Brad Jordahl RedlinOctober 16, 2014

Context and Policies

1. Federal Farm Policy in Context

2. Conservation Policy

3. Production Policy

4. Risk Management Policy

Context and Policies

51 percent of total U.S. land is in agricultural use

(61 percent of lower 48 states).

Urban land use is 2.7 percent.

Farm numbers and sizes have changed, but not the acreage.

Land in farms, as owned or rented by farm operator.

Major commodity prices strong in recent farm bill periods…

Crop prices do not have major effect on food prices

Farm production is only 9.7 percent of food costs

Title I Commodities Title II Conservation Title III Trade Title IV Nutrition Title V Credit Title VIRural Development Title VII Research Title VIII Forestry Title IX Energy Title X Horticulture Title XI Crop Insurance Title XII Miscellaneous

Farm Bill reauthorized every 5 years--or will revert to 1949 law.

There are 3 means for delivering $ to agriculture via Farm Bill.

Commodity Subsidies, Conservation Programs, Crop Insurance.

USDA Nutrition Assistance►Farm Bill: SNAP (food stamps).►Non-Farm Bill: National School Lunch Program;Women, Infants and Children (WIC); Child and Adult Care Food Program; School Breakfast Program.

Commodity Subsidies, Conservation Programs, Crop Insurance.

1. Federal Farm Policy in Context

2. Conservation Policy

3. Production Policy

4. Risk Management Policy

Context and Policies

Conservation Title contains a suite of programs.

Programs meet different goals and utilize different methods.

Wetlands Reserve Program, Farmland Protection Program, and Grassland Reserve Program (easement) consolidated into:

Agricultural Conservation Easement Program (ACEP)

Agricultural Water Enhancement Program, Chesapeake Bay Watershed Program, Cooperative Conservation Partnership Initiative, Great Lakes Basin Program are consolidated into:

Regional Conservation Partnership Program (RCPP)

Wildlife Habitat Incentive Program is merged into:

Environmental Quality Incentives Program (5% dedicated wildlife)  

Grassland Reserve Program (rental) will be through:

Conservation Reserve Program(grassland up to 2 million acres)

Working lands conservation is dominant.

Conservation ComplianceHighly Erodible Land (HEL) Compliance, Sodbuster, Wetland Conservation (Swampbuster)

Public provides financial support via USDA payments. Recipients protect soil and wetlands for the public.

Penalties are reduction or loss of farm program payments for draining existing wetlands or not maintaining soil protections.

Ducks Unlimited photo

NRCS photoNRCS photo

Swampbuster/WC

IA - NRCS photo

ND - Ducks Unlimited photo

HEL Compliance

Ducks Unlimited photo

Conservation CHIMPS.

Farm Bills set mandatory spending levels; appropriators nonetheless do otherwise.

1. Federal Farm Policy in Context

2. Conservation Policy

3. Production Policy

4. Risk Management Policy

Context and Policies

CCP 

CYs 2010-12

Wheat $4.17/bu

Corn $2.63/bu

Grain sorghum $2.63/bu

Barley $2.63/bu

Oats $1.79/bu

Upland cotton $0.7125/lb

Long-grain rice $10.50/cwt

Medium-grain rice

$10.50/cwt

Peanuts $495/ton

Soybeans $6.00/bu

Other oilseeds $12.68/cwt

Loan Rate  CYs 2010-12

Wheat $2.94/bu

Corn $1.95/bu

Grain sorghum

$1.95/bu

Barley $1.95/bu

Oats $1.39/bu

Long-grain rice

$6.50/cwt

Medium-grain rice

$6.50/cwt

Soybeans $5.00/bu

Other oilseeds

$10.09/cwt

Upland cotton

$0.52/lb

ELS cotton $0.7977/lb

Peanuts $355/ton

Commodity production supports paid on floor & target prices… and at a standard rate de-coupled from production.

 Direct Payment rate

Wheat $0.52/bu

Corn $0.28/bu

Grain sorghum $0.35/bu

Barley $0.24/bu

Oats $0.024/bu

Upland cotton $0.0667/lb

Long-grain rice $2.35/cwt

Soybeans $0.44/bu

Commodity program payments made on “base acres.” historical planted acreage registered for each farm.

may plant *any crop; payments based on “base”…

Soybeans35 acres

Corn50 acres

Wheat15 acres

…and historical yield; previously 1998 - 2001 yields.

2014 Farm Act permits one-time option to update base

(no increase in acres) and yield (2009 - 2012).

base stays with farm

XYZ Farm100 acres

Direct and Countercyclical Payment Program- planting provisions -

DCP paid on registered “base” for program crops…but

prohibited and penalized fruit, vegetables, and tree nuts.

Price Loss Coverage (PLC)

• 85% base• SCO

Wheat$5.50 per

bushel

Corn$3.70 per

bushel

Grain sorghum$3.95 per

bushel

Barley$4.95 per

bushel

Oats$2.40 per

bushel

Long-grain rice$14.00 per

hundredweight

Medium-grain rice

$14.00 per hundredweight

Soybeans$8.40 per

bushel

Other oilseeds$20.15 per

hundredweight

Loan Rate 

Wheat $2.94/bu

Corn $1.95/bu

Grain sorghum

$1.95/bu

Barley $1.95/bu

Oats $1.39/bu

Long-grain rice

$6.50/cwt

Medium-grain rice

$6.50/cwt

Soybeans $5.00/bu

Other oilseeds

$10.09/cwt

Upland cotton

$0.42/lb to $0.52/lb

ELS cotton $0.7977/lb

Peanuts $355/ton

Maintains MAL; PLC alternative to CCP; and ARC “shallow loss.” (choose one time between PLC and ARC)

Agricultural Risk Coverage(ARC) 

Pymts no greater than 10 percent of benchmark revenue

ARC-county(85% base)

avg county yield times national farm price drops below 86% of county benchmark revenue (5-year Olympic avg county yield times > 5-year Olympic avg national or reference price each year)

ARC-individual(65% base)

difference between 86% individual farm guarantee (the 5-year Olympic avg individual yield times > 5-year Olympic avg of national or reference price each year) and actual individual farm revenue summed across all commodities (sum all covered commodities avg revenue weighted by plantings)

ARC explained …maybe.

Price Loss Coverage and Agriculture Risk Coverage- planting provisions -

PLC and ARC enrollment permits fruit, vegetables, and wild rice on up to 15% of registered farm base acres.

non-base acres base acres

no penalty<15% base acres: no penalty

 

>15% base acres:payment acres reduction acre-for-acre exceding15%

(NOTE: 35% individual ARC)

Associated programs offered in 2015.

Supplemental Coverage Option (SCO)• eligible if enroll in PLC and purchase federal Crop Insurance• provides coverage based on county average yield or revenue• subsidies pay 65 percent of premiums• pays from 86% down to level of federal crop Insurance coverage purchased• not subject to payment limitations or adjusted gross income (AGI) eligibility limits.*

Stacked Income Protection Plan (STAX)• county/area revenue insurance policies to cotton producers• in place of coverage for cotton under PLC and ARC• STAX policies can supplement federal crop insurance, or be stand-alone• pays from 90% down to level of insurance coverage, or maximum of 70%• subsidies pay 80 percent of premiums• not subject to payment limitations or adjusted gross income (AGI) eligibility limits.*

* Payment limit $125,000 for PLC, ARC and MAL combined (double for spouse)

AGI eligibility limit of $900,000 (3-year average)

1. Federal Farm Policy in Context

2. Conservation Policy

3. Production Policy

4. Risk Management Policy

Context and Policies

Federal Crop Insurance is subsidized for producers and insurance companies.

National average is 62% of premium is paid by subsidy, often even higher.

Crop Insurance exempted from compliance in 1996 Farm Bill. Reinstated in 2014.

Participation in Crop insurance is high across major commodities.

Premium subsidies, Revenue policies have been growing rapidly.

Revenue insurance is on major crops; high coverage levels.

Fundamental crop insurance formula:

((Yield * Coverage) * price) * acres = Insured Revenue

Yield – Actual Production History (APH)minimum 4 yrs, maximum 10 yrs

Coverage – percentage of yield/APH insuredlike a deductible, select from sequence 50% - 85%

Price – generally, higher of spring/harvest priceaverage futures prices Feb or Oct

Acres – acres planted to insured cropoptional “units,” e.g. all acres of one crop in county

Approved Projected Price: $5.65 Approved Harvest Price: $4.39

Subsidized risk reduction, without compliance checks and balances, can incent unintended consequences:

Producers “left” the farm program to avoid compliance.

Producers may take risks with land or practices.

Crop Insurance dominant in Farm Bill policy and budget.

2014 again seeing record production & yield for major crops.

Extended low-price cycle is challenge to revenue insurance.

Climate change is challenge to APH (provisions already enacted).

Crop Insurance is lynch pin of Farm Bill for farmers.

2014 Farm Act asks complex questions of farmers.

And 2014 Farm Act continues to provide conservation options.

www.iwla.org/farmbill

Brad Jordahl Redlinbjredlin@gmail.com651.270.0564

www.sustainableagriculture.net

Context and Policies

www.ers.usda.gov/ www.fsa.usda.gov/FSA/