PROCRASTINATOR'S FARM BILL UPDATE. Paul Goeringer, Extension Legal Specialist, Women in Ag Wednesday Webinar March 11, 2015

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1 PROCRASTINATOR'S FARM BILL UPDATE Paul Goeringer, Extension Legal Specialist, Women in Ag Wednesday Webinar March 11, 2015

2 Individual Farm Level Details are available from a crop insurance agent (list available at:

3 Like Us on Facebook

4

5 DEADLINES

6 What deadlines do you need to be aware of Crop Insurance March 16 th is sales closing date deadline for: spring planted crops, whole farm crop insurance coverage, and Commodity Title decisions March 31: Deadline for 1 time base acre reallocation and payment yield update Deadline to elect ARC-CO, ARC-IN, or PLC supplemental coverage option on corn and soybeans

7 BASE ACRE REALLOCATION AND PAYMENT YIELD UPDATE

8 Updating Base Acres and Payment Yields Farm Bill provides one time opportunity to reallocate base acres and update payment yields. Price Loss Coverage will use payment yields to calculate the payment (not actual yield)

9 Updating Payment Yields Owners have a one-time opportunity to update current payment yields established under the 2008 farm bill to 90% of average yields. Done crop by crop If 90% of average yields higher than current payment yield then update

10 Reallocating Base Acres Landowners also have a one-time opportunity to reallocate their current base acres to reflect their cropping pattern in Number of base acres can not be increased, but mix of acres can change. Landowners can choose to keep their current base acres or reallocate their current base acre total according to the mix of crops in

11 Updating Base Acres and Payment Yields Why am I not showing you the math involved? Answer is simple, decision tools available to help you with this decision Deadline to do both is by Mar. 31

12 Lets Look at an Example

13 NEW COMMODITY PROGRAMS

14 Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) replace the Direct and Counter Cyclical Programs Eliminates Direct payments

15 Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) ARC - provides revenue loss coverage at 2 different levels ARC- County (CO) provides revenue loss coverage at the county level for selected covered commodities on a farm ARC-Individual (IC) provides revenue loss coverage at the farm level, which is considered the sum of the producer s interest in all of the producer s ARC-IC farms in the state

16 Price Loss Coverage (PLC) Payments are issued when Market Year Average (MYA) Price of a covered commodity is less than the reference price established by the Farm Bill PLC payment = (85% of the base acres of the covered commodity) * reference price MYA * Payment Yield PLC is Countercylical Payment Program with a new name.

17 Reference Prices for PLC Reference prices are: wheat, $5.50/bushel; corn, $3.70/bushel; grain sorghum, $3.95/bushel; barley, $4.95/bushel; oats, $2.40/bushel; long grain rice, $14.00/hundredweight (cwt).; medium grain rice, $14.00/cwt.; soybeans, $8.40/bushel; other oilseeds, $20.15/cwt.; peanuts $535.00/ton; dry peas, $11.00/cwt.; lentils, $19.97/cwt.; small chickpeas, $19.04/cwt.; and large chickpeas, $21.54/cwt.

18 Agricultural Risk Coverage County (ARC-CO) Agricultural Risk Coverage - County ARC-CO Payments are issued when the covered commodity s actual county crop revenue < ARC-CO guarantee based on county data, not farm data

19 Agricultural Risk Coverage County (ARC-CO) The ARC-CO guarantee is set by multiplying the 5-year moving Olympic average MYA price by the 5-year moving Olympic average County Yield and then by 86% (to factor in the 14% deductible). Actual county revenue is determined by the current year s MYA price multiplied by the current year s county yield. The payment (if any) = ARC-CO guarantee - actual county revenue * 85% of base acres. Payments may not exceed 10 percent of the benchmark county revenue (ARC guarantee price times ARC county guarantee yield)

20 Agricultural Risk Coverage Individual (ARC-IC) Payments are issued when the covered commodities actual Individual crop revenue < Individual ARC guarantee based on farm data (producer s interest in all farms in the state) Payment is equal to 65% of the base acres of the covered commodity X (individual guarantee revenue - actual individual crop revenue for the covered commodities) using planted acres for both the individual guarantee and actual revenues Individual ARC Guarantee = 86% of the farm s ARC Individual benchmark Guarantee [ARC Guarantee price X ARC Individual Yield]

21 SO WHAT DO YOU NEED TO BE FOCUSED ON?

22 Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) I need to stress a point. These programs are not designed to make a payment every year Certain criteria has to be met.

23 Market Year Average Price Corn and Soybeans: Sept. 1 to Aug. 31 Roughly 5.5 months into marketing year Wheat and Barley June 1 to May 31 Roughly 9.5 months into marketing year

24 Market Year Average You are walking into decision making process with good idea of what price will be for this year. What about 2016, 2017, 2018, and possibly longer?

25 Market Year Average

26 Paul, How Do I Decide Which Program is Better? Going to need to have previous years cropping data on each farm (yield and acres planted). Will also need crop insurance history Then use one of the decision tools

27 LET S WALK THROUGH AN EXAMPLE

28 Election Requirement All of the producers on a farm must make a one-time, unanimous election of: PLC/ARC-CO on a covered-commodity-by-covered-commodity basis for each FSA farm. ARC-IC for all covered commodities on the farm. Decision must be made by March 31, If the producers on the farm elect PLC/ARC-CO, the producers must also make a one-time election to select which base acres on the farm are enrolled in PLC and which are enrolled in ARC-CO

29 Election Requirement The election between ARC and PLC is made in 2014/2015 and is in effect through the 2018 crop year If an election is not made in 2014/2015, the farm may not participate in either PLC or ARC for 2014 and the producers on the farm are deemed to have elected PLC for subsequent crop years But must still enroll their farm to receive coverage

30 CROP INSURANCE DECISIONS TO CONSIDER

31 Supplemental Coverage Option (SCO) A county level revenue or yield based optional endorsement that covers a portion of losses not covered by the same crop s underlying crop insurance policy. Indemnities will be payable once a 14 percent loss has occurred in the county. Individual payments for revenue or yield loss and coverage levels will depend on the underlying policy selected by producers.

32 Supplemental Coverage Option (SCO) SCO is only available to producers who select PLC and has purchased an underlying Revenue or Yield protection policy. Not available to those that select ARC (County or Individual)

33 Supplemental Coverage Option (SCO) For the 2015 crop year, the SCO endorsement is not available in all Maryland counties. For corn and soybeans, SCO is available in all counties but Garrett and Alleghany counties. For wheat, SCO is available in Caroline, Carroll, Dorchester, Frederick, Kent, Queen Anne s, Talbot, and Worcester counties.

34 Yield Exclusion YE allows for producers to exclude specific yields from eligible years from their actual production histories (APH). This exclusion can have an impact on producers APHs and crop insurance premiums. To be eligible, the county average planted acreage yield must be 50 percent below the simple average for the previous 10 consecutive crop years. When a county is determined eligible for YE for a crop year, a contiguous county will also be eligible for YE.

35 Yield Exclusion Exclusion of yields from eligible crop years will potentially result in a higher approved yield, which will increase the insurance guarantee, and increase an indemnity payment, which will increase the producer s premiums. No substitute yield will replace the excluded yield unless the exclusion results in fewer than 4 years to calculate the APH. If the exclusion results in fewer than 4 years to calculate the APH, then the applicable transitional yield will be substituted for the excluded crop years to reach a minimum of 4 years.

36 YE for Soybeans

37 YE for Corn

38 YE Example Queen Anne s farmer with previous 10 years of APH yield history. Notice potential impact YE can have. Have to bear in mind could potentially increase premium costs

39 TA-APH YE Example Queen Anne s farmer with previous 10 years of APH yield history. Notice potential impact YE can have. Have to bear in mind could potentially increase premium costs

40 Whole Farm Revenue Protection (WFRP) Beginning with the 2015 crop year (which began on October 1, 2014), diversified specialty crop, mixed grain, organic, or livestock producers will have the option of using WFRP. WFRP is currently available in all Maryland counties. Coverage levels range from 50 to 85 percent, but Catastrophic Risk Protection (CAT) coverage is not available along with WFRP.

41 Whole Farm Revenue Protection (WFRP) WFRP will protect farms against loss of expected farm revenue from either: crops produced during the insurance period (whether sold or not), commodities bought for resale during the insurance period, and all commodities on the farm but excludes timber, forest, forest products, and animals for sport, show, or pets.

42 Whole Farm Revenue Protection (WFRP) The insurance year for WFRP will depend on how you file your taxes. If you file your taxes on a calendar year (January 1 to December 31) then you will use a calendar year. If you use a fiscal year (Ex: July 1 to June 30) to file your taxes, then you will use the fiscal year for WFRP.

43 Whole Farm Revenue Protection (WFRP) Sales closing and coverage modification dates in Maryland will be March 15 each year. Finally, farm operation reporting deadlines will vary among operations. Want more info? Link to fact sheet available in the tool bar

44 Conservation Compliance Conservation compliance for highly erodible lands and wetlands is now required when purchasing crop insurance. Failure file a form 1026 at FSA by June 1, 2015 certifying compliance means being ineligible for any portion of the crop insurance policy premium that is paid by FCIC (i.e. you will pay for 100% of the premium) beginning with the 2016 crop year. Shouldn t be an issue here since Maryland requires conservation plans that are more stringent than USDA requires.

45 How Good is your Risk Management Plan? What do you want your Crop Insurance Based Risk Management Plan to do For YOU when disasters occur? Protect crop value $? A. Protect input cost $? A. Protection to secure operating loan (security) $? $$ To replace livestock feed $? $$ Buy-out preharvest sales contracts $? Strengthen the business plan and avoid an income interruption $? At what percent of crop damage do you need a loss claim to trigger? %

46 Risk Management Check Up Will YOUR 2015 Risk Management Plan be Adequate to Manage 2015 Risks? (Increasing Input Costs, Prices & Weather Volatility) Individual farm details available from crop ins. agents, list available at: www3.rma.usda.gov/apps/agents/

47 The alternative to having crop ins. & NAP

48 THANKS ANY QUESTIONS? Contact info: Website: Phone: Facebook: Facebook.com/MDCropInsurance