More than 450 people packed into Versailles High School to hear from three leading farm bill experts.
Many of the details are yet to be determined as the farm bill implementation process is just getting started. Adam Sharp, from the Ohio Farm Bureau, provided an overview of the 959-page Agricultural Act of 2014.
“It is very low cost if you look at the overall budgets. The whole farm bill is less than 2% of the total budget, and the agricultural titles are just a fraction of that,” Sharp said. “There are 12 titles in the farm bill, but most of the debate is in the Title 1 for commodities and in the nutrition title.”
The new Dairy Producers Margin Protection Program (DPMPP) replaces the MILC and product support programs. The DPMPP is voluntary and based on the margin between the price of milk and feeds costs. The program does not guarantee a profit and there is no supply control provision. It does create a Dairy Product Donation Program when margins fall below $4 for two months in which USDA will buy and distribute dairy products to food banks, Sharp said.
“For the first time in a long time the dairy program is actually easier to understand than the commodity programs,” he said. “I am fascinated to see how this is going to work and how dairy farmers are going to react to it. We’ve never had a dairy program like this.”
Here is more from Sharp on the new dairy program:
The Conservation Title consolidates 23 duplicative programs into 13 and accounts for $56 billion in funding, or about 6% of the farm bill. The Conservation Reserve Program was reduced to 24 million acres by 2018 while the Conservation Stewardship Program is set at 10 million acres per year. The Environmental Quality Incentives Program is still mostly focused on livestock. It is important to note that conservation compliance is linked to being eligible for the subsidization of the crop insurance premium, Sharp said.
Specialty crops got a boost with $9 million annually for technical assistance and additional funding through Specialty Crop Block Grants, the Farmers Market Promotion Program and the Plant Pest and Disease Program, among others.
From there, Jonathan Coppess (originally from Ohio but now with the University of Illinois) delved into the complexities of the Commodity Title Programs. Here is an update from Coppess:
Here is an overview from Coppess on the Commodity Title.
The 2014 Farm Bill gives farm operators and landowners the choice among fixed price supports (PLC) and county- or farm-level revenue coverage (ARC). Assuming trend yield levels in 2014 for corn and soybeans, County ARC payments in 2014 would reach their limits in most Midwest counties at price levels that are above the PLC reference price levels but below the USDA’s projections for the 2014 marketing year.
In comparing the Individual and County ARC options, Individual ARC seems likely to trigger smaller payments than County ARC under most circumstances. This is because Individual ARC pays on 65% of base acres compared to 85% for County ARC. Also, by averaging revenues across crops, Individual ARC will tend to reduce the likelihood and size of payments due to diversification effects. Individual ARC also has higher reporting requirements than the other choices. However, Individual ARC does provide revenue protection based on actual farm-level yields, which could make it more desirable in areas where there is significant yield basis risk (i.e. the potential for significant difference between county and farm yields).
Second, the choice between ARC and PLC will be fundamentally related to price expectations relative to the reference price. Take corn as an example with a $3.70 reference price. If MYA prices are expected to be above $3.70 over the next five years, ARC will provide better protection since PLC will never trigger payments. If prices are expected to be very low, averaging less than $3, PLC will arguably provide better support due to the adjustment in the ARC revenue guarantee to lower prices and the 10% cap on ARC payments. Price expectations in the $3 to $3.70 range make the comparison and decision more difficult. ARC will potentially make larger payments than PLC towards the higher end of that price range, particularly during early years of the Farm Bill. However, PLC could make larger payments at the lower end of the range, particularly in later years.
For corn and soybeans, price expectations offered by contracts on futures markets suggest that County ARC will make larger payments. This expectation of higher payments should be weighed against the higher payments offered by PLC at low, but unlikely, prices.
Finally, the choice of either ARC option will make the producer ineligible to purchase the supplemental coverage option (SCO) crop insurance program on that farm, which will be made available beginning in the 2015 crop year. Related to this, in addition to price expectations, producers should also consider how the base acreage on their farms compares to what they expect to plant over the next five crop years. The PLC and ARC commodity programs tie payments to base acreage while the SCO program covers planted acreage.
The 2014 Farm Bill creates a new insurance program called the Supplemental Coverage Option (SCO). SCO will be available starting in the 2015 crop year and provides area-based coverage to supplement the producer’s individual insurance plan coverage. SCO will be rated by the Risk Management Agency and have its premium subsidized at a rate of 65%. While 2014 crop insurance program decisions should not be impacted by the new SCO program, commodity program choices that will have to be made this year will impact a producer’s eligibility to use SCO in future crop years. Specifically, acreage planted to crops that are enrolled in the county or individual ARC commodity programs will not be eligible for SCO coverage. Only crops enrolled in the PLC program will be eligible for SCO.
Here more about SCO from G. Art Barnaby, Jr. from Kansas State University.