The 2014 Farm Bill Program Selection JEWELL County Sandra L. Wick K-State Research and Extension Post Rock District Crop Production Agent 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: JEWELL County Payout for ARC-CO at $6.60/bu. County yield < 34 bu./ac ARC-CO payment maxes out at $27.52/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: Jewell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 41.7 Program Yield 41.7 5 Yr. Olympic Avg. MYA Price $6.60 Reference Price $5.50 Benchmark Revenue $275.22 Yield 25 28 31 34 38 42 46 50 MYA Price PLC Payment ARC Payment $7.99 $0.00 $27.52 $12.97 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $7.26 $0.00 $27.52 $27.52 $11.63 $0.00 $0.00 $0.00 $0.00 $0.00 $6.60 $0.00 $27.52 $27.52 $27.52 $12.29 $0.00 $0.00 $0.00 $0.00 $6.44 $0.00 $27.52 $27.52 $27.52 $17.73 $0.00 $0.00 $0.00 $0.00 $6.28 $0.00 $27.52 $27.52 $27.52 $23.17 $0.00 $0.00 $0.00 $0.00 $6.12 $0.00 $27.52 $27.52 $27.52 $27.52 $4.13 $0.00 $0.00 $0.00 $5.68 $0.00 $27.52 $27.52 $27.52 $27.52 $20.85 $0.00 $0.00 $0.00 $5.42 $3.34 $27.52 $27.52 $27.52 $27.52 $27.52 $9.05 $0.00 $0.00 $5.18 $13.34 $27.52 $27.52 $27.52 $27.52 $27.52 $19.13 $0.00 $0.00 $4.95 $22.94 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $8.99 $0.00 $4.73 $32.11 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $19.11 $0.19 $4.52 $40.87 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $10.69 $4.32 $49.21 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $20.69 $4.13 $57.13 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $3.94 $65.05 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $3.76 $72.56 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $3.59 $79.65 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $3.43 $86.32 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 $27.52 **Units are $/acre. Remember payment is only on 85% of base acres** 5 2014 Farm Bill Corn: JEWELL County Payout for ARC-CO at $5.29/bu. County yield < 99 bu./ac ARC-CO payment maxes out at $64.38/ac PLC < ARC-CO max unless prices fall below $3.29 **Units are $/acre. Remember payment is only on 85% of base acres** 6 3
2014 Farm Bill Sorghum: JEWELL County Payout for ARC-CO at $5.07/bu. County yield < 84 bu./ac ARC-CO payment maxes out at $52.22/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: Jewell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 103.0 Program Yield 103.0 5 Yr. Olympic Avg. MYA Price $5.07 Reference Price $3.95 Benchmark Revenue $522.21 Yield 61 68 76 84 93 103 113 124 MYA Price PLC Payment ARC Payment $6.14 $0.00 $52.22 $31.58 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5.58 $0.00 $52.22 $52.22 $25.02 $0.00 $0.00 $0.00 $0.00 $0.00 $5.07 $0.00 $52.22 $52.22 $52.22 $23.22 $0.00 $0.00 $0.00 $0.00 $4.94 $0.00 $52.22 $52.22 $52.22 $34.14 $0.00 $0.00 $0.00 $0.00 $4.82 $0.00 $52.22 $52.22 $52.22 $44.22 $0.84 $0.00 $0.00 $0.00 $4.70 $0.00 $52.22 $52.22 $52.22 $52.22 $12.00 $0.00 $0.00 $0.00 $4.36 $0.00 $52.22 $52.22 $52.22 $52.22 $43.62 $0.02 $0.00 $0.00 $4.16 $0.00 $52.22 $52.22 $52.22 $52.22 $52.22 $20.62 $0.00 $0.00 $3.97 $0.00 $52.22 $52.22 $52.22 $52.22 $52.22 $40.19 $0.49 $0.00 $3.79 $16.48 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $20.83 $0.00 $3.62 $33.99 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $40.04 $0.22 $3.46 $50.47 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $20.06 $3.30 $66.95 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $39.90 $3.15 $82.40 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $3.01 $96.82 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $2.87 $111.24 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $2.74 $124.63 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $2.62 $136.99 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 $52.22 **Units are $/acre. Remember payment is only on 85% of base acres** 7 2014 Farm Bill Soybean: JEWELL County Payout for ARC-CO at $12.28/bu. County yield < 31 bu./ac ARC-CO payment maxes out at $46.30/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: Jewell Type: All ARC PLC 5 Yr. Olympic Avg. County Yield 37.7 Program Yield 37.7 5 Yr. Olympic Avg. MYA Price $12.28 Reference Price $8.40 Benchmark Revenue $462.96 Yield 23 25 28 31 34 38 42 46 MYA Price PLC Payment ARC Payment $14.86 $0.00 $46.30 $26.65 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $13.51 $0.00 $46.30 $46.30 $19.87 $0.00 $0.00 $0.00 $0.00 $0.00 $12.28 $0.00 $46.30 $46.30 $46.30 $17.47 $0.00 $0.00 $0.00 $0.00 $11.97 $0.00 $46.30 $46.30 $46.30 $27.08 $0.00 $0.00 $0.00 $0.00 $11.67 $0.00 $46.30 $46.30 $46.30 $36.38 $1.37 $0.00 $0.00 $0.00 $11.38 $0.00 $46.30 $46.30 $46.30 $45.37 $11.23 $0.00 $0.00 $0.00 $10.56 $0.00 $46.30 $46.30 $46.30 $46.30 $39.11 $0.00 $0.00 $0.00 $10.08 $0.00 $46.30 $46.30 $46.30 $46.30 $46.30 $15.11 $0.00 $0.00 $9.63 $0.00 $46.30 $46.30 $46.30 $46.30 $46.30 $32.21 $0.00 $0.00 $9.20 $0.00 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $11.75 $0.00 $8.79 $0.00 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $28.97 $0.00 $8.39 $0.38 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $45.77 $12.21 $8.01 $14.70 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $29.69 $7.65 $28.28 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.25 $7.31 $41.09 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $6.98 $53.53 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $6.67 $65.22 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $6.37 $76.53 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 $46.30 **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 into 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 Post Rock Extension District will be able to run the decision tool for individual producers by appointment. www.agmanager.info 18 9
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 19 Questions? Sandra L. Wick K-State Research and Extension Post Rock District Crop Production Agent swick@ksu.edu Smith Center Office 785-282-6823 More information available at: www.agmanager.info 20 10