Agricultural Lender meetings Dexter and Sikeston, MO December 1, 214 Pat Westhoff (westhoffp@missouri.edu) FAPRI-MU, University of Missouri www.fapri.missouri.edu
Eliminates many existing farm programs Direct payments, countercyclical payments, ACRE Dairy price supports and MILC payments Reduces SNAP (food stamp) spending Limits conservation reserve enrollment Allocation of savings Reduce federal deficit Create new programs that pay farmers when prices or revenues fall below a trigger
Commodity programs Continuing pre- 214 farm bill laws With the 214 farm bill in place Change because of the 214 farm bill 58.8 44.5-14.3 Crop insurance 84.1 89.8 +5.7 (Comm. programs + crop insurance) 142.9 134.3-8.6 Conservation 61.6 57.6-4. Nutrition (SNAP) 764.4 756.4-8. Everything else* 4. 8.1 +4. Total 972.9 956.4-16.6 *Includes research, energy, horticulture, rural development and more. Source: http://www.cbo.gov/publication/4549?utm_source=feedblitz&utm_medi um=feedblitzemail&utm_content=812526&utm_campaign=
CCC net outlays total $76 billion over FY 214-23 Billion dollars 14 12 1 8 6 4 2 27 29 211 213 215 217 219 221 223 Fiscal year Grains, oilseeds & cotton Conservation All other Source: FAPRI-MU U.S. Baseline Briefing Book, page 47
Crop insurance share of program spending increases 3 25 Billion dollars 2 15 1 5 27 29 211 213 215 217 219 221 223 Fiscal year Net CCC Crop insurance Non-CCC conservation Other non-ccc Source: FAPRI-MU U.S. Baseline Briefing Book, page 47
No more direct, countercyclical or ACRE program payments Must choose between Price loss coverage (PLC, payments when prices fall below a trigger) Agriculture risk coverage (ARC, payments when per-acre revenues fall below a trigger) A new crop insurance option (SCO) for PLC participants A new crop insurance option (STAX) for cotton producers No ARC or PLC program for cotton But cotton producers get transition payment in 214 and can get ARC/PLC for other crops grown on the farm
Producers on each farm can choose An individual farm version of ARC for all crops on the farm OR For each crop on a farm, they can choose between the county version of ARC or PLC Choice is made once for the life of the farm bill If producers on a farm do not agree on a choice No ARC or PLC benefits are available in 214 PLC is only remaining option for 215 and beyond
Like countercyclical payments in some respects Makes payments when prices fall below a trigger Payments tied to base acreage and program yields These generally do NOT depend on current production choices Except for those with cotton base or with fruits and vegetables, planting more or less of a given crop will have NO effect on payments But different in many ways, including Formula is simpler payment rate is just the difference between reference price and the higher of the season-average farm price and the loan rate New reference prices are far higher than old target prices
28 farm bill Target prices 214 farm bill Reference prices Wheat/bu. $4.17 $5.5 Corn/bu $2.63 $3.7 Soybeans/bu. $6. $8.4 Sorghum/bu. $2.63 $3.95 Upland cotton/lb. 71.25 cents None* Long-grain rice/cwt $1.5 $14. Japonica rice/cwt $1.5 $16.1 *Upland cotton is not eligible for PLC (or ARC) benefits under the 214 farm bill. Instead, it has a special crop insurance program: STAX. Under PLC, payments are made in the October of the year after the crop is harvested (e.g., payments for the 214 crop would be made in October 215 or later)
Dollars per bushel Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. 8 7 6 5 4 3 2 Corn prices FAPRI farm USDA farm Reference Paid on 85% of base acres (tied to historical plantings) 1 Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214
Dollars per bushel 8 7 6 219 yield in #5 is 14 bushels per acre (avg: 174) 5 4 3 2 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Actual/average #5 #25 #495 Reference Source: FAPRI-MU stochastic baseline, March 214
Dollars per bushel 8 7 6 5 4 3 2 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Actual/average 9th percentile 1th percentile Reference Source: FAPRI-MU stochastic baseline, March 214
Dollars per bushel 5. 4.5 4. 3.5 3. 2.5 2. 13/14 14/15 15/16 16/17 17/18 18/19 FAPRI-Mar FAPRI-Nov. Dec. futures Reference Source: FAPRI-MU baselines, Mar. and Nov. 214; CME December futures contracts, Nov. 28, 214
12 1 95 98 9 8 8 6 49 4 2 14 21 25 26 25 214/15 215/16 216/17 217/18 218/19 1th %tile 5th %tile Mean 9th %tile
Dollars per bushel Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Paid on 85% of base acres (tied to historical plantings) 16 14 12 1 8 6 4 2 Soybean prices FAPRI farm USDA farm Reference Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214
Dollars per bushel 16 14 12 1 8 6 4 2 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Actual/average 9th percentile 1th percentile Reference Source: FAPRI-MU stochastic baseline, March 214
Dollars per bushel 14 13 12 11 1 9 8 7 6 5 13/14 14/15 15/16 16/17 17/18 18/19 FAPRI-Mar. FAPRI-Nov. Jan. futures Reference Source: FAPRI-MU baselines, March and Nov. 214; CME Jan. futures contracts, Nov. 28, 214
Dollars per bushel Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Paid on 85% of base acres (tied to historical plantings) 9 8 7 6 5 4 3 2 1 Wheat prices FAPRI farm USDA farm Reference Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214
Dollars per bushel 9 8 7 6 5 4 3 2 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Actual/average 9th percentile 1th percentile Reference Source: FAPRI-MU stochastic baseline, March 214
Dollars per bushel 7.5 7. 6.5 Jun-Nov prices for 214/15 avg. ~$6.7, with ~66% already marketed, so PLCs are very unlikely for 214 crop of wheat 6. 5.5 5. 4.5 4. 3.5 3. 13/14 14/15 15/16 16/17 17/18 18/19 FAPRI-Mar FAPRI-Nov. July futures Reference Source: FAPRI-MU baselines, March and Nov. 214; CME July futures contracts, Nov. 28, 214
Dollars per cwt 16 15 14 13 12 11 1 9 8 13/14 14/15 15/16 16/17 17/18 18/19 Mar. FAPRI Jan. futures Reference Nov. FAPRI Source: FAPRI-MU baselines, March and Nov. 214; Jan. rough rice futures contracts, Nov. 28, 214
Cents per pound 1 9 8 7 6 5 4 3 2 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Mar. FAPRI Oct. FAPRI Oct. futures Source: FAPRI-MU baselines, March and November 214; CME Oct. futures, Nov. 28, 214
Dollars per acre Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) 9 8 7 6 5 4 3 2 1 Corn revenues per acre Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Oct. 214 baseline
Max of (national avg. farm price, reference price) County yield 29/1 $3.7/bu. 137.9 bu./a. 21/11 $5.18 13.3 211/12 $6.22 113.8 212/13 $6.89 77.8* 213/14 $4.46 137.2 Olympic average $5.29 118.1 Revenue 214/15 benchmark revenue $625 86% of benchmark $538 1 st option triggering payments $3.4 <158 <$538 2 nd option triggering payments <$3.16 17 <$538 *Note: this yield would be replaced by a plug yield, but regardless, it is dropped as the lowest of the five years.
3 25 25 27 24 25 26 25 21 2 15 14 16 13 1 5 214/15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
3 25 2 Given Nov. baseline prices, 214 expected payments would be considerably higher under both programs. 27 25 25 26 25 24 21 15 14 16 13 1 5 214/15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
Dollars per acre Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) 7 6 5 4 3 2 1 Soy revenues per acre Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Oct. 214 baseline
2 18 16 14 12 1 8 6 4 2 19 18 18 15 14 15 14 12 11 9 214/15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
Dollars per acre Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) Wheat revenues per acre 4 35 3 25 2 15 1 5 Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Oct. 214 baseline
2 18 16 14 12 1 8 6 4 2 19 18 17 17 11 11 1 1 9 7 214/15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
2 18 16 14 12 1 8 6 4 2 Given Nov. baseline prices, 214 expected payments would be lower under PLC. 1 1 17 17 11 11 214/15 215/16 216/17 217/18 218/19 9 18 7 19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
7 6 5 Given Nov. baseline prices, 214 expected payments would be higher under PLC. 62 6 62 63 4 3 2 1 22 9 1 11 1 1 214/15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline
214/15 national seasonaverage corn price PLC payment per base acre (program yield= 1 bu./a.) ARC payment per base acre if county yield is 13 bu./a. ARC payment per base acre if county yield is 15 bu./a. ARC payment per base acre if county yield is 17 bu./a. 3. $59.5 $53.1 $53.1 $23.19 3.2 $42.5 $53.1 $48.69 $ 3.4 $25.5 $53.1 $23.19 $ 3.6 $8.5 $53.1 $ $ 3.8 $ $36.79 $ $ 4. $ $14.69 $ $
Reallocate base acres? Cannot change total, but can reallocate existing Based on 29-12 planted + prevented planted Plantings from 213 forward generally do not affect base area or payments (except on old cotton base) Update program yield for PLC? Can keep old countercyclical payment yield Or update to 9% of 28-212 average (with many bells and whistles, including plugs for years with very low yields) Note: both of these choices are made by landowners ARC-PLC choice is by producers (in cash rent situation renter, not landowner)