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2014 Farm Bill provisions set to take effect in 2015

May 12, 2014 | 0 comments


For the most part, the provisions of the 2014 federal Farm Bill that directly affect farmers will not take effect until the new federal fiscal year that begins on October 1 or until calendar year 2015.

That gives farmers, especially those who count on commodity crops for a significant part of their income, at least several more months to decide on what kind of risk coverage they will lock themselves into for the duration of what is intended to be a 5-year Farm Bill, said University of Wisconsin Extension Service agricultural economist Paul Mitchell at the annual spring farm management update for agribusiness professionals in the state's east central counties.

Mitchell emphasized that no changes are occurring in the crop insurance program for this year. He noted, however, that farmers will be asked to make decisions later this year on what kind of participation they want in the newly-named commodity support programs.

Terminology changes

Although some details still need to be clarified, most of the upcoming changes are in the terminology rather in the payments that growers of commodities could receive, Mitchell indicated. Among the new acronyms that farmers will be expected to recognize are PLC, ARC and SCO, while ACRE, SURE and CCP will be gone.

Price Loss Coverage (PLC), which Mitchell finds to be most popular in the South for such crops as rice and cotton, closely resembles the former countercyclical payments (CCP) but with higher target or reference prices for program crops, including the corn ($3.70 per bushel), soybeans ($8.40), wheat ($5.50) and oats ($2.40) that account for a great majority of the acres in the Upper Midwest. Accompanying PLC is a new supplemental coverage option (SCO) on crop insurance, which Mitchell expects will be chosen most often in the South.

PLC will be among the support program options available to farmers when they receive official notification from their county Farm Service Agency office, possibly as early as late summer. Mitchell emphasized that the choice that is made will be irrevocable through the 2018 crop year and that PLC will be the default position for anyone who does not pick one of the other options.

Agriculture risk coverage

Those options come under the title of Agriculture Risk Coverage (ARC), which Mitchell describes as "a new-and-improved ACRE (revenue support) program" that is well-received by farmers in the Midwest. ARC offers the irrevocable choice of either countywide revenue by crop or a whole-farm revenue for all crops as its mantle of protection.

For both the county and individual farm coverage, Olympic averages for the past five years are used in the computation, Mitchell explained. This means that the numbers for three years are used because both the high and the low are dropped in the Olympic formula.

Various percentages are applied along the way in the formula that includes base acres, payment yields, payment rates, county or farm benchmark revenue and reference prices, Mitchell said. He predicted most Midwest farmers will choose the county rather than individual farm ARC because crop yields could offset one another on individual farms.

Farm bill changes

Mitchell reminded farmers that, as a result of the 2014 Farm Bill, they will not receive commodity crop direct payments in the fall of this year. Instead, any payments due for 2014 crops will be made in the fall of 2015.

Another change allowed by the new legislation is the first reallocation of crop base acres since 2002, Mitchell said. This allows a shifting in the allocation of shares for commodity program crop acres that were grown from 2009-12 but does not permit an increase in the base acre total, he explained.

Crop yields used in the payment formula can also be updated to 90 percent of the farm average for 2008-12, Mitchell indicated. He commented that the yields used in the payment formula "have always been low relative to the farm's expected yield."

Points of uncertainty

Because both the landowner and crop operator (renter) must choose either PLC or one of the ARC options, it is possible that those who rent from several owners might be operating under up to three different sets of rules and payment formulas, Mitchell said. Clarifications will be needed on that point as well as on any land that might go to a different renter during the tenure of the Farm Bill.

Questions also exist on verification of crop yields for the minority of farmers who have not had crop insurance but who want to participate in the new programs, Mitchell said. He suggested that FSA records could fill that gap.

Crop insurance update

Starting with the 2015 crop year, several changes are in place for the federal crop insurance program, Mitchell reported. They include a conservation compliance provision to retain eligibility for subsidies on the crop insurance premiums; lower subsidies on any new land converted from native sod; availability of SCO only with the PLC option; differing coverage levels for dryland and irrigated crops; and permanency of premium discounts for enterprise unit coverage.

Crop insurance premiums are lower this year due to the average daily price during February for the late-year corn and soybean futures, Mitchell said. Those average prices were $4.62 per bushel for corn and $11.36 for soybeans compared to $5.65 and $12.87 respectively in 2013.

Regarding SCO, which is available only with PLC, Mitchell said anyone who is interested can check the University of Illinois website at http://farmdocdaily.illinois.edu/2014/2014-farm-bill-the-supplements. He also noted that SCO will first be available in 2015.

'Rounding Error'

Despite all of the attention to what proved to be the 2014 Farm Bill and the long procedure in Congress leading to its approval, Mitchell noted that the total spending of about $100 billion per year by the U.S. Department of Agriculture is little more than "a rounding error" in the total federal budget of $3.98 trillion.

Of that total spending authorized by the Farm Bill, 80 percent goes to various nutrition support programs, Mitchell said. Crop insurance and commodity programs account for another 13 percent, while conservation and forestry have a 6 percent share.

In Wisconsin during recent years, farmers have been obtaining less than 5 percent of their income from government payments, he said. It had been as high as 40 percent during the period of very low grain and milk prices in 2000 and back up to 33 percent during the milk price plunge in 2009.

Mitchell can be reached by email at pdmitchell@wisc.edu or by phone at (608) 265-6514.

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