Thursday, April 26, 2012

First Draft of the New Senate Farm Bill

AgFax.Com - Your Online Ag News Source


On April 21, 2012, what is called the Chair Mark for the 2012 Farm Bill was released by Senator Deborah Stabenow, Chair, of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry. This is the first publically released draft of the 2012 Farm Bill. The Chair Mark will form the basis for deliberations by the Committee as it completes writing the Farm Bill. This article summarizes provisions in the farm bill that concern the safety net for U.S. crops: The provisions are in Title I, Commodity Programs, and Title XI, Crop Insurance.




2012 Farm Bill Crop Safety Net for 2013-2017 Crop Years

(1) Marketing Loans retained.
• Loan rates remain the same as for the 2012 crop year, except cotton’s loan rate can be lowered.

(2) Agriculture Risk Coverage (ARC) program created.
• Farmer makes a 1-time, irrevocable election to participate in individual farm ARC or county ARC if county has sufficient data.

(3) Crop Insurance retained and adds new Supplemental Coverage Option that allows individual insurance to be supplemented with county insurance to cover all or part of the individual insurance deductible.
• makes 2008 Farm Bill pilot program for enterprise crop insurance permanent
• insurance APH yield will be calculated using 70%, instead of 60%, of insurance transitional yield
• irrigated and non-irrigated enterprise insurance is to be made available in counties
• any future Standard Reinsurance Agreement should be budget neutral
• separate insurance program is created for cotton, called the Stacked Income Protection Plan (STAX)

Program Parameters that apply to both Individual and County ARC Programs

► Crops covered: wheat, corn, sorghum, barley, oats, long grain and medium grain rice, pulse crops, soybeans, other oilseeds, peanuts

► Payments are made on an individual crop basis.

► The election is for the entire farm operation, not for an individual FSA farm.

► Coverage is for losses between 11% and 21% relative to the benchmark value.

► For a covered crop, eligible acres are all acres planted or prevented from being planted to the crop on a farm during a crop year.
• A farm’s total eligible acres cannot exceed its average eligible acres for the 2009-2012 crops.

► Election decision applies to all acres under operational control of the farmer, including acres added after the election.
• Acres that change farms are subject to the election decision of the new farmer.
• Conservation Reserve acres converted back to cropland can be added to eligible acres.

► Benchmark values are calculated to the extent practicable for irrigated and non-irrigated acres.

► Limit on payment per payment entity per year is $50,000 for peanuts and $50,000 for all other covered crops.

• In general, the rules for determining a payment entity are the same as in the 2008 Farm Bill.

► No payments can be received if a payment entity’s average adjusted gross income over the 3 preceding taxable years exceeds $900,000 (Adjusted Gross Income Limitation).

► Conservation compliance and wetland protection must be met to be eligible for ARC payments.

tab1c.jpg

Summary Observations

This farm bill draft clearly moves the U.S. farm safety net in the direction of risk management. The elimination of direct payments, creation of ARC, and enhancements to crop insurance all support this observation.

A commonly-expressed desire for this Farm Bill was to reduce overlap in farm programs. This objective is clearly, but only partly accomplished by limiting the ARC program to losses between 11% and 21% as compared with the larger range of losses covered by both ACRE and SURE. However, because different prices and yields are used to determine the ARC benchmark value and the insurance plant guarantee values, overlap continues to exist. For the 2012 crop year, the estimated benchmark price for ACR for Illinois corn, soybeans, and wheat is less than the insurance plant (expected) price. Thus, the programs would cover some of the same losses. The only ways to eliminate all overlap is to more formally merge the insurance and commodity programs or to make the ARC program effective only if its benchmark revenue exceeds the crop insurance guarantee revenue. At present, neither of these two options is likely to be politically acceptable.
fig1.jpg
Should ARC come into existence, farmers will have to decide if they want to enroll in the individual or county ARC program. In addressing this question, a key question will be whether, over the 2013-2017 crop years, farmers expect the greatest risk to be (1) low yield on their farm or (2) low market price. The individual farm ARC provides protection for yield losses on the individual farm. However, the county ARC has a higher coverage rate (75% vs. 60%). Thus, the county ARC provides more protection for losses that occur due to yield losses over larger areas or because of low prices (i.e., losses not due to individual low yields). Future farmdoc articles will look at this decision in more detail, as well as how expected payments will vary across the U.S. by crop and region.

From the perspective of managing risk, the $50,000 limit on ARC payments per payment entity is a key issue. Risk management programs like ARC will make large payments when a farm experiences a sizable loss. However, occurrence of such a loss is not known until after the crop is planted. To limit payments when they are most needed undermines the program and makes the management of farm risk much more difficult. From the perspective of helping farmers manage risk and assuming there is a desire to help small farms more than large farms, it would be better to reduce the share of losses covered for larger farms. For example, a farm with less than 100 acres could receive payment on losses between 11% and 21% while a farm with over 2000 acres could receive payment on losses between 16% and 21%. This type of limit would not restrict payments when a large loss occurs, thus providing assurance to the farmer that ARC will cover these losses. As important, the farmer can then make other risk management decisions knowing what losses will be covered.

Farmers also will have to decide if they want to use the Supplemental Insurance Option to replace individual insurance with a combination of individual and county coverage through this new program. The only observation I feel comfortable making at the present time is that this option could be an important tool to better allow a farmer to customize risk management to the risks his/her farm confronts.

Last, this is a draft farm bill. The Bill must be passed by both the House and Senate and signed by the President. In addition, as part of the agreement to address the Brazilian cotton case with the World Trade Organization, Brazil will have to decide if it finds the proposed cotton program acceptable and what actions they will take if they find the cotton program unacceptable. In short, there are lots of steps yet to be taken before the farm bill is finalized. Much discussion will occur and changes will be made.


Tags:


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    DTN Livestock Close: Cattle Contracts Significantly Higher10-20

    Herbicide Resistant Weed Summit’s Slides, Webcast Available Online10-20

    DTN Cotton Close: Mixed as December Premium Narrows10-20

    DTN Grain Close: Finish Mixed On Quiet Day10-20

    Rice and Sugar: Thailand’s Quest for World Domination10-20

    AgFax Peanut Review: Portales Celebrates Peanuts Despite Plant Uncertainty10-20

    DTN Livestock Midday: Cattle Futures Move Sharply Higher10-20

    World Trade Organization Rules Against U.S. in COOL Dispute — DTN10-20

    Wheat Scientists, Breeders Advocate Biotech Crop — DTN10-20

    Good on Grain: Storage Issues May be Less Severe Than Anticipated10-20

    DTN Grain Midday: Markets Lower, Led by Soybeans10-20

    Brazil Soybeans: Planting Falls Further Behind — DTN10-20

    DTN Cotton Open: Ticks Lower as Inversion Narrows10-20

    DTN Livestock Open: Mixed Trade Expected10-20

    DTN Grain Open: Futures Start Out Lower10-20

    Flint on Crops: Cover Crops Provide Many Benefits10-20

    Keith Good: Lawsuits Concerning GMO Corn Mount Against Syngenta AG10-20

    New Holland Combine Sets Guinness Harvest Record10-18

    Rice Market: Sideways Movement Continues10-17

    Rice Crop: Delta Region Saw Harvest Delays with Storms10-17

    AFB Grain-Soybean Close: Wheat Follows Corn, Soybeans Lower10-17

    AFB Cotton Close: Dec. Moves Lower10-17

    AFB Rice Close: Futures Recover from Early Losses10-17

    Rose on Cotton: Dec Contract Still Under Pressure10-17

    Cleveland on Cotton: Exports Lowest in ‘My Memory’10-17

    Brazil: Beef Production Steps Up Over Next 10 Years10-17

    Soybeans: Neonic Seed Treatment Little or No Benefit, says EPA – DTN10-17

    Informa Forecast: Soybean Acres Up 4.3M in 2015 – DTN10-17

    DTN Grain Close: Prices Down for the Day, Positive for the Week10-17

    Crop Margins Tighten, Living Expenses Not Far Behind10-17

    USDA: Peanut Price Highlights10-17

    Georgia: 6 Counties Declared Natural Disaster Areas10-17

    Livestock: WTO Ruling on Country of Origin Labeling Expected Soon — DTN10-17

    U.S. Energy: Narrowing Brent-WTI Spread Impacts Global Crude Markets10-17

    Gasoline Prices: Show 9-Cent Decline10-17

    Propane Stocks: Rise by 0.7M Barrels10-17

    Diesel Prices: Average Decreases 4 Cents10-17

    Georgia Blueberries: State Leads Nation in Production — 96M Pounds10-17

    Farm Bill Contingency Plans: How Optimistic are You? – DTN10-16

    Arkansas Agriculture Secretary Calhoun Retiring10-16

    Georgia: Waste Pesticide Disposal, Quitman, Oct. 3010-16

    Global Ag: Ebola Hits West Africa Hard – DTN10-16

    Grain Markets: Crop Prices Up After Bearish USDA Report10-16

    Brazil Soybeans: Dry Conditions Put Planting on Hold10-16

    U.S. Grain Transportation: Rail Backlog Grows, Secondary Bids Spike10-16

    U.S. Drought Outlook: Improvements for Southwest, Southern CA10-16

    Coarse Grain Outlook: Record Corn Yields Produce Record Crop10-16

    Rice Outlook: U.S. Production Projection Raised to 220.7M Cwt10-16

    Resistant Weeds: USDA Accelerates the Fight — DTN10-16

    Mississippi Soybeans: Poised to Shatter Record for Average Yield10-16

    Keith Good: Beige Book — Observations on Ag Economy10-16

    Cotton Outlook: Global Stock Growth to Slow in 2014-1510-15

    Oil Crops Outlook: Soybean Prices Depressed by Historically High Supply10-15

    Wheat Outlook: Endings Stocks Lower on Increased Usage10-15

    Enlist Duo Herbicide Approved for Use in 6 States — DTN10-15

    State Environmental Agency Calls on EPA to Withdraw Water Rule — DTN10-15

    Georgia: Tifton’s Grimes Named Southeastern Farmer of Year10-15

    Doane Cotton Close: Volatility Reigns in Market10-14

    Sunbelt Ag Events

    Rice News

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney