THE NEW FARM BILL
DECISION TOOL II INSTRUCTIONS
Disclaimer – This excel file is intended to help producers make the decisions required by the
Agricultural Act of 2014. It is designed to deal SOLELY with California medium grain rice and
offers no assistance for decisions for other covered commodities for which you might have base
acres. This excel file references NASS information plus the producer’s FSA information. If this
information changes, the results will change. The producer MUST provide their projections of
2014 yields and prices, which by their very nature will in almost all instances not be proven
correct. By using this Decision Tool, you are agreeing that it generates outcomes based on
information that are only estimates and provides no guarantee of actual program payments.
Tim Kelleher
Step 1. Print these instructions.
Step 2. Download Excel File – Decision Tool II.ARCorPLC.Temperate
Japonica Rice.2014-2018 and save before doing any input. Then save a second file
with a different name to use for your inputs. That way if you make an input mistake
or somehow corrupt the file you can start over.
Explanations and Cautions
a.
b.
c.
Please note that cells that require grower input are colored orange. Many of
these cells will remain empty.
All cells which link to your input are orange numbers in white cells. Do not
change the numbers in these cells!
1234
All cells which automatically calculate based on submitted data are colored
light gray.
YOU CANNOT CHANGE THESE FORMULAS!
Step 3. Open Tab – “Grower Information”
a.
Input your Name, Farm Number and County
b.
Input your individual yields in pounds.
i.
For 2008 – 2014 crop years input your actual yields from your crop
insurance report or your own records if you don’t have crop insurance.
ii.
For 2015 – 2018 crop years input your expected yields
c.
Input your county’s yields in pounds.
i.
For 2008 - 2013 crop years input yields from the table at the bottom of
the page.
THE NEW FARM BILL
DECISION TOOL INSTRUCTIONS
ii.
For 2014 – 2018 crop years input your best guess of county yields.
Look at the relationship between your individual yields and the county
fields and then maintain that relationship for these years. e.g. if you
yields are 500 lbs over the county yields for the 2008 – 2013 crop years,
you would want to keep that relationship in future years, based on the
general belief of growers that their yields move with the county yields.
If your farm doesn’t track county yields, make you best guess.
d.
Input your Payment Yield (updated or old CC yield, whichever is greater).
e.
Input your medium grain base acres.
f.
Now go to the Worst Case Scenarios and enter:
i.
Your best estimate of the worst yields you might experience. You may
wish to enter more than one lower yield in any crop year. In the years
you expect normal yields, put the same yield as you put into the top
part.
ii.
Your best estimate of the worst yields for the county. You may wish to
enter more than one lower yield in any crop year. In the years you
expect normal yields, put the same yield as you put into the top part.
iii.
Your best estimate of the worst price or prices (if in multiple years) for
the 2014 – 2018 crop years. First, your previous price estimates will
automatically be put into the Price line for each year. You are to
override those numbers for your worst case price guess, which might be
for multiple years.
Step 4. Go to the Tab “PLC”. You don’t enter any data. Based on your projected
prices from the Grower Information Tab you will see if there is a payment in any
year and the amount.
Step 5. Go to the Tab “ARC-Individual”. The actual revenue for the year is
calculated based on your projected yield and price. That figure is compared to your
Benchmark Revenue x .86 = Agriculture Risk Coverage Guarantee. If your
projected revenue based on your yield and price estimates is less than the Guarantee,
a payment/acre will be calculated. Either this amount or the maximum per acre
payment amount (10% of your Benchmark Revenue) will be multiplied times your
payment acres (65% of your base acres). These calculations are made out through
crop year 2018.
THE NEW FARM BILL
DECISION TOOL INSTRUCTIONS
Step 6. Go to the Tab “ARC-County”. The actual revenue for the year is
calculated based on your projected county yield and estimated price. That figure is
compared to your Benchmark Revenue x .86 = Agriculture Risk Coverage
Guarantee. If the calculated revenue based on your yield and price estimates is less
than the Guarantee, a payment/acre will be calculated. Either this amount or the
maximum per acre payment amount (10% of your Benchmark Revenue) will be
multiplied times your payment acres (85% of your base acres). These calculations
are made out through crop year 2018.
Step 7. Go to the Tab – “Summary” to compare results under both your best
estimates and worst case scenarios.
Step 8. Go back to your Tab “Grower Information”, and change your projected
prices and yields to another scenario that you consider likely to occur and then
compare payments under the programs to see how they are affected by your new
projections.
Caution: Look at the calculated numbers closely. If they do not seem to make
sense you have made a mistake. START OVER!
OBSERVATIONS:
PLC – The Reference Price for California Medium/Short Grain rice (temperate
japonica) is $16.10. This price includes CCC loan, so you are talking about $9.60
over loan. California has not seen prices at this level since 2007. However, you
have to select PLC if you want to participate in SCO.
SCO – In 2015 crop insurance will add a Supplemental Coverage Option (“SCO”).
SCO is available ONLY if you choose PLC. This insurance will cover the
difference between your selected coverage level and the SCO coverage, which is
86%. This supplemental coverage will be the same as your underlying crop
insurance coverage; i.e. yield protection (“YP”), revenue protection (“RP”) or
revenue protection with Harvest Price Exclusion (“RP-HPE”). These last two
insurance programs were anticipated to be available in 2015, but have been
postponed to 2016. Premiums will be subsidized at 65% and the rates are minimal.
SCO does not cover prevented planting! Since most rice farmers purchase crop
insurance primarily for the prevented planting coverage and choose higher yield
THE NEW FARM BILL
DECISION TOOL INSTRUCTIONS
coverage levels, SCO availability is often discounted or ignored in making the PLCARC election.
ARC establishes a revenue benchmark using Olympic averages. A payment under
ARC will be made if a current year’s revenue is less than 86% of the Benchmark
Revenue. Assuming an average price of $19.56/cwt and constant yields, if the price
drops more than 15%, or below $16.82, there is greater price protection under ARC
than PLC. However, this is true only for 2014 and the price point will change in
each of the following years.
Generally, my calculations have shown that ARC-CO will generate slightly
higher payments as ARC-I when a producer’s yield is below or close to the county
average. If a producer’s yield is substantially higher, ARC-I will generate higher
payments. Similarly, if a producer’s yields vary significantly from year-to-year,
unlike county averages, the ARC-I option may be the better choice, even though
ARC-I payments are 65% of base acres versus 85% for ARC-CO.
RICE LAWYERS, INC.
Tim Kelleher
Attorney at Law