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Farm bill implementation: the long process continues…

Farmers are showing a lot of interest in farm bill education sessions across the Southwest This is a crowd at a recent meeting in Altus Okla
<p>Farmers are showing a lot of interest in farm bill education sessions across the Southwest. This is a crowd at a recent meeting in Altus, Okla.</p>
Producers and landowners have several decisions to consider under the new farm bill.

After more than three years of debate on the farm bill, the Agricultural Act of 2014 was signed into law on February 7, 2014. However, even though almost a year has passed, implementation of key commodity programs is still underway.  For agricultural commodity producers and landowners, the 2014 farm bill offers new programs and new choices. Key changes include the elimination of direct payments, counter-cyclical payments, and the Average Crop Revenue Election (ACRE) program.  Even though producers have new programs to consider, payments will be made on base acres, which is consistent with previous farm bills.

Producers and landowners have several decisions to consider under the new farm bill. Landowners have the option to update yields and reallocate base acreage, while producers have the option to elect Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC).  For ARC, producers may choose farm level or county level coverage.

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In addition, two new supplemental crop insurance programs were added, the Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX) for cotton producers.  

Similar to the 2008 farm bill, producers will have the option to make a one-time, irrevocable decision to enroll in ARC or PLC on a commodity-by-commodity basis for each crop on the farm. However, producers who enroll in individual-level ARC must elect individual-level ARC for all crops on the farm and producers must plant covered commodities each year. For county-level ARC and PLC, producers do not have to plant a covered commodity to be eligible for ARC or PLC. 

Producers who elect PLC will have the option to purchase the Supplemental Coverage Option (SCO), a new crop insurance program designed to help cover a portion of the losses that would typically be in the range of a producer’s deductible.  SCO has a slightly higher subsidy rate than current buy-up insurance, making it a relatively inexpensive option.  Producers will have the option to purchase SCO on top of their typical buy-up coverage.

Another key change is the elimination of upland cotton as a covered commodity under Title I commodity programs. Cotton base acres now become generic base acres and cannot be reallocated.  However, producers who plant covered commodities on generic cotton base acres can elect ARC or PLC on the covered commodity. 

Program choice will vary across crops, regions, and farms, which means producers will need to evaluate both ARC and PLC for each crop on each of their farms and decide which option provides the safety net they would be most comfortable with over the next 5 years.  Unfortunately, no one knows exactly where prices are going for sure but evaluating each choice across a wide range of potential price levels is going to be essential.  Important deadlines for FSA programs include:

February 27, 2015: Yield update and base reallocation

March 31, 2015: ARC or PLC election

Mid-April – summer 2015: ARC or PLC enrollment

Annually in spring or fall – Crop insurance enrollment (underlying policy, SCO, STAX)

The 2014 farm bill includes significant changes that producers will need to evaluate thoroughly before signing up with FSA and purchasing crop insurance.  With lower commodity prices forecasted for the next few years, producers should evaluate their farm commodity program and crop insurance decisions carefully and consider the amount of protection that is and is not provided by each of these alternatives. Decision tools are available to assist producers with these important decisions. 

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