Seed Cotton Informational Meeting. Price Loss Coverage Program (PLC)

Transcription

1 Seed Cotton Informational Meeting Price Loss Coverage Program (PLC)

2 PLC Overview PLC is an Income Support Program PLC payments are not dependent upon planting of the crop PLC is the default program election

3 PLC Overview Payment is triggered when the Effective Price of a covered commodity falls below the statutory Reference Price

4 Definition: PLC Effective Price National 12-month Market Year Average (MYA) Price 4

5 PLC Reference Prices CROP REFERENCE PRICE CROP REFERENCE PRICE Barley $4.95 per bu. Mustard $20.15 per cwt. Chickpeas, Large (Garbanzo Bean, Kabuli) Chickpeas, Small (Garbanzo Bean, Desi) $21.54 per cwt. Rapeseed $20.15 per cwt. $ per cwt. Safflower $20.15 per cwt. Corn $3.70 per bu. Sesame Seed $20.15 per cwt. Dry Peas $11.00 per cwt. Sunflower $20.15 per cwt. Grain Sorghum $3.95 per bu. Peanuts $ per ton Lentils $19.97 per cwt. Rice, Long Grain $14.00 per cwt. Oats $2.40 per bu. Rice, Medium Grain $14.00 per cwt. Canola $20.15 per cwt. Soybeans $8.40 per bu. Crambe $20.15 per cwt. Wheat $5.50 per bu. Flaxseed $11.28 per bu. SEED COTTON $0.367 per lb. 5

6 PLC Payments Payment Rate = The difference between the Reference Price and the Effective Price REFERENCE PRICE = PAYMENT RATE EFFECTIVE PRICE 6

7 PLC Payment Calculation Multiply: Payment X PLC X Payment X Producer Rate Yield Acres Share PLC Yield is farm-specific Payment Acres equal 85% of the crop s base acres 7

8 Example 1 Farm 444 CROP BASE ACRES PLC YIELD REFERENCE PRICE Payment Rate = Reference Price Effective Price Seed Cotton: $ $ = $ Base Acres X 85% X Yield X Payment Rate Seed Cotton: 275 ac. X 85% X 2628 lb. X $ = $19,473 ($83.31/payment acre) EFFECTIVE PRICE MYA Loan Rate Seed Cotton lb. $0.367 $.3353* $.2500 Corn bu. $3.70 $3.36* $1.95 Soybeans bu. $8.40 $9.40* $5.00 *Hypothetical prices 8

9 PLC -- Review PLC is an income support program PLC payments are NOT dependent on the planting of the crop. PLC is the default program

10 PLC -- Review PLC payments are triggered when the Effective Price falls below the posted Reference Price for the commodity. PLC payments will be issued as soon as possible after October 1 at the end of the applicable marketing year

11 Seed Cotton Informational Meeting Questions 11

12 PLC Payment Exercise FSN 111 Option 1 vs. Option 2 The generic base allocation calculations were completed on FSN 111 and the owner, Mr. Needmo Cash was presented the following options for allocating his generic base acres. Using projected MYA prices, which option would deliver the greater total payment amount? All crop elections are to PLC. 12

13 FSN Option 1 BASE OPTION 1 Acres PLC Yield Effective Price MYA Loan projected Rate Reference Price Seed Cotton $ $0.25 $0.367 Unassigned PLC Payment Exercise Corn $3.85 $1.95 $3.70 Rice $ $ $ Soybeans $10.00 $5.00 $8.40 Wheat $5.10 $2.94 $5.50 Payment Rate Payment Amount REMEMBER: Reference Price Minus Effective Price Equals Payment Rate AND Base acres X 85% X Payment Rate = Payment Amount 13

14 PLC Payment Exercise FSN 111 Option 1 - Results BASE OPTION 1 Acres PLC Yield Effective Price Reference MYA Loan Rate Price projected Payment Rate Payment Amount Seed Cotton $ $0.25 $0.367 $ $81,937 Unassigned Corn $3.85 $1.95 $3.70 $0 $0 Rice $ $ $ $ $2,629 Soybean $10.00 $5.00 $8.40 $0 $0 Wheat $5.10 $2.94 $5.50 $0.40 $40 TOTAL $84,606 14

15 FSN 111 Option 2 PLC Payment Exercise BASE OPTION 2 Acres PLC Yield Effective Price MYA Loan projected Rate Reference Price Payment Rate Seed Cotton $ $0.25 $0.367 $ Unassigned Corn $3.85 $1.95 $3.70 $0 Rice $ $ $ $ Soybean $10.00 $5.00 $8.40 $0 Wheat $5.10 $2.94 $5.50 $0.40 TOTAL Payment Amount REMEMBER: Reference Price Minus Effective Price Equals Payment Rate AND Base acres X 85% X Payment Rate = Payment Amount 15

16 PLC Payment Exercise FSN 111 Option 2 -- Results BASE OPTION 2 Acres PLC Yield Effective Price MYA Loan projected Rate Reference Price Payment Rate Payment Amount Seed Cotton $ $0.25 $0.367 $ $36,247 Unassigned Corn $3.85 $1.95 $3.70 $0 $0 Rice $ $ $ $ $6,335 Soybean $10.00 $5.00 $8.40 $0 $0 Wheat $5.10 $2.94 $5.50 $0.40 $98 TOTAL $42,680 16

17 PLC Payment Exercise FSN 111 Option 1 vs. Option 2 -- Summary BASE Seed Cotton OPTION 1 Acres Unassigned Payment Amount $81,937 Corn $0 Rice $2,629 Soybean $0 Wheat 1.96 $40 TOTAL $84,606 BASE OPTION 2 Acres Payment Amount Seed Cotton $36,247 Unassigned 0 Corn $0 Rice $6,335 Soybean $0 Wheat 4.81 $98 TOTAL $42,680 17

18 Seed Cotton Informational Meeting Questions 18

19 ARC-CO Program/Payment Calculation 19

20 ARC Background ARC is a income support program When Crop Revenues fall below Benchmark Revenue levels Seed Cotton is now a covered commodity 20

21 ARC Background ARC-CO or PLC may be Elected on a covered commodity by covered commodity basis on the farm 21

22 ARC Background If an election is NOT made by ALL current producers on the farm by the end of the election period, then: All newly assigned base, including seed cotton, will have the PLC election. This is the default election. 22

23 ARC-CO Features ARC-CO does not require production reports from producers, benchmark revenues and actual revenues are computed using County yield data, not individual producer/farm yield data ARC-CO payments are NOT dependent on planting of covered commodities 23

24 ARC-CO Yields County level Yields are used, NOT individual producer/farm yields a county may trigger a crop due to a low county yield; however, the neighboring counties may not trigger that crop 24

25 ARC-CO Price Marketing Year Average (MYA) prices are used in revenue calculations MYA prices are determined at the end of the marketing period for the crop. ARC-CO revenue calculations are computed after the MYA prices are determined ARC-CO payments are made in OCTOBER after the MYA prices are determined 25

26 Basic mechanics of ARC-CO There is a county guarantee calculated. If the county revenue falls below the guarantee, payments will equal the difference in those amounts. 26

27 Calculating the ARC-CO guarantee (5 year Olympic Avg. county yield) X (5 year Olympic Avg. market price) X 86% = Guarantee 27

28 Calculating the actual revenue for a year County Average Yield X Marketing Year Average Price = Revenue 28

29 Calculating the ARC-CO payment Guarantee County Revenue = Payment Rate 29

30 ARC-CO Payments Payments are issued on 85% of the base acres Payment rate is capped at 10% of the County Benchmark revenue. 30

31 Example County Benchmark Revenue = (2590 lbs/ac) X ($0.3670/lb) = $950.53/ac Guarantee = $ X 86% = $ County Revenue = (2500 lbs/ac) X ($0.3125/lb) = $

32 Example Difference Between Guarantee and Revenue: $817.46/ac $781.25/ac = $36.21/ac $36.21 would be paid on 85% of the acres of seed cotton base. 32

33 ARC-CO Summary Revenue-based program, takes into account yield and price. County yields and national average prices are used for calculations. NOT a farm s actual yields. The level of coverage is 86% of a 5- year average revenue. 33

34 ARC-CO Summary The annual revenue must fall below that level of coverage to trigger a payment. Payment rates are capped at 10% of the benchmark revenue. 34

35 35

36 Marketing Year Average Prices

37 Marketing Year Average Prices PLC, ARC-CO and ARC-IC use national prices for covered commodities in determining payment rates. Price data from NASS is used by FSA for these programs. The 2014 Farm Bill requires that a 12-month marketing year average (MYA) price be used for the ARCPLC program.

38 Marketing Year Average Prices Marketing Year Average (MYA) Price: Is the term used by FSA and NASS to identify the 12- month average marketing year price. FSA also refers to this price as the national average marketing price or NAMP.

39 Marketing Year Average Prices This section will: Identify the marketing year for the covered commodities and the publishing month of the MYA s. Describe how NASS determines MYA prices Answer common questions that have been raised by producers and the public about how the MYA prices are established and the effects of the local prices, forward contracts, etc.

40 Marketing Year Average Prices

41 Marketing Year Average Prices The previous chart is available at: Scroll down to the Program Year 2018 Data section and select Projected 2018 PLC Payment Rates

42 Marketing Year Average Prices How does USDA determine the MYA prices and when are they published? NASS is the agency that surveys buyers of commodities and publishes the price data. NASS completes monthly price surveys of up to 2000 plus buyers Nationwide to determine monthly prices. The prices are weighted across the US each month and for the 12 month marketing period for the crop.

43 Marketing Year Average Prices Price data collected is for prices received for the entire previous month of the survey across the US. The buyers respond to this question for each commodity for each month: What quantity of the crop was purchased during the month? What was the total dollars paid (gross value) for that quantity.

44 Marketing Year Average Prices Total Dollars/Total Quantity = Ave. Price Within the same month. Point of Sale is when the buyer takes ownership of the grain and payment is made. Commodity quantities are on dry or shrink basis and based on standard moisture.

45 Marketing Year Average Prices Price received or paid out includes: Full price paid out in the month Includes premiums for quality and direct delivery Prices reduced for discounts associated with quality or moisture Prices are not reduced for transportation, drying, storage, etc

46 Marketing Year Average Prices Frequent Questions on MYA Price Is the local price I receive used for my ARCPLC payment? NO, not by itself. Is crop that is forward contracted at higher prices than offered today included in the monthly price? YES, the month the crop is delivered and the buyer takes ownership.

47 Marketing Year Average Prices Frequent Questions on MYA Price What does weighted price mean? The total value of the crop over 12 months of the marketing year divided by the total of all bushels purchased in those same 12 months = weighted average price or MYA.

48 Marketing Year Average Prices Frequent Questions on MYA Price How is the $ PLC seed cotton price determined? The $ price is the Reference Price for seed cotton for the 2018 crop year. This reference price was set in Bipartisan Budget Act and cannot change.

49 Marketing Year Average Prices Frequent Questions on MYA Price What price will trigger a PLC payment on seed cotton? To calculate a PLC payment rate under the 2014 farm bill as amended by the Bipartisan Budget Act, the crop s 12 month marketing year average (MYA) weighted price, formerly called NAMP, must fall below the crop s reference price.

50 Marketing Year Average Prices Frequent Questions on MYA Price Is the seed cotton MYA price determined from a statewide average price based on cash bids or a statewide price average based on futures prices? MYA price is essentially a cash price weighted across the US during the 12- month marketing period for upland cotton, both cottonseed and lint.

51 Marketing Year Average Prices