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Get Help Making Farm Bill Decisions

Get Help Making Farm Bill Decisions
USDA continues roll out of farm bill programs and resources are available to aid in decision making.

The U.S. Department of Agriculture is continually rolling out key provisions of this year’s farm bill and coinciding with the releases are several valuable decision-making tools for producers. Here’s a quick list of some of the latest news on the horizon for new farm bill programs. Stay up-to-date with the latest information at www.usda.gov/farmbill or at www.farmdoc.illinois.edu/farmbilltoolbox.

Kansas State University’s Ag Manager site has also put together a very useful FAQ on Title 1 programs of this year’s farm bill.

SCO

The farm bill creates a Supplemental Coverage Option (SCO) which allows crop insurance coverage up to 86% of the normal revenue or yield for a crop. The option is available for corn, cotton, grain sorghum, rice, soybeans, spring barley, spring wheat, and winter wheat in most counties for the 2015 crop years. RMA plans to expand SCO to additional crops and counties in 2016. Here is a map showing which counties offer coverage for the different crops.

RMA’s Crop Insurance Decision Tool is an educational tool to help understand how SCO and cotton’s Stacked income Protection Plan (STAX) interact with traditional crop insurance.

ARC-Co or PLC?

The 2014 farm bill gives Farm Service Agency (FSA) farm owners the option to choose their crop program for the 2014 through 2018 crop years. A factor, perhaps key factor that will influence this decision is the payment by the program choices for the 2014 crop year. An article posted on the Farmdoc site plugs the just released U.S. yield and price estimates in the August 2014 World Agricultural Supply and Demand Estimates (WASDE) to calculate an indicator of potential payments by the Agriculture Revenue Coverage - county program (ARC-CO) and the Price Loss Coverage (PLC) program.

K-State also has put together an analysis on ARC vs. PLC on wheat, feedgrains and soybeans. It suggests PLC will be the preferred product if a wheat farmer expects very low prices in the later years. Sorghum is a clear case for PLC. Soybeans with an average yield will need a marketing year average price approaching $7 before PLC will pay more than ARC. The last 3 years of the Farm Bill could find prices low enough to generate PLC payments greater than ARC but that appears unlikely, Art Barnaby projects. Large corn-soybean farmers might want to consider putting their soybeans in ARC and their corn in PLC.

Here is also a helpful article on the decision on whether or not to reallocate base acres.

Dairy MPP

Thursday USDA released details of its new dairy Market Protection Program designed to provide financial assistance to participating farmers when the margin – the difference between the price of milk and feed costs – falls below the coverage level selected by the farmer.

Enrollment begins at local Farm Service Agency offices Sept. 2 and ends on Nov. 28, 2014, for 2014 and 2015. Participating farmers must remain in the program through 2018 and pay a minimum $100 administrative fee each year.

Producers will insure their margins on a sliding scale, and must decide annually both how much of their milk production to cover (from 25% up to 90%), and the level of margin they wish to protect.

Basic coverage, at a margin of $4 per hundredweight, is offered at no cost. Above the $4 margin level, coverage is available in 50-cent increments, up to $8 per cwt. Premiums are fixed for five years, but will be discounted by 25% in 2014 and 2015, for annual farm production volumes up to 4 million pounds. Premium rates are higher at production levels above 4 million pounds.

A web-based decision support tool and companion educational materials have been developed to help dairy operators make key coverage decisions for both the MPP and the Livestock Gross Margin-Dairy (LGM-Dairy) insurance program. The tool can be found at: www.fsa.usda.gov/mpptool.  

NMPF will also be updating its www.futurefordairy.com website with relevant information for farmers, including a spreadsheet of historical margin trends, and an online calculator that will allow farmers to enter pricing and production data to help them select insurance coverage levels in the future.

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