People who say the new farm bill is a safety net don't have it exactly right.
"It more like a Las Vegas gamble," says Dwight Aakre, a North Dakota State University Extension ag economist and farm policy analyst.
He is talking about the commodity programs in the 2014 farm bill – the Agricultural Risk Coverage program, Price Loss Coverage program and the Supplemental Coverage Option.
You'll have to decide which of these new programs to enroll in. But none is connected to what you plant. You wouldn't even have to plant anything to get a check, he says. ARC and PLC are calculated on base acres, not planted acres. Therefore if planted acres do not match base acres, this program will not serve as true safety net. The ARC is basically a replacement for the old Average Crop Revenue Election (ACRE) program. ARC will pay if a crop's current year revenue drops below the guarantee, which is determined by a five-year Olympic average national price and five-year Olympic average county yield times 85 percent of your base acres for each crop.
The PLC is a new version of the old counter cyclical payment program. Historic yields and prices don't matter in the PLC. .It will pay you if the national average annual price drops below the reference price. This payment rate is multiplied by the farm's payment yield times base acres times 85 percent. Reference price is a new name for target price. Some of the reference prices are $5.50 per bushel for all wheat, $4.95 for all barley, $3.70 for corn, $8.40 for soybeans and $3.95 for grain sorghum.
The Supplemental Coverage Option is a shallow loss insurance program that will be sold by insurance agents. It's available only if you choose PLC. SCO will not be available for 2014. Numerous details for this program are not available yet.
"They are not revolutionary new programs," Aakre says. "They are an evolution of old programs."
There are many details about all of the program you'll need to study before making a decision. Sign up will probably get underway in late summer to early fall.
Deciding which program is best may be a little tricky. ARC looks attractive if you grow corn and soybeans because prices set records recently. This results in a high revenue guarantee for the 2014 crop year. ARC could pay out the first couple years, but as lower prices are figured into the average, the odds of getting a payment would decline.
PLC may pay out on barley because the barley reference price is pretty high compared to the current market.
Landowners will also have the opportunity to update base yields and to reallocate bases. Reallocating base acres may turn out to be the most important decision to be made with this farm bill. Base acres and yields will factor into program payments under PLC and base acres are factored into ARC payments. It's not clear yet whether base and yield changes are the responsibility of the landowner alone or if tenants will have any say in how base acres are allocated.