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Farm Bill 2014: Updating Payment Yields and Reallocating Base Acres

Farm-BillThe Agricultural Act of 2014, more commonly known as the Farm Bill, brought with it some changes that will have an impact on producers’ pocketbooks. Specifically, the latest Farm Bill specifies that producers will have a one-time opportunity to adjust their base acres and update their payment yields, thereby potentially increasing their program payments. The Bill also stipulates that producers elect the type of coverage they would prefer for crop years 2014-2018. The deadline—February 27, 2015—is fast approaching.

The opportunity to evaluate and make these changes shouldn’t be ignored; they are few and far between, and might not come along again for a matter of years. An update allows a realignment between a farm’s current production pattern and the payment formulas for commodity programs. Many farms’ base acres and yields are still operating by data obtained during the 80s. Any producer can attest that much has changed since then, and thus an evaluation is in order.

Looking more closely at program payment yields, if elected, the new payment yield for a crop will be 90 percent of the average yield planted and considered planted acres during the years 2008-2012. If the newly calculated payment yields are higher than current payment yields, producers will likely want to follow through and update to the new standards, as higher program payment yields will improve their options when it comes to the new Farm Bill commodity support programs.

Similarly, producers will be able to reallocate their base acres, based on their 2009-2012 cropping patterns. Most producers’ current base acres reflect cropping patterns for the years 1998-2001, and their planting decisions may have changed significantly since then. While the total number of acres cannot be increased, reallocating these acres based on crops planted will have an impact on program payments received for the 2014-2018 seasons. Additionally, it’s important to note that reallocating base acres doesn’t affect the choice of what to plant in a specific year, only the program payments received.

After evaluating whether or not to update payment yields and reallocate base acres, producers will then need to determine which of three options the new Farm Bill provides for commodity support: PLC, County ARC, or individual ARC. PLC, or Prices Loss Coverage, is essentially the same as previous payment programs, but with higher target prices. ARC, or Agriculture Risk Coverage, is a revenue support program that makes payments based on crop-by-crop revenue on either a county basis (County ARC) or based on whole farm revenue outcomes (individual ARC). The Farm Bill allows producers to annually decide in which program they’d like to enroll for the 2014-2018 growing seasons. However, the decision to update yields and base acres must be decided within the coming weeks.

Do you have concerns about the impact the latest Farm Bill could have on your farming operation? Please don’t hesitate to contact a UFARM professional; we are happy to listen to your concerns and point you in the right direction.UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

 

Sources consulted:  Mitchell, Paul D. “Updating Base Acres and Payment Yields Under the New Farm Bill.” Integrated Pest and Crop Management. University of Wisconsin. 05 Aug. 2014. Web. 05 Feb. 2015.  Olson, Kent. “Updating Payment Yields and Reallocating Base Acres.” University of Minnesota Extension. University of Minnesota. Nov. 2014. Web. 05 Feb. 2015.  Plastino, Alejandro. “Base Acrage Reallocation and Payment Yield Update.” Iowa State University Extension and Outreach. Iowa State University Extension. Aug. 2014. Web. 05 Feb. 2015.

 

 

 

 

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Latest Farm Bill’s Effects on Landowners

2014 Farm BillThe Agricultural Act of 2014, more familiarly known as the Farm Bill, was finally passed in February, and since then the changes made in the final iteration of the bill are out in the open. Among the most significant changes for farmers and landowners—besides the end to direct payments—are the expanded insurance and revenue protection programs available. In place of DCP and ACRE programs, the new farm bill will offer:

• Price Loss Coverage (PLC), a price protection program that triggers payments when market year average prices fall below target levels, which are called reference prices.

• Agricultural Risk Coverage County (ARC-C), a revenue protection program that triggers payments when the county revenue per acre falls below a benchmark revenue guarantee per acre set for the county.

• Agricultural Risk Coverage Individual (ARC-I), a revenue protection program that triggers payments when there is a revenue-per-acre shortfall on the individual farm that falls below a benchmark revenue guarantee per acre for that farm.

Producers taking advantage of the ARC program will have to choose either the county or farm option. The county option pays up to 85 percent of the base acres, while the farm option is limited to a maximum of 65 percent of base acres.

The PLC option will work much like the previous DCP program. The PLC payment results when the covered commodity’s marketing price falls below the reference price.

While the initial analysis of these new program options seemed a bit more clear-cut last spring, the falling grain prices and bearish markets coupled with the record volume of harvested grains forecasted this fall, the options become a bit muddied. In addition to the current market trend, it’s important for farmers and landowners to understand that whichever program in which they choose to enroll is permanent for the five year span of the bill, and cannot be changed. Therefore, it is critical that they make the best decision based on their specific farm situation.

Landowners also need to be aware that if “push-comes-to-shove” it is really the operator of record for 2014 that will make the decision.  With that in mind, landowners should work with their land tenants to arrive at a decision that both parties are comfortable with.  A professional land manager can provide valuable assistance to landowners when it comes to negotiating the correct programs for their land.If you are changing tenants for 2015, the former tenants have the authority to make the program decisions, when they really have no stake in the 2015 or beyond crops.  This could leave the landowner, or new buyer, of the farm with a program choice they didn’t have input on. The FSA is still determining if there’ll be exceptions made for those types of situations.

Some other specific considerations to be aware of are as follows:

  • Failure to enroll in 2014 places a farmer automatically in the PLC program beginning in 2015 with no payment eligibility for the 2014 crops
  • If choosing either PLC or ARC-C, a farmer may enroll in different programs commodity by commodity. As an example on the same FSA farm, the corn base acreage could be enrolled in PLC while soybeans are enrolled in ARC-C
  • If choosing the ARC-I program all base acres on that FSA farm must be enrolled in the ARC-I program
  • Base acreage can be reallocated to be in the same proportion as the actual planted crops during the 2009 to 2012 crops. This will be an elective as each farm can stay with the current base, or update.
  • Those electing PLC can update their FSA yield base to 90% of that farm’s yields from 2008 through 2012. It is likely that most electing PLC will also want to update their yields.

Undoubtedly, farmers and landowners have even more critical decisions to make with the expended program options available with the new Farm Bill. The pressure is on to have the latest information in order to make the right decision. This program details are still evolving and training for FSA staff is going on as this is written.  More information will come to light in the weeks ahead.

Do you have questions or concerns about the latest Farm Bill’s affect on your land and how the programs will be applied to your property? Contact a UFARM representative, and they’ll be happy to help make you make an informed decision.

Sources consulted:
Clayton, Chris. “Offering Advice on Farm Bill Choices.” The Progressive Farmer. 12 Oct. 2014. Web. 13 Oct. 2014.
Keeney, Roman. “A Perspective on the 2014 Farm Bill.” Purdue University Center for Commercial Agriculture. Purdue University Ag Econ Dept. 2014. Web. 13 Oct. 2014.

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New Farm Bill Ends Direct Payments to Farmers

Farm Bill Effects of LandownersAfter multiple extensions and delays, the Agricultural Act of 2014—more widely known as the Farm Bill—was finally passed by Congress and signed into law by the president in February. Since then, it has been up to the USDA and other agencies to integrate the changes the bill contains, to work through the specific rules for the programs, and to oversee its implementation at ground level. Farmers themselves are interested in the portions of the bill that have changed in regard to agriculture policy and how these changes may affect them.

The vast majority of the Farm Bill costs still fall to the Nutrition program, also known as the Supplemental Nutrition Assistance Program (SNAP), at 80 percent. After that, 8 percent goes to expanded crop insurance programs, 6 percent to conservation programs, 5 percent commodities, and 1 percent “other.”

However, the end of direct payments has garnered the most attention on the agricultural scene. These payments were known as the Direct and Counter-cyclical Program (DCP) and the Average Crop Revenue Program (ACRE). These direct payments to farmers, first instated as a temporary program in the 1996 farm bill but retained in subsequent bills since, were the object of bipartisan ire for many years, since the payments didn’t depend on need or the condition of the crop, but solely on the number of acres owned, sometimes even if those acres did not grow an actual crop.

As a result, lawmakers backing the final iteration of the bill touted a victory in managing to pass something that affected such a wide array of interest groups, and that is expected to cut the budget by $17 billion over a decade.

While direct payments have come to an end, the bill does offer more robust insurance and revenue protection systems instead. In place of DCP and ACRE programs, the new farm bill will offer:

• Price Loss Coverage (PLC), a price protection program that triggers payments when market year average prices fall below target levels, which are called reference prices.

• Agricultural Risk Coverage County (ARC-C), a revenue protection program that triggers payments when the county revenue per acre falls below a benchmark revenue guarantee per acre set for the county.

• Agricultural Risk Coverage Individual (ARC-I), a revenue protection program that triggers payments when there is a revenue-per-acre shortfall on the individual farm that falls below a benchmark revenue guarantee per acre for that farm.

Dwight Aakre, North Dakota State University Extension Service farm management specialist, says this of the new ARC programs: “Unlike the ACRE program, where the entire state had to experience a revenue shortfall in the current year, the ARC program will use the county or the individual farm as the benchmark. This results in support payments when the revenue is less than the benchmark for either the county or the farm, which more closely reflects the actual condition an individual producer experiences.”

Producers taking advantage of the program will have to choose either the county or farm option. The county option pays up to 85 percent of the base acres, while the farm option is limited to a maximum of 65 percent of base acres.

The PLC option will work much like the previous DCP program. The PLC payment results when the covered commodity’s marketing price falls below the reference price.

The latest farm bill brings some significant changes to the programs offered to farmers. Do you need help further understanding these changes, and how they may affect you as a landowner? Let UFARM help you navigate the options available to you.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s.

 

Sources:
“2014 Farm Bill Eliminates Direct Payments.” North Dakota State University Agricultural Communication. NDSU Extension Service. 31 Jan. 2014. Web. 05 Jun. 2014.
Stewart, Jennifer. “Purdue Ag Economist Offers Insights to Latest Farm Bill.” The Prairie Star. The Prairie Star. 04 Jun. 2014. Web. 05 Jun. 2014.

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What do 2014 Farm Bill negotations hold for landowners?

After multiple short-term extensions on the Farm Bill—the latest of which expired on December 31st—lawmakers are set to resume the next legislative session, and USDA secretary Tom Vilsack is confident that a deal can be reached on an updated version, and that it can be put up to a vote this month. Conferees on the committee have been working on a new iteration of the Farm Bill for the last three months.

The multiple delays are largely the result of disagreement over potential cuts to the federal Supplemental Nutrition Assistance Program (SNAP), which comprises a large portion of the Farm Bill. Last summer, both the House and the Senate proposed changes to the current law, with the House suggesting larger cuts to the Food Stamp program and also passing a separate piece of legislation that would separate the SNAP program from the Farm Bill altogether. With three bills to reconcile, the conference committee has had its hands full.

2014 Farm Bill While most national headlines have focused on the more politically polarizing SNAP cuts proposed, the likely elimination of direct payments to farmers is attracting the focus of farmers and landowners. The direct payment program has its roots in the 1996 Farm Bill, and has received bipartisan criticism for a number of years. Critics argue that these payments—regardless of crop prices, and often paid to those who haven’t even grown a crop—are costing taxpayers too much. But sources reveal other portions of the newly proposed bill that would expand other protections for farmers. “Negotiators say they are trying to modernize the system by balancing the needs of farmers with the interests of taxpayers,” writes Kristina Peterson. “But the emerging compromise, which would replace direct payments with beefed-up crop insurance and other protections for farmers, has already triggered criticism from outside groups who say it won’t radically reduce the amount of risk the federal government assumes in the agriculture industry.” While the end to direct payments might sound dismaying to many producers, the newly proposed expanded crop insurance protections, as well as new programs to help cover losses not addressed by insurance and other forms of assistance for farmers, may soften the blow to a certain extent. In statements made last Friday, Vilsack noted that whatever form of the Farm Bill is passed by Congress, the USDA is trying to ensure that they are able to put the new measures into effect in an expeditious manner. “Obviously we want to be in position … once the President signs the farm bill to be able to begin the process of implementation as quickly as possible,” Vilsack said.

In the meantime, farmers and landowners are still faced with some uncertainty until a final bill is successfully reconciled in Conference Committee and passed by Congress. Producers are already making their 2014 planting decisions, and even if a bill is successfully reconciled and passed with new farmer protections, it is unlikely that they will have much of an effect in 2014. In this way, it is likely that farmers and landowners will face similar uncertainties as they did in 2013.

The professional land managers at United Farm and Ranch Management stay on top of the changes happening in agriculture, from legislation, tax laws to farming practices.  If you would like to discuss how they can maximize your land’s potential, contact UFARM today.

Sources: (Peterson, Kristina. “Direct Payments to End, But Farm-Bill Policy Questioned.” The Wall Street Journal. 02 Jan. 2014. Web. 06 Jan. 2014.)  (Baum, Janelle. “Farm Bill Process Far From Over.” Prairie Farmer. Farm Progress. 06 Jan. 2014. Web. 06 Jan. 2014.)

Effects of the US Farm Bill on Landowners and Farmers

Time is running out for Congress to vote on a newly proposed version of the farm bill, leaving some farmers and landowners in limbo when it comes to making decisions regarding varying aspects of their farming enterprises. The farm bill is renewed every 5 years, and has already seen a 1 year extension after it had been set to expire in 2012. The new extension expired September 30, 2013.

Earlier this summer, the House and Senate hammered out new versions of the Farm Bill. The Senate passed their version in June, and on July 11th, the House passed a so-called “Farm Only” version of the bill, seeking to separate out the supplemental food program (SNAP) from the bill and place it in separate legislation.

The Senate version of the farm bill is similar to the last extended 2008 legislation and includes the food program. It also retains the permanent farm laws of 1938 and 1949. The proposed House bill signals a shift in farm law policy by eliminating the supplemental food program from the farm bill, as well as eliminating the farm laws of 1938 and 1949. Eliminating these permanent farm laws would discontinue direct payments and make other adjustments, thereby saving money on commodity programs in the long run. The permanent farm laws in the proposed House legislation would be replaced with a new Title I, which would ensure that farm commodity programs would continue in the event that a new farm bill is not enacted or renewed.

At any rate, how would the proposed farm bill affect farmers and landowners? At the very least, they will face a bit of uncertainty until a farm bill is passed or renewed. The most immediate effects would be a possible end to direct payments and other various subsidies should some form of the House bill pass Congress.  Many area farmers wonder how proposed changes might affect the crop insurance industry, and how these changes may affect their risk management decisions.

On September 19th, the House succeeded in passing another bill that attempts to address the SNAP benefits portions that has traditionally been included in the farm bill. As separate legislation, it contains $40 billion worth of cuts, out of $80 billion. These cuts would be spread out over a period of 10 years.

Now, the House and Senate need to go to Conference Committee and attempt to meld together the Senate’s version and the two separate House versions and then agree on passage of a new bill.  Will they have the votes, and if so, will President Obama sign it into law, should portions of the House version pass committee containing cuts to the food stamp program?  Time will tell, but these proposals will make for interesting political dynamics in an age of huge deficits and amid calls for fiscal responsibility.

To learn more about how the next farm bill may affect your land and tenants and to learn ways to minimize risk, set up a free consultation with one of our experienced farm mangers.