The 2014 Farm Bill Program Selection Mitchell County Neil Cates Livestock Extension Agent Post Rock Extension District #1 1 Disclaimer This information is based on my understanding of the 2014 Farm Bill This information is intended for educational purposes only Keep checking www.agmanager.info for updated information 1
Decisions to be made Update your program yields on base acres (2008-2012) New yields would be 90% of updated average (with plug yields) Can increase your program payments in PLC If audited, will require proof (e.g. crop insurance records) If updated yield is higher than previous program yield= UPDATE! LANDOWNERS Reallocate your program base acres (2009-2012) If you have been planting a different crop/rotation than your base, can reallocate Cannot increase base Two strategies: Align payments with risk, maximize payments Decisions to be made Elect a Program TENANT OR BOTH IF SHARED RISK Decision for each Commodity PRICE LOSS COVERAGE (PLC) AGRICULTURAL RISK COVERAGE - County Level - (ARC-CO) All Commodities on Farm AGRICULTURAL RISK COVERAGE - Individual Level - (ARC-IC) Supplemental Coverage Option (SCO) 4 2
2014 Farm Bill Wheat: Mitchell County Payout for ARC-CO at $6.60/bu County yield < 37 bu/ac ARC-CO payment maxes out at $30.82/ac PLC < ARC-CO max unless prices fall below $4.95 Wheat ARC Payments vs. PLC Payments Under Different Yields and Prices for 2014/15 Marketing Year County: Mitchell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 46.7 Program Yield 46.7 5 Yr. Olympic Avg. MYA Price $6.60 Reference Price $5.50 Benchmark Revenue Yield 28 31 $308.22 34 38 42 47 52 56 PLC MYA Price Payment ARC Payment $7.99 $0.00 $30.82 $17.38 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $7.26 $0.00 $30.82 $30.82 $18.23 $0.00 $0.00 $0.00 $0.00 $0.00 $6.60 $0.00 $30.82 $30.82 $30.82 $14.27 $0.00 $0.00 $0.00 $0.00 $6.44 $0.00 $30.82 $30.82 $30.82 $20.35 $0.00 $0.00 $0.00 $0.00 $6.28 $0.00 $30.82 $30.82 $30.82 $26.43 $1.31 $0.00 $0.00 $0.00 $6.12 $0.00 $30.82 $30.82 $30.82 $30.82 $8.03 $0.00 $0.00 $0.00 $5.68 $0.00 $30.82 $30.82 $30.82 $30.82 $26.51 $0.00 $0.00 $0.00 $5.42 $3.74 $30.82 $30.82 $30.82 $30.82 $30.82 $10.33 $0.00 $0.00 $5.18 $14.94 $30.82 $30.82 $30.82 $30.82 $30.82 $21.61 $0.00 $0.00 $4.95 $25.69 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $7.67 $0.00 $4.73 $35.96 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $19.11 $0.19 $4.52 $45.77 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.03 $11.95 $4.32 $55.11 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $23.15 $4.13 $63.98 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $3.94 $72.85 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $3.76 $81.26 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $3.59 $89.20 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $3.43 $96.67 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 $30.82 **Units are $/acre. Remember payment is only on 85% of base acres** 5 2014 Farm Bill Corn: Mitchell County Payout for ARC-CO at $5.29/bu County yield < 94bu/ac ARC-CO payment maxes out at $60.84/ac PLC < ARC-CO max unless prices fall below $3.29 Corn ARC Payments vs. PLC Payments Under Different Yields and Prices for 2014/15 Marketing Year County: Mitchell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 115.0 Program Yield 115.0 5 Yr. Olympic Avg. MYA Price $5.29 Reference Price $3.70 Benchmark Revenue $608.35 Yield 69 77 85 94 104 115 127 138 MYA Price PLC Payment ARC Payment $6.35 $0.00 $60.84 $34.23 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5.82 $0.00 $60.84 $60.84 $28.48 $0.00 $0.00 $0.00 $0.00 $0.00 $5.29 $0.00 $60.84 $60.84 $60.84 $25.92 $0.00 $0.00 $0.00 $0.00 $5.16 $0.00 $60.84 $60.84 $60.84 $38.14 $0.00 $0.00 $0.00 $0.00 $5.03 $0.00 $60.84 $60.84 $60.84 $50.36 $0.06 $0.00 $0.00 $0.00 $4.90 $0.00 $60.84 $60.84 $60.84 $60.84 $13.58 $0.00 $0.00 $0.00 $4.55 $0.00 $60.84 $60.84 $60.84 $60.84 $49.98 $0.00 $0.00 $0.00 $4.35 $0.00 $60.84 $60.84 $60.84 $60.84 $60.84 $22.93 $0.00 $0.00 $4.15 $0.00 $60.84 $60.84 $60.84 $60.84 $60.84 $45.93 $0.00 $0.00 $3.96 $0.00 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $20.26 $0.00 $3.78 $0.00 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $43.12 $1.54 $3.61 $10.35 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $25.00 $3.45 $28.75 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $47.08 $3.29 $47.15 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $3.14 $64.40 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $3.00 $80.50 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $2.87 $95.45 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $2.74 $110.40 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 $60.84 **Units are $/acre. Remember payment is only on 85% of base acres** 6 3
2014 Farm Bill Sorghum: Mitchell County Payout for ARC-CO at $5.07/bu County yield < 75bu/ac ARC-CO payment maxes out at $46.49/ac PLC < ARC-CO max unless prices fall below $3.46 Sorghum ARC Payments vs. PLC Payments Under Different Yields and Prices for 2014/15 Marketing Year County: Mitchell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 91.7 Program Yield 91.7 5 Yr. Olympic Avg. MYA Price $5.07 Reference Price $3.95 Benchmark Revenue $464.92 Yield 55 61 68 75 83 92 101 110 MYA Price PLC Payment ARC Payment $6.14 $0.00 $46.49 $25.29 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5.58 $0.00 $46.49 $46.49 $20.39 $0.00 $0.00 $0.00 $0.00 $0.00 $5.07 $0.00 $46.49 $46.49 $46.49 $19.58 $0.00 $0.00 $0.00 $0.00 $4.94 $0.00 $46.49 $46.49 $46.49 $29.33 $0.00 $0.00 $0.00 $0.00 $4.82 $0.00 $46.49 $46.49 $46.49 $38.33 $0.00 $0.00 $0.00 $0.00 $4.70 $0.00 $46.49 $46.49 $46.49 $46.49 $9.73 $0.00 $0.00 $0.00 $4.36 $0.00 $46.49 $46.49 $46.49 $46.49 $37.95 $0.00 $0.00 $0.00 $4.16 $0.00 $46.49 $46.49 $46.49 $46.49 $46.49 $17.11 $0.00 $0.00 $3.97 $0.00 $46.49 $46.49 $46.49 $46.49 $46.49 $34.59 $0.00 $0.00 $3.79 $14.67 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $17.04 $0.00 $3.62 $30.26 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $34.21 $1.63 $3.46 $44.93 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $19.23 $3.30 $59.61 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $36.83 $3.15 $73.36 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $3.01 $86.20 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $2.87 $99.04 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $2.74 $110.96 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $2.62 $121.96 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 $46.49 **Units are $/acre. Remember payment is only on 85% of base acres** 7 2014 Farm Bill Soybean: Mitchell County Payout for ARC-CO at $12.28/bu County yield < 26 bu/ac ARC-CO payment maxes out at $38.93/ac PLC < ARC-CO max unless prices fall below $7.31 Soybean ARC Payments vs. PLC Payments Under Different Yields and Prices for 2014/15 Marketing Year County: Mitchell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 31.7 Program Yield 31.7 5 Yr. Olympic Avg. MYA Price $12.28 Reference Price $8.40 Benchmark Revenue $389.28 Yield 19 21 23 26 29 32 35 38 MYA Price PLC Payment ARC Payment $14.86 $0.00 $38.93 $22.72 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $13.51 $0.00 $38.93 $38.93 $24.05 $0.00 $0.00 $0.00 $0.00 $0.00 $12.28 $0.00 $38.93 $38.93 $38.93 $15.50 $0.00 $0.00 $0.00 $0.00 $11.97 $0.00 $38.93 $38.93 $38.93 $23.56 $0.00 $0.00 $0.00 $0.00 $11.67 $0.00 $38.93 $38.93 $38.93 $31.36 $0.00 $0.00 $0.00 $0.00 $11.38 $0.00 $38.93 $38.93 $38.93 $38.90 $4.76 $0.00 $0.00 $0.00 $10.56 $0.00 $38.93 $38.93 $38.93 $38.93 $28.54 $0.00 $0.00 $0.00 $10.08 $0.00 $38.93 $38.93 $38.93 $38.93 $38.93 $12.22 $0.00 $0.00 $9.63 $0.00 $38.93 $38.93 $38.93 $38.93 $38.93 $26.62 $0.00 $0.00 $9.20 $0.00 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $12.78 $0.00 $8.79 $0.00 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $27.13 $0.76 $8.39 $0.32 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $15.96 $8.01 $12.36 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $30.40 $7.65 $23.78 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $7.31 $34.55 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $6.98 $45.01 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $6.67 $54.84 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $6.37 $64.35 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 $38.93 **Units are $/acre. Remember payment is only on 85% of base acres** 8 4
Comparing the 2014 MYA Reference Price for 2014 ARC-CO vs. PLC Statute Price for Wheat Est Est. MYA Year14/15* Wt.* June... 6.50 13.0 Last Month 14/15 Est MYA price $5.83 July... 6.16 19.3 2014 ARC Reference Price August... 5.98 13.3 MYA Price 13/14 $6.87 September. 5.74 9.1 MYA Price 12/13 $7.77 October... 5.60 6.3 MYA Price 11/12 $7.24 Forecasted November.. 5.66 4.9 MYA Price 10/11 $5.70 Forecasted December.. 5.68 6.6 Statute, Min MYA Price 09/10 $5.50 Forecasted January 1... 5.68 7.6 5 Yr. Olympic Average Forecasted February... 5.68 5.2 Reference Price for 2014 ARC $6.60 Forecasted March... 5.68 6.0 ARC 14% Deductible $5.68 Forecasted April... 5.68 4.6 Est. 5 Yr. Olympic Average Forecasted May... 5.62 4.1 Reference Price for 2015 ARC $6.60 to $6.68 Est. 14/15 MYA price $5.92 PLC Reference Price & Differe $5.50 $0.18 *The monthly prices in black are NASS published prices, monthly prices in red are KSU estimates and all of the weights are KSU estimates. Comparing the 2014 MYA Reference Price for 2014 ARC-CO vs. PLC Statute Price for Corn Est MYA Year14/15* Wt.* September. 3.48 7.46 Last Month 14/15 Est MYA price $3.37 October... 3.28 12.98 2014 ARC Reference Price Forecasted November.. 3.43 11.42 MYA Price 13/14 $4.46 Forecasted December.. 3.56 8.98 MYA Price 12/13 $6.89 Forecasted January 1... 3.56 14.08 MYA Price 11/12 $6.22 Forecasted February... 3.56 7.44 MYA Price 10/11 $5.18 Forecasted March... 3.64 8.24 atute, MYA Price 09/10 $3.70 Forecasted April... 3.64 6.10 5 Yr. Olympic Average Forecasted May... 3.71 5.24 Reference Price for 2014 ARC $5.29 Forecasted June... 3.71 5.90 ARC 14% Deductible $4.55 Forecasted July... 3.78 6.40 Est. 5 Yr. Olympic Average Forecasted August... 3.78 5.76 Reference Price for 2015 ARC $5.29 to $5.29 Est. 14/15 MYA price 3.56 PLC Reference Price & Differe $3.70 $0.85 *The monthly prices in black are NASS published prices, monthly prices in red are KSU estimates and all of the weights are KSU estimates. 5
Comparing the 2014 MYA Reference Price for 2014 ARC-CO vs. PLC Statute Price for Sorghum Est MYA Year14/15* Wt.* September. 3.20 5.94 Last Month 14/15 Est MYA price $3.26 October... 3.06 12.38 2014 ARC Reference Price Forecasted November.. 3.28 16.60 MYA Price 13/14 $4.28 Forecasted December.. 3.41 13.28 MYA Price 12/13 $6.33 Forecasted January 1... 3.41 10.98 MYA Price 11/12 $5.99 Forecasted February... 3.41 5.08 MYA Price 10/11 $5.02 Forecasted March... 3.49 4.72 atute, MYA Price 09/10 $3.95 Forecasted April... 3.49 3.60 5 Yr. Olympic Average Forecasted May... 3.56 2.46 Reference Price for 2014 ARC $5.10 Forecasted June... 3.56 4.44 ARC 14% Deductible $4.38 Forecasted July... 3.63 10.38 Est. 5 Yr. Olympic Average Forecasted August... 3.63 10.14 Reference Price for 2015 ARC $5.10 to $5.10 Est. 14/15 MYA price 3.39 PLC Reference Price & Differe $3.95 $0.43 *The monthly prices in black are NASS published prices, monthly prices in red are KSU estimates and all of the weights are KSU estimates. Comparing the 2014 MYA Reference Price for 2014 ARC-CO vs. PLC Statute Price for Soybeans Est MYA Year14/15* Wt.* September. 10.90 7.26 Last Month 14/15 Est MYA price $9.37 October... 9.64 24.76 2014 ARC Reference Price Forecasted November.. 9.55 11.74 MYA Price 13/14 13.00 Forecasted December.. 9.55 9.54 MYA Price 12/13 14.40 Forecasted January 1... 9.62 15.84 MYA Price 11/12 12.50 Forecasted February... 9.62 7.64 MYA Price 10/11 11.30 Forecasted March... 9.70 5.92 MYA Price 09/10 9.59 Forecasted April... 9.70 4.24 5 Yr. Olympic Average Forecasted May... 9.76 3.30 Reference Price for 2014 ARC 12.27 Forecasted June... 9.76 3.46 ARC 14% Deductible 10.55 Forecasted July... 9.77 3.56 Est. 5 Yr. Olympic Average Forecasted August... 9.64 2.74 Reference Price for 2015 ARC 12.27 to $12.27 Est. 14/15 MYA price 9.73 PLC Reference Price & Differe 8.40 2.15 *The monthly prices in black are NASS published prices, monthly prices in red are KSU estimates and all of the weights are KSU estimates. 6
What to choose? Election is for the life of the Farm Bill! Best fit for your farm will depend on your preferences for risk management Protection against catastrophic price declines (PLC) Protection against shallow revenue losses (ARC) Or. Maximize Program payments 2014-2015 (if any) Payment likely for some crops under ARC-CO (wheat-yield loss, others-price loss) and PLC (corn/sorghum) How good you are at guessing where prices and yields will be in future years? 13 PLC vs. ARC PLC on wheat and soybeans is unlikely to pay in first year. ARC payment on wheat possible with low yields Corn and Sorghum MYA price at current levels will trigger PLC and ARC payments in first year. The spread in PLC and ARC sorghum strike prices is less than it is for corn. Higher program yields increase the PLC. Major price drop ($2.50 corn) makes for a large PLC payment, ARC will max out quickly 14 7
ARC-CO vs. ARC-IC 85% of base vs. 65% of base All crops per FSA farm serial # count towards the guarantee, can t pick and choose Paperwork will be more cumbersome Producers may see higher payments from ARC-IC if their individual yields are much greater than the county yield County Revenue Benchmark = $5.29 X 90 bu/acre = $476.10 (stop loss $47.61) Individual Benchmark = $5.29 X 150 bu/acre = $793.50 (stop loss $79.35) Less beneficial to diversified farms ARC-IC is based on the prior 5 year history of the crop that is planted, the crop planted determines the guarantee 15 Supplemental Coverage Option (SCO) Covers the deductible of the underlying insurance contract up to 86%. Triggers on losses at the county level. Some counties don t have coverage offers greater than 75%, so SCO covers 11 points of deductible or more. Adds more protection. Can be purchased on all planted acres, so farmers with significantly more crop acres than base acres can add more protection. No payment limit, so large farmers that will hit the $125,000 cap on commodity programs can offset more risk with SCO. Risk averse corn-soybean farmers who are willing to forego a likely small ARC payment because they want to avoid a catastrophic price collapse by selecting PLC & SCO over ARC. 16 8
Maximum Payments $125,000 cap on payments ($250,000 husband/wife) $25/acre=5,000 acres $45/acre= 2,778 acres $65/acre= 1,923 acres Large Farmers may want to put enough commodity acres in to ARC to max out the $125K payment limit and the balance of other commodity acres in PLC, i.e. hedge their bets. 17 OSU-KSU Farm Bill Decision Aid Microsoft Excel spreadsheet that can be downloaded to your computer at no cost Input you own farm acres and yields to look at updated payment yield and reallocating base Run scenarios with different price outlooks to evaluate program payouts for ARC, PLC, and SCO using your own farm data The Mitchell County Extension office will be able to run the decision tool for your own farm numbers upon making a scheduled appointment. www.agmanager.info 18 9
OSU-KSU Farm Bill Decision Aid 19 Resources for you www.agmanager.info Click on the Farm Bill Icon! Frequently Asked Questions Reallocating Base Updating Program Yield Articles on Price Forecasts Decision Tool Much more!!! USDA-FSA decision aids: ARC/PLC, Dairy www.fsa.usda.gov/fsa Farm Bill In-Depth Educational Meetings: January 12: Wichita January 13: Pittsburg January 14: Emporia January 15: Ottawa January 20: Salina January 21: McPherson January 22: Pratt January 26: Goodland January 27: Scott City January 28: Liberal January 29: Dodge City February 10: Phillipsburg February 11: Hays February 12: Frankfort February 13: Atchison Thank you to our Premier Sponsors: Ag Risk Solutions ARMtech Insurance Services Farm Credit Associations of Kansas ProAg 32 10
Questions? More information available at: www.agmanager.info 33 11