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4 considerations when choosing a farm bill commodity program

4 considerations when choosing a farm bill commodity program

Lots of people have made decisions about the new farm bill. The House and Senate decided to pass the legislation. President Obama decided to sign the bill. That was the easy part. The hard part: farmers making decisions about which commodity programs to participate in and navigating the details of the Price Loss Coverage and Agriculture Risk Coverage programs.

Title I of the 2014 Farm Bill includes a price-based assistance program called Price Loss Coverage (PLC) and revenue-based assistance programs called Agriculture Risk Coverage (ARC). The University of Illinois has put together several points to consider when making the decision about which program fits your farm best.

1. Owners of a farm will be provided a one-time opportunity to either retain their current base acres or to reallocate their base acres among those covered commodities planted during the 2009 through 2012 crop years.  If the owners choose reallocation, the farm's base acres going forward will be in proportion to the four-year average of acres planted to each covered commodity in those crop years, including any acreage that was prevented from being planted to a covered commodity in a crop year.

2. The owners of a farm will be provided a single opportunity to elect to update payment yields for covered commodities.  Payment yields are currently a part of the farm records at USDA (along with base acres) and, similar to the Counter-Cyclical Payments program from 2008, payment yields will be used to calculate the PLC payments for any covered commodities on which PLC has been elected.  If a yield update is elected, the new payment yields will be equal to 90 percent of the average yield per planted acre of the covered commodity in the 2008 through 2012 crop years.

3. Beginning with the 2014 crop year all of the producers on a farm must make a one-time, irrevocable election among the price (PLC), county level revenue (County ARC) and individual farm level revenue (Individual ARC) programs.  The PLC election can be made on a covered-commodity-by-covered-commodity basis, however, Individual ARC applies to all covered commodities on the farm and a farm cannot elect PLC for some commodities and Individual ARC for others.

4. Revenue-based assistance through ARC requires that all producers agree to "select" the same coverage level:  county or individual farm.  Again, if owners of the farm choose Individual ARC that applies to all covered commodities on the farm.  The calculations and payments for County ARC and Individual ARC are similar but with important differences.  County ARC makes revenue-based payments on 85 percent of the covered commodity's base acres when actual county revenue is between 86 percent and 76 percent of the benchmark county revenue.  The benchmark county revenue is calculated using the 5-year Olympic rolling average (drop the highest and lowest crop years) of county yields for the commodity and the 5-year Olympic rolling average of its national prices.

Read more from U of IL about considerations when choosing a farm bill commodity program for your farm.

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