Considerations for Signing Up
Important things to consider when signing up for the 2014 farm bill:
1. You are able to "reallocate" base acres. You were sent a "Planted Acres History Summary" last August which shows the different crops and their respective acres that was certified at FSA. You CANNOT increase total farm base acres but you can reallocate them among the crops planted from 2009 to 2012. Landowner's decision.
2. You are able to increase your FSA yields based on 90% of the average yields produced from 2008 to 2012. Landowner's decision.
3. Grain producers must choose either the Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC). Cotton is automatically enrolled into its own program called STAX.
4. Program enrollment is determined by the following;
a. Cash rent lease is Operator's decision.
b. Custom lease is Landowner's decision.
c. Crop Share lease is a joint decision between Landowner and Operator.
5. Program enrollment is by FSA Farm Number.
6. If you do not make a choice or the landowner and operator can't agree, the election will default to the PLC program beginning with 2015. No payment eligibility for 2014.
7. If you choose the PLC program, you may add a Supplemental Coverage Option (SCO) to your current crop insurance program. This has to be done with your crop insurance agent by the sales closing deadline date.
8. If you choose the ARC program, then you must decide if you want to use the County Agricultural Risk Coverage or ARC-Individual Risk Coverage.
9. All payments are limited to $125,000 individual.
Further explanation of the PLC & ARC programs are as follows:
Price Loss Coverage
Price Loss Coverage (PLC) is a price support program. Should the National Marketing Year average cash price fall below pre-set limits on a crop that has base acres, then a payment would automatically be made to the producer based on 85% of the crops base acres times 90% of the established FSA yield. The prices will be set almost one year past the harvest of the commodity and so any payment, if available, would be received the year following the actual harvest of the crop. The set prices for the most produced commodities are:
Example of payment on a farm with 147 corn base acres with a 140 bushel FSA Yield and the National Marketing Average Yearly Cash price being $3.50 per bushel:
Supplemental Coverage Option
Anyone enrolled into the PLC program has the decision on whether to add or not add the Supplemental Coverage Option (SCO) to their respective crop insurance coverage. This SCO option is not a FSA based program, so the sign up has to occur through your crop insurance agent. There will be an additional premium charged to the producer to add this option to your crop insurance policy.
The SCO option is designed to cover "soft losses" of crop insurance guarantees. Basically, if you currently have a 75% crop insurance coverage level on your crop, then, the SCO would add another 11% coverage to your policy. However, that 11% of coverage is NOT based on what happens on your specific farm. It is BASED on what happens at the COUNTY level.
Each year there will be a COUNTY revenue guarantee calculated and the SCO will insure 86% of that COUNTY revenue guarantee. After the actual yearly COUNTY crop yield is known and the National Marketing Year Cash average price is known, should that "actual" revenue fall below 86% of the original "guaranteed" revenue, then a payment would be made to the producer for the amount between the 86% "soft loss" guaranteed level and the amount of the producer crop insurance coverage, in this case the 75% level.
Example of a SCO potential payment is as follows:
Agricultural Risk Coverage
The first thing to know about the Agricultural Risk Coverage (ARC) is that you have to decide between ARC - County and ARC - Individual. If you choose ARC - County, you choose it by "crop" and payments will be based off of COUNTY yield results. You could put corn in the ARC - County program and soybeans and wheat in the PLC program with or without the SCO option or vice versa. If you choose ARC - Individual, all of the crops under that farm FSA number will be enrolled in the ARC - Individual program and payments will be based off of individual farm yield results.
The above is the first difference in these two ARC programs. The second most significant difference in the two ARC programs is that ARC - County payments, if any, will be factored on 85% of base acres per crop. ARC - Individual payments, if any, will be factored on 65% of base acres per crop.
The ARC Revenue Guarantees are a "rolling Olympic average" revenue guarantee based on yield history of the most previous 5 years whether it be county or individual farm. The Olympic average yield is multiplied by the same Olympic Average National Cash Price for the respective crop which calculates a per year revenue guarantee. This revenue guarantee will change each year since it is a rolling average.
ARC - County would use the "county yield" and ARC - Individual would use the respective farm's individual yields for the entire crop.
Payments are limited to a maximum of 10% of the ARC Revenue Guarantee in both programs.
More Information and Analysis Tools
The following websites contain additional information and analysis tools for the 2014 farm bill program: