’s acreage
•
Scrolling over bar will
provide detail on expected
payment
•
2014 crop year & Average
expected payments for the
5-year horizon (2014-2018)
3
1
FARM PROGRAM DECISION MATRIX
Step 6: Consider SCO
 Supplemental Coverage Option; crop insurance
 County-triggered (86%) down to COMBO policy
 Applied to underlying policy deductible
 Is only available for crops in PLC (or no program)
3
SAMPLE FARM
Expected SCO shown:
 Depends on COMBO
policy
 Only shown in 5-year
horizon b/c not
available in 2014
 Shown along with
PLC for comparison
to ARC-CO
 Disclaimer needed for
counties where it is
unavailable
3
SAMPLE FARM
Safety Net Analysis:
 Using different levels of
target revenue
 Compare probability of
reaching target revenue
 With no programs
 With ARC-CO
 With PLC & SCO
 With ARC-IC
3
FARM PROGRAM DECISION MATRIX
Step 7: Decisions & Sign-up
 Designed to help producer make an informed
decision
 Program decision must be made for 2014 crop or
forfeit payments, deemed in PLC 2015-2018
 Elections on programs, base and payment yields
 Sign-up (yearly) to enter contract for payments
3
Questions and Thank You
www.farmbilltoolbox.farmdoc.illinois.edu
36
APAS Sample Farms
ADDITIONAL SLIDES
3
SAMPLE FARMS
Quick Comparison of Programs
 Select your state
 Select your county
 Select your price series
•
CBO = Congressional
Budget Office May 2014;
higher range
•
USDA = WASDE forecast
prices; lower range
 Note estimated crop
insurance
3
SAMPLE FARMS
3
SAMPLE FARMS
 NASS data of crop acreages
for counties in the Crop
Reporting District
 Average planted acres from
2009 to 2012 crop years
 Scroll over to see the
average acreage for each
crop
4
SAMPLE FARM
The sample farm is constructed
based on acres of top 4 crops;
scaled to $500,000 revenue for
the whole farm (2013 prices)

This is a sample farm for
the county

Can be used for simple and
quick program comparison

Can be used as a
‘benchmark’

Can change the number of
acres for each crop to
better align with farm’s
base
4
SAMPLE FARM
Expected Program Payments
•
For all crops using the
sample farm’s acreage
•
Scrolling over bar will
provide detail on expected
payment
•
2014 crop year & Average
expected payments for the
5-year horizon (2014-2018)
4
2
SAMPLE FARM
Click “Show Prices” to see the
two price series (CBO & USDA)
available
Represent a high price and low
price scenario for quick
comparison of programs
4
SAMPLE FARM
Expected payments also
available per acre by crop
Available on a one year horizon
or 5 year horizon
Because it is on a crop-by-crop
basis, ARC-IC is not shown
4
SAMPLE FARM
Safety Net Analysis:
 Using different levels of
target revenue
 Compare probability of
reaching target revenue
 With no programs
 With ARC-CO
 With PLC & SCO
 With ARC-IC
4
2014 Farm Bill and Insurance Decision
Aid Developed by the NAAFP
FSA Training on ARC/PLC
Part 14
Louisville, Ky
September 24-26, 2014
https://decisionaid.afpc.tamu.edu/
4/13/2015
46
A Few Things to Think About
• All of the decisions required in the farm bill add to the
producer’s ability to tailor the bill to fit their
operations – not just add to complication
• There will be plenty of time to gather needed info,
analyze options, and make sign-up decisions – no
reason to panic
• Two kinds of producers – those who want to
maximize their government payments and those who
want to manage risk
– It is one thing to use point estimates to show how programs
work – quite another for evaluating alternatives under risk
4/13/2015
47
Discussion of NAAFP Decision Aid
• National Association for Agriculture and Food Policy
(NAAFP) has been working on the decision aid for
nearly 2 years
– AFPC at Texas A&M
– FAPRI at University of Missouri-Columbia
• Applied for and received funding from USDA-FSA to
develop nation-wide decision aid
• Available today
at:https://www.afpc.tamu.edu/models/decisionaid.p
hp
• Available soon on the USDA-FSA website
4/13/2015
48
Overview of NAAFP Farm Bill
Decision Aid
• Register as a producer or multi client user
– Email address and password protect your data
– Email address allows us to contact user when FSA changes
rules or new price projections are available
• Enter data for all FSA Farm and Tract Numbers
– All Crops and their Practices by Tract number
– Types not critical to FSA but important to RMA for SCO, STAX,
and insurance
• Analyze yield update, base reallocation, ARC-IC,
ARC-CO, PLC, SCO, STAX, and insurance options
4/13/2015
49
Why Enter Crop Types?
RMA User-Specified Type
FSA – “All Wheat”
Winter Wheat (Type 11)
Spring Wheat, exc. Durum (Type 12)
Durum Wheat (Type 15)
“Wheat is Wheat” quoted from an
FSA Expert
• ARC/PLC interact with crop insurance (SCO, Yield
Protection, Revenue Protection, etc.)
• To analyze this interaction we must analyze farm
units at the RMA tract/farm unit level
• The decision aid requires practice and type for each
4/13/2015
50
crop
Overview of NAAFP Farm Bill
Decision Aid
• Producers’ data are stored in the decision aid
– Data accessed by a user name and password
• We encourage producers to enter their data
now and run the tool for each decision
– Presently farmers should be using the tool to analyze
Yield Update decision
– Next farmers can consider the interaction between
Base Reallocation and PLC, ARC-CO, ARC-IC Election
• This decision should be tested with multiple price scenarios
– Before final election, farmers can re-run the analysis
to see if updated price outlooks in the Spring
4/13/2015
51
changed their preferences
Preparation for Using NAAFP
Decision Aid
• Information needed for the Decision Aid are
available from two primary sources
– FSA Reported Commodity Crop History Summary
(letter from FSA to producers, August 2014)
• FSA farm number
• Base Acres and CCP Yield for covered crops
• Planted Acres
– Crop Insurance Actual Production Report
• Historical yields and planted acres
• Ten years of yields preferred but 2008-2013 is
essential
4/13/2015
52
FSA Crop History Summary
4/13/2015
53
Insurance Yield & Acreage Report
4/13/2015
54
NAAFP Crop/Unit Information Sheet
4/13/2015
55
NAAFP Information Sheet Ex. Iowa Farm
Historical Data
needed for risk
analysis
4/13/2015
Data needed for risk
analysis, yield
update, and base
56
reallocation
First Step Is to Register
4/13/2015
57
Producer data is Saved, Email to
Notify Regarding FSA Updates
4/13/2015
58
Producer and Multi Client
Users
4/13/2015
59
Create Client Records & Switch Clients
4/13/2015
60
Farm with Two Crops and One FSA Number
4/13/2015
61
Yield Update Analyzer
4/13/2015
62
Results for Yield Update
• Producer can print the FSA Yield Worksheet
• Print a separate form for each FSA number. Fill in the name and email
address for contact person, farm number, historical yields, state code, and
4/13/2015 code.
63
county
Select the Base Acre Reallocation & PLC/
ARC Decision Aid
4/13/2015
64
Base Reallocation Options Calculated Directly, Next
Analyze their Impacts on Payments by Program
4/13/2015
65
Three Choices for Testing
Alternative Price Scenarios
4/13/2015
66
Output for Base Reallocation,
PLC, ARC-IC, and ARC-CO
4/13/2015
67
Whole Farm Decision: All Crops
Elect the Same Program
4/13/2015
68
Crop-by-Crop Results for Each
Program Election Option
4/13/2015
69
Unfold Details to See Risk of
Payments for PLC and ACR
4/13/2015
70
Crop-by-Crop Results for Each
Program Election Option
4/13/2015
71
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
4/13/2015
72
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
4/13/2015
73
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
4/13/2015
74
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
4/13/2015
75
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
4/13/2015
76
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
Net revenue for
the “best”
combination of
ARC/PLC and
Insurance is
presented.
Result here is
ARC, with
Revenue
Protection at
85%.
4/13/2015
77
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
Option buttons
allow user to test
impact of
program and
insurance
changes.
In this case PLC
plus SCO rather
than ARC reduces
net revenue
(40.4% chance of
net revenue
below lower
4/13/2015
target).
78
Crop Insurance Analysis Interacts
with ARC/PLC+SCO
Option buttons allow user to
test impact of program and
insurance changes.
In this case PLC plus SCO
and a lower level of
underlying insurance
coverage for RP to 75%
rather than choosing ARC
with 85% coverage reduces
net revenue (69% chance of
net revenue below lower
target).
4/13/2015
79
Future Developments
• Farmers will be able to print FSA forms
– Yield update information form
– Base acre reallocation form
– ARC/PLC election form
• Print a separate form for each FSA number with:
–
–
–
–
–
Name and email address for contact person
Farm number
Historical yields and planted acres
State and county codes
AND the ARC/PLC election by crop by farm
• We are still testing and improving
• More than 2,000 farmers, FSA, extension, and
4/13/2015
insurance agents testing the decision aid
80
Summary
• Decision Aid available on AFPC website since June 20th
– More than 2,000 testers
• Will be on FSA website when officially released
• All 21 covered commodities plus cotton available in the
official release version
• Changes we expect after the official release:
– Monthly updates of price projections by FAPRI
– USDA price projections updates as available
– Tool will be updated as FSA updates rules
• Accessible by smart phones, tablets, iPads, anything
that can access the internet
81
• 4/13/2015
Helpdesk available 7am to 7pm CST
Thanks!!!
Visit our Website
WWW.AFPC.TAMU.EDU
for Podcasts on the
farm program and
the Decision Aid
4/13/2015
82
USDA Farm Bill Timeline
September 29, 2014 – February 27, 2015: Landowners have
a one-time, irrevocable opportunity to reallocate base and
update payment yields
November 17, 2014 – March 31, 2015: Producers have a
one-time, irrevocable decision to elect either (1) ARC-County
or PLC on a covered-commodity by covered-commodity basis
OR elect (2) ARC-Individual for all of the covered
commodities on the farm.
Mid-April 2015 – Summer 2015: Producers sign contracts to
participate in ARC/PLC for 2014 and 2015 crop years
Source: FSA
Economics
2014 Farm Bill Regional Meetings
Farm Bill Producer Meetings
Date
Location
12-Nov
Owensboro
20-Nov
Lexington
20-Nov
Maysville
Time
Confirmation
6:30 PM Confirmed
10:00 AM
Confirmed, other counties around Lexington could join
by Lync if they prefer.
6:30 PM Confirmed
Propose that Pike and other District 1 Counties join
Maysville by Lync or Adobe Connect, Some may wish
to travel to the Mason Co. Extension office
20-Nov
Pikeville
25-Nov
Elizabethtown
1-Dec
Princeton
10:00 AM Confirmed
2-Dec
Hopkinsville
10:00 AM Confirmed
13-Jan
London
Source: FSA
1:30 PM Confirmed
6:30 PM Confirmed
Economics
Tentative Agenda
Welcome – county agent hosting (5 minutes)
Farm Bill Decision – Todd Davis (30 minutes)
Base reallocation and program yield update decisions made by landowner
ARC-County, ARC-Individual, and PLC decision made by the producer.
Working with FSA on this Decision – Marcinda Kester FSA (30 minutes)
The information needed, the USDA timeline, and the process of working with
the county FSA office throughout this process.
Farm Bill Decision Aid Example – Todd Davis (30 minutes)
This presentation will demonstrate the decision tool that the County Agents
will use to help landowners and producers with this decision.
Conservation Compliance – Randy Smallwood / Mark Ferguson (NRCS) 15 minutes
NRCS will talk about what conservation compliance is for crop insurance
and how to get back into compliance.
Source: FSA
Economics
Need Your Input
• Which decision tool to present to farmers
– TAMU model more data intensive
– UIUC model is “quick and dirty”
– Play around with both and let me know what
works better for your farmers/landowners
• Regional meetings will be followed-up with
meetings at the county or bi-county level
• Help in coordinating meeting
dates/locations
Thank you for your attention!
Questions?
Todd D. Davis
todd.davis@uky.edu
270-365-7541 x 243
Economics