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Economics
Outline• 2014 Farm Bill Decisions• Univ. of Illinois Decision Tool
– fsa.usapas.com
• TAMU/FAPRI Tool– https://decisionaid.afpc.tamu.edu
• USDA Decision Timeline
• Regional Meeting Schedule and Agendas• Input From You
Economics
Outline
Base Reallocation Decision• Can’t increase base – only reallocate• Decision made by owner. Applies to all covered crops
and is in effect with the 2014 crop• Choices are to retain base as of September 30, 2013
OR reallocate proportional to planting & prevented planting from 2009-12
• If a crop was prevented from planting but planted to a subsequent crop, you choose which acreage to count but can’t count both
• Prevented has to be due to natural disasters• Double cropped acres count IF an established
practice (USDA) for the area• Base can’t exceed crop acres (except for double crop)
3
Base Reallocation Example
Base Acres Average Reallocation Reallocation9/30/2013 2009 2010 2011 2012 2009-12 Percentage Option
Corn 50 70 75 60 65 67.5 67.5% 67.5Soybeans 35 30 25 40 35 32.5 32.5% 32.5Wheat 15 0 0 0 0 0 0.0% 0
Total 100 100 100 100 100 100
Crop History
Payment Yield Update Decision• One time, irrevocable option made by owner• Made on covered crop-by-covered crop basis. Don’t
have to update all of the yields on a FSA farm• Choices are to retain the 2013 counter-cyclical
payment yield OR update to 90% of the average yield for 2008-2012
• A year is excluded if no acres were planted to a crop• If the farm yield is below 75% of the county’s 2008-12
average, use 75% of the county’s 2008-12 average• Decision independent of the base reallocation decision
5
Year Corn Corn Corn
2008 DNP No Records 95
2009 88 No Records 100
2010 120 No Records 120
2011 100 110 130
2012 150 120 120
Substitute Yield 70 70 70
2013 CC Yield 90 90 90
Yield UpdatingYield Updating
Could Update to: (88 + 120 + 100 + 150)/4 * .9 =103
Farmer SmithOn Farm 5 Yrs
Farmer JonesOn Farm 2 Yrs
(70 + 70 + 70 + 110 + 120)/5 * .9 =79
Farmer BrownOn Farm 2 Yrs
Obt
aine
d Fr
om P
rior T
enan
t
(95 + 100 + 120 + 130 + 120)/5 * .9 =102
Payment Yield Update Example
2008 2009 2010 2011 2012 Average PaymentYield per PA Planted no 165 155 No 35 2008-12 Yield
evidence Acres75% of 2008-12County average 107 107 107 107 107
90%Yield Used 107 165 155 107 134 120
** It might be a good idea to update the payment yield even if you are not going to enroll in PLC. You never know what future Farm Bills will have for Title I programs or your ability to update your history.
Price Loss Coverage (PLC)
Reference Prices
2014 Farm Bill 2008 Farm Bill
% Change from 2008
Wheat $5.50/bu. $4.17/bu. +32%
Corn $3.70/bu. $2.63/bu. +41%
Grain Sorghum $3.95/bu. $2.63/bu. +50%
Barley $4.95/bu. $2.63/bu. +88%
Soybeans $8.40/bu. $6.00/bu. +40%
Rice $14.00/cwt. $10.50/cwt. +33%
Peanuts $535/ton $495/ton +8%
PLC Payment Calculations
(Reference Price – Effective Price) x Payment Yield x Payment Acres
– Effective price = max(MYA Price, Loan Rate)– Payment Yield is old CCP yield or update to 90% of
2008-12 average yield per planted acre– Payment Acres is base acres– Paid on 85% of Base Acres
Example: Farm has 100 acre corn base with payment yield of 150 bu/a MYA price is $3.50/bu.PLC Payment = ($3.70 -$3.50) x 150 x 100 x 85% = $2550
Agriculture Risk Coverage, County Coverage (ARC-C)
• Area-based revenue guarantee
• Guarantee based on 5-year Olympic average of county yield and 5-year Olympic average of US MYA price
• Covers losses between 86% and 76% of benchmark revenue
• Paid on 85% of base acres
• Producers can choose to participate on a crop-by-crop basis
Agriculture Risk Coverage (Area Election)
Producer Loss
Crop Insurance Stand-Alone
(66% for 75% RP)
Crop Insurance Premium
For ARC Benchmark Revenue Based On 5-Year Olympic Average County Yields/National MYA Prices (or Ref. Price)
14% Loss
Coverage between 86% and
76% of revenue benchmark.
ARC (85% Base Acres)
Revenue based plan (paid out on base acres)
Individual Crop Program
ARC County Example• Olympic Avg. MYA Corn Price = $5.30 and
Olympic Avg. County Yield = 151 bu/ac.• Benchmark Revenue = $800 = ($5.30 x 151)• Revenue Guarantee = $688 = ($800 x 0.86)• Maximum ARC-C Payment = $80 = ($800 x 0.10)• 100 base acres• Actual County Yield = 160 bu/acre and Actual
MYA price = $4/bu.• Actual County Revenue = $640 = (160 x $4)• ARC-C Payment = $4,080 = ($688 - $640) x 100
x 85%12
Agriculture Risk Coverage, Individual Coverage (ARC-I)
• Multi-crop, multi-farm coverage– Benchmark revenue is based on all covered
commodities on a farmers share across all farms in which the producer has an interest
• Individual benchmark calculated as 5-year Olympic average revenue (higher of reference price or US MYA price) across all covered crops and farms, weighted by current year plantings
• Covers losses between 86% and 76% of benchmark revenue
• Paid on 65% of base acres
ARC – Individual Example – Part 1: Determining the Revenue Guarantee
14
Total Acres 500
Corn Soybeans Wheat Corn Soybeans Wheat2009 185 65 50 2009 $3.55 $9.59 $4.872010 170 60 52 2010 $5.18 $11.30 $5.702011 195 68 47 2011 $6.22 $12.50 $7.242012 90 45 48 2012 $6.89 $14.40 $7.772013 140 48 50 2013 $4.50 $12.70 $6.87
Revenue2009 657$ 623$ 244$ 2010 881$ 678$ 296$ 2011 1,213$ 850$ 340$ 2012 620$ 648$ 373$ 2013 630$ 610$ 344$
Avg. 722.45$ 649.78$ 326.73$
2014 Plantings 200 200 100
Benchmark 614$ Guarantee 528$ 61.42$ max
MYA PricesYield
ARC – Individual Example – Part 2: Determining Payments
15
2014 Plantings 200 200 100
Benchmark 614$ Guarantee 528$ 61.42$ max
2014 Prices 3.90$ 10.35$ 6.30$ Total2014 Yield 144 48 532014 Production 28,800 9,600 5,300 2014 Revenue 112,320$ 99,360$ 33,390$ 245,070$
2014 Rev / Acre 490.14$ ARC-I Pmt. Rate 38.11$ Total Base Ac. 450ARC-I Payment 11,146$
FARM PROGRAM DECISION TOOL
University of Illinois
fsa.usapas.com
Development & Outreach Coalition
• University of Illinois• Watts & Associates• The Ohio State University• Michigan State University• Delaware State University• University of Arkansas-Pine Bluff• North Carolina A&T University• Montana State University 1
7
18
FARM PROGRAM DECISIONS
• Farm Bill Toolbox on farmdoc
• Walk farmers through decision matrix and how best to use the APAS tool
• Are 3 sets of decisions; 7 steps towards making them
19
FARM PROGRAM DECISION MATRIX
Step 1: Collect Farm informationProducers advised to collect necessary information for each FSA farm
FSA August letter: base, yields, acres planted
Yield history for 2008 to 2012; crop insurance records count
20
FARM PROGRAM DECISION MATRIX
Step 2: Retain or Update YieldsLandowner decision; keep current (FSA letter) or update to 90% of 2008-2012
Need cropping history; Crop Insurance records count
Crop-by-crop decision; generally, choose the one that results in highest yield
21
UPDATE PAYMENT YIELDS
Select state, county and crop
Producer needs yield history for 2008 to 2012 crop years
Enter historical yields per planted acre
Producer advised to select the highest yield
22
Economics
Let’s Try It!• Handout has the farm yields (per planted
acre) for 2008-2012
• Notice that the decision tool automatically substitutes the plug yield if the farm yield is lower than the plug – (75% of the county average yield from 2008-
12)
FARM PROGRAM DECISION MATRIX
Step 3: Retain or Reallocate BaseLandowner decision; all program crops on farm; will not increase or decrease total
Keep current or reallocate to ratio of 2009-2012 plantings of program crops
Generally, look to increase base for crops depending on potential for payments
24
REALLOCATE BASE ACRES
Using information from FSA letter for each farm
Use “add a crop” menu for each program crop with base acres
Enter existing base acres on the farm for that crop
Enter planted acres for each crop on the farm, 2009 to 2012 crop years
Compare reallocation to current base acres for decision
25
Economics
Let’s Try It!• Handout has the farm planted acres from
2009-12 and the current base acres
• Notice that you have to enter zero’s for crops that aren’t planted in 2009-12
• Reallocate to crops that are likely to payout more frequently
FARM PROGRAM DECISION MATRIX
Step 4: Compare ARC-CO & PLCLandowner & producer; crop-by-crop decision
ARC-CO: county revenue program; 5-year Olympic average MYA prices & county yields
PLC: price only; deficiency payment when MYA price is below reference price
APAS Sample Farms for quick, simple comparison
27
28
SAMPLE FARM
Estimated expected payments available per acre by crop
Available on a one year horizon or 5 year horizon
Because it is on a crop-by-crop basis, ARC-IC is not shown
29
FARM PROGRAM DECISION MATRIX
Step 5: Consider ARC-IC
Landowner & producer; all program crops
Individual, farm-level revenue program using farm’s yields for all program crops with base
5-year Olympic average revenues, added together and weighted by planted acres
30
SAMPLE FARM
Expected Program Payments
•For all crops using the sample farm’s acreage
•Scrolling over bar will provide detail on expected payment
•2014 crop year & Average expected payments for the 5-year horizon (2014-2018)
31
FARM PROGRAM DECISION MATRIX
Step 6: Consider SCOSupplemental Coverage Option; crop insurance
County-triggered (86%) down to COMBO policy
Applied to underlying policy deductible
Is only available for crops in PLC (or no program) 32
SAMPLE FARM
Expected SCO shown:
Depends on COMBO policy
Only shown in 5-year horizon b/c not available in 2014
Shown along with PLC for comparison to ARC-CO
Disclaimer needed for counties where it is unavailable
33
SAMPLE FARM
Safety Net Analysis:
Using different levels of target revenue
Compare probability of reaching target revenue
With no programs
With ARC-CO
With PLC & SCO
With ARC-IC
34
FARM PROGRAM DECISION MATRIX
Step 7: Decisions & Sign-upDesigned to help producer make an informed decision
Program decision must be made for 2014 crop or forfeit payments, deemed in PLC 2015-2018
Elections on programs, base and payment yields
Sign-up (yearly) to enter contract for payments
35
Questions and Thank You
www.farmbilltoolbox.farmdoc.illinois.edu
36
ADDITIONAL SLIDESAPAS Sample Farms
37
SAMPLE FARMS
Quick Comparison of Programs
Select your state
Select your county
Select your price series
•CBO = Congressional Budget Office May 2014; higher range
•USDA = WASDE forecast prices; lower range
Note estimated crop insurance
38
SAMPLE FARMS
39
SAMPLE FARMS
NASS data of crop acreages for counties in the Crop Reporting District
Average planted acres from 2009 to 2012 crop years
Scroll over to see the average acreage for each crop
40
SAMPLE FARM
The sample farm is constructed based on acres of top 4 crops; scaled to $500,000 revenue for the whole farm (2013 prices)
This is a sample farm for the county
Can be used for simple and quick program comparison
Can be used as a ‘benchmark’
Can change the number of acres for each crop to better align with farm’s base
41
SAMPLE FARM
Expected Program Payments
•For all crops using the sample farm’s acreage
•Scrolling over bar will provide detail on expected payment
•2014 crop year & Average expected payments for the 5-year horizon (2014-2018)
42
SAMPLE FARM
Click “Show Prices” to see the two price series (CBO & USDA) available
Represent a high price and low price scenario for quick comparison of programs
43
SAMPLE FARM
Expected payments also available per acre by crop
Available on a one year horizon or 5 year horizon
Because it is on a crop-by-crop basis, ARC-IC is not shown
44
SAMPLE FARM
Safety Net Analysis:
Using different levels of target revenue
Compare probability of reaching target revenue
With no programs
With ARC-CO
With PLC & SCO
With ARC-IC
45
FSA Training on ARC/PLCPart 14
Louisville, KySeptember 24-26, 2014
https://decisionaid.afpc.tamu.edu/
2014 Farm Bill and Insurance 2014 Farm Bill and Insurance Decision Aid Developed by the Decision Aid Developed by the
NAAFPNAAFP
04/21/23 46
A Few Things to Think AboutA Few Things to Think About
• All of the decisions required in the farm bill add to the producer’s ability to tailor the bill to fit their operations – not just add to complication
• There will be plenty of time to gather needed info, analyze options, and make sign-up decisions – no reason to panic
• Two kinds of producers – those who want to maximize their government payments and those who want to manage risk– It is one thing to use point estimates to show how
programs work – quite another for evaluating alternatives under risk04/21/23 47
Discussion of NAAFP Decision Discussion of NAAFP Decision AidAid
• National Association for Agriculture and Food Policy (NAAFP) has been working on the decision aid for nearly 2 years– AFPC at Texas A&M– FAPRI at University of Missouri-Columbia
• Applied for and received funding from USDA-FSA to develop nation-wide decision aid
• Available today at:https://www.afpc.tamu.edu/models/decisionaid.php
• Available soon on the USDA-FSA website04/21/23 48
Overview of NAAFP Farm Bill Overview of NAAFP Farm Bill Decision AidDecision Aid
• Register as a producer or multi client user– Email address and password protect your data– Email address allows us to contact user when FSA
changes rules or new price projections are available
• Enter data for all FSA Farm and Tract Numbers– All Crops and their Practices by Tract number– Types not critical to FSA but important to RMA for SCO,
STAX, and insurance
• Analyze yield update, base reallocation, ARC-IC, ARC-CO, PLC, SCO, STAX, and insurance options
04/21/23 49
Winter Wheat (Type 11)
Spring Wheat, exc. Durum (Type 12)
Durum Wheat (Type 15)
Why Enter Crop Types?Why Enter Crop Types?
“Wheat is Wheat” quoted from an FSA Expert
RMA User-Specified Type FSA – “All Wheat”
• ARC/PLC interact with crop insurance (SCO, Yield Protection, Revenue Protection, etc.)
• To analyze this interaction we must analyze farm units at the RMA tract/farm unit level
• The decision aid requires practice and type for each crop04/21/23 50
Overview of NAAFP Farm Bill Overview of NAAFP Farm Bill Decision AidDecision Aid
• Producers’ data are stored in the decision aid– Data accessed by a user name and password
• We encourage producers to enter their data now and run the tool for each decision– Presently farmers should be using the tool to analyze
Yield Update decision– Next farmers can consider the interaction between
Base Reallocation and PLC, ARC-CO, ARC-IC Election• This decision should be tested with multiple price scenarios
– Before final election, farmers can re-run the analysis to see if updated price outlooks in the Spring changed their preferences
04/21/23 51
Preparation for Using Preparation for Using NAAFP Decision Aid NAAFP Decision Aid
• Information needed for the Decision Aid are available from two primary sources– FSA Reported Commodity Crop History Summary
(letter from FSA to producers, August 2014)
• FSA farm number• Base Acres and CCP Yield for covered crops• Planted Acres
– Crop Insurance Actual Production Report• Historical yields and planted acres• Ten years of yields preferred but 2008-2013 is essential
04/21/23 52
FSA Crop History FSA Crop History SummarySummary
04/21/23 53
Insurance Yield & Acreage Insurance Yield & Acreage ReportReport
04/21/23 54
NAAFP Crop/Unit Information SheetNAAFP Crop/Unit Information Sheet
04/21/23 55
NAAFP Information Sheet Ex. Iowa NAAFP Information Sheet Ex. Iowa FarmFarm
Historical Data needed for risk analysis
Data needed for risk analysis, yield update, and base reallocation
04/21/23 56
First Step Is to RegisterFirst Step Is to Register
04/21/23 57
Producer data is Saved, Email Producer data is Saved, Email to Notify Regarding FSA to Notify Regarding FSA
UpdatesUpdates
04/21/23 58
Producer and Multi Client Producer and Multi Client UsersUsers
04/21/23 59
Create Client Records & Switch Create Client Records & Switch ClientsClients
04/21/23 60
Farm with Two Crops and One FSA Farm with Two Crops and One FSA NumberNumber
04/21/23 61
Yield Update AnalyzerYield Update Analyzer
04/21/23 62
Results for Yield UpdateResults for Yield Update
• Producer can print the FSA Yield Worksheet• Print a separate form for each FSA number. Fill in the name and
email address for contact person, farm number, historical yields, state code, and county code.
04/21/23 63
Select the Base Acre Reallocation & Select the Base Acre Reallocation & PLC/ ARC Decision AidPLC/ ARC Decision Aid
04/21/23 64
Base Reallocation Options Calculated Directly, Base Reallocation Options Calculated Directly, Next Analyze their Impacts on Payments by Next Analyze their Impacts on Payments by
ProgramProgram
04/21/23 65
Three Choices for Testing Three Choices for Testing Alternative Price ScenariosAlternative Price Scenarios
04/21/23 66
Output for Base Output for Base Reallocation, PLC, ARC-IC, Reallocation, PLC, ARC-IC,
and ARC-COand ARC-CO
04/21/23 67
Whole Farm Decision: All Whole Farm Decision: All Crops Elect the Same Crops Elect the Same
ProgramProgram
04/21/23 68
Crop-by-Crop Results for Crop-by-Crop Results for Each Program Election Each Program Election
OptionOption
04/21/23 69
Unfold Details to See Risk Unfold Details to See Risk of Payments for PLC and of Payments for PLC and
ACRACR
04/21/23 70
Crop-by-Crop Results for Crop-by-Crop Results for Each Program Election Each Program Election
OptionOption
04/21/23 71
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
04/21/23 72
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
04/21/23 73
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
04/21/23 74
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
04/21/23 75
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
04/21/23 76
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
Net revenue for the “best” combination of ARC/PLC and Insurance is presented.Result here is ARC, with Revenue Protection at 85%.
04/21/23 77
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
Option buttons allow user to test impact of program and insurance changes.
In this case PLC plus SCO rather than ARC reduces net revenue (40.4% chance of net revenue below lower target). 04/21/23 78
Crop Insurance Analysis Crop Insurance Analysis Interacts with ARC/PLC+SCOInteracts with ARC/PLC+SCO
Option buttons allow user to test impact of program and insurance changes.
In this case PLC plus SCO and a lower level of underlying insurance coverage for RP to 75% rather than choosing ARC with 85% coverage reduces net revenue (69% chance of net revenue below lower target). 04/21/23 79
Future DevelopmentsFuture Developments
• Farmers will be able to print FSA forms– Yield update information form– Base acre reallocation form– ARC/PLC election form
• Print a separate form for each FSA number with:– Name and email address for contact person– Farm number– Historical yields and planted acres– State and county codes– AND the ARC/PLC election by crop by farm
• We are still testing and improving• More than 2,000 farmers, FSA, extension, and
insurance agents testing the decision aid04/21/23 80
SummarySummary
• Decision Aid available on AFPC website since June 20th
– More than 2,000 testers
• Will be on FSA website when officially released • All 21 covered commodities plus cotton available in
the official release version• Changes we expect after the official release:
– Monthly updates of price projections by FAPRI – USDA price projections updates as available– Tool will be updated as FSA updates rules
• Accessible by smart phones, tablets, iPads, anything that can access the internet
• Helpdesk available 7am to 7pm CST04/21/23 81
Thanks!!!
Visit our WebsiteWWW.AFPC.TAMU.EDU
for Podcasts on thefarm program and the Decision Aid
04/21/23 82
EconomicsSource: FSA
USDA Farm Bill Timeline
September 29, 2014 – February 27, 2015: Landowners have a one-time, irrevocable opportunity to reallocate base and update payment yields November 17, 2014 – March 31, 2015: Producers have a one-time, irrevocable decision to elect either (1) ARC-County or PLC on a covered-commodity by covered-commodity basis OR elect (2) ARC-Individual for all of the covered commodities on the farm. Mid-April 2015 – Summer 2015: Producers sign contracts to participate in ARC/PLC for 2014 and 2015 crop years
EconomicsSource: FSA
2014 Farm Bill Regional Meetings
Farm Bill Producer Meetings
Date Location Time Confirmation
12-Nov Owensboro 6:30 PM Confirmed
20-Nov Lexington 10:00 AMConfirmed, other counties around Lexington could join by Lync if they prefer.
20-Nov Maysville 6:30 PM Confirmed
20-Nov Pikeville Propose that Pike and other District 1 Counties join Maysville by Lync or Adobe Connect, Some may wish to travel to the Mason Co. Extension office
25-Nov Elizabethtown 1:30 PM Confirmed
1-Dec Princeton 10:00 AM Confirmed
2-Dec Hopkinsville 10:00 AM Confirmed
13-Jan London 6:30 PM Confirmed
EconomicsSource: FSA
Tentative Agenda
Welcome – county agent hosting (5 minutes) Farm Bill Decision – Todd Davis (30 minutes)
Base reallocation and program yield update decisions made by landowner ARC-County, ARC-Individual, and PLC decision made by the producer.
Working with FSA on this Decision – Marcinda Kester FSA (30 minutes)
The information needed, the USDA timeline, and the process of working with the county FSA office throughout this process.
Farm Bill Decision Aid Example – Todd Davis (30 minutes)
This presentation will demonstrate the decision tool that the County Agents will use to help landowners and producers with this decision.
Conservation Compliance – Randy Smallwood / Mark Ferguson (NRCS) 15 minutes
NRCS will talk about what conservation compliance is for crop insurance and how to get back into compliance.
Need Your Input• Which decision tool to present to farmers
– TAMU model more data intensive– UIUC model is “quick and dirty”– Play around with both and let me know what
works better for your farmers/landowners
• Regional meetings will be followed-up with meetings at the county or bi-county level
• Help in coordinating meeting dates/locations
Economics
Thank you for your attention!Questions?
Todd D. Davis
270-365-7541 x 243