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Brad Jordahl Redlin
September 24, 2015
Context and Policies
1. Federal Farm Policy in Context
2. Production Policy
3. Conservation 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.
 Major commodity prices had been strong in recent farm
bill periods…
 Crop prices do not have major effect on food prices
 Farm production % is up at 10.5 percent of food costs
 Title I Commodities
 Title II Conservation
 Title III Trade
 Title IV Nutrition
 Title V Credit
 Title VI Rural 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.
1. Federal Farm Policy in Context
2. Production Policy
3. Conservation 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”…
Soybeans
35 acres
Corn
50 acres
Wheat
15 acres
…and historical yield.
 2014 Farm Act permits one-time option to update base
(no increase in acres) and yield (2009 - 2012).
 base stays with land.
XYZ Farm
100 acres
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
 2014 law 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)
NOTE: CBO 2015 projection:
ARC and PLC will average
$4.4 billion, compared with
CBO’s 2014 projection of
$2.94 billion
 ARC
explained
…maybe.
$4.50 x 180 =
$810 x 0.86 =
$696.60/acre $3.20 x 180 =
$576/acre
$696.60 - $576 =
$120.60 x 50 acres =
$6,030 x 0.85 =
$5,125.50 or $102.51/acre
($810 x 0.10 = $81/acre)
$81 x 50 =
$4,050 ARC payment
Price Loss Coverage and Agriculture Risk Coverage
- planting provisions -
 Previous policy (multiple farm bills) lost acre-to-acre DP
and penalized market value of vegetables.
 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. Production Policy
3. Conservation 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 Compliance
Highly 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
 Conservation
CHIMPS.
 Farm Bills set
mandatory
spending levels;
appropriators
nonetheless do
otherwise.
1. Federal Farm Policy in Context
2. Production Policy
3. Conservation 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.
 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.
 Participation in Crop
insurance is high across
major commodities.
 Premium subsidies,
Revenue policies have
been growing rapidly.
 Revenue insurance is dominant with 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 insured
like a deductible, select from sequence 50% - 85%
Price – generally, higher of spring/harvest price
average futures prices Feb or Oct
Acres – acres planted to insured crop
optional “units,” e.g. all acres of one crop in county
Approved Projected Price: $5.65 Approved Harvest Price: $4.39
 Crop Insurance dominant in Farm Bill policy and budget.
 2014 again saw near/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 Redlin
bjredlin@gmail.com
651.270.0564
www.sustainableagriculture.net
Context and
Policies
www.ers.usda.gov/ www.fsa.usda.gov/FSA/

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Federal Farm Policy - University of Minnesota 09-24-15

  • 1. Brad Jordahl Redlin September 24, 2015 Context and Policies
  • 2. 1. Federal Farm Policy in Context 2. Production Policy 3. Conservation Policy 4. Risk Management Policy Context and Policies
  • 3.  51 percent of total U.S. land is in agricultural use (61 percent of lower 48 states).  Urban land use is 2.7 percent.
  • 4.  Farm numbers and sizes have changed, but not the acreage.
  • 5.  Major commodity prices had been strong in recent farm bill periods…
  • 6.  Crop prices do not have major effect on food prices
  • 7.  Farm production % is up at 10.5 percent of food costs
  • 8.  Title I Commodities  Title II Conservation  Title III Trade  Title IV Nutrition  Title V Credit  Title VI Rural 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.
  • 9.  There are 3 means for delivering $ to agriculture via Farm Bill.  Commodity Subsidies, Conservation Programs, Crop Insurance.
  • 10. 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.
  • 11. 1. Federal Farm Policy in Context 2. Production Policy 3. Conservation Policy 4. Risk Management Policy Context and Policies
  • 12. 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
  • 13.  Commodity program payments made on “base acres.”  historical planted acreage registered for each farm.  may plant any* crop; payments based on “base”… Soybeans 35 acres Corn 50 acres Wheat 15 acres …and historical yield.  2014 Farm Act permits one-time option to update base (no increase in acres) and yield (2009 - 2012).  base stays with land. XYZ Farm 100 acres
  • 14. 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  2014 law 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) NOTE: CBO 2015 projection: ARC and PLC will average $4.4 billion, compared with CBO’s 2014 projection of $2.94 billion
  • 15.  ARC explained …maybe. $4.50 x 180 = $810 x 0.86 = $696.60/acre $3.20 x 180 = $576/acre $696.60 - $576 = $120.60 x 50 acres = $6,030 x 0.85 = $5,125.50 or $102.51/acre ($810 x 0.10 = $81/acre) $81 x 50 = $4,050 ARC payment
  • 16. Price Loss Coverage and Agriculture Risk Coverage - planting provisions -  Previous policy (multiple farm bills) lost acre-to-acre DP and penalized market value of vegetables.  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)
  • 17.  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)
  • 18. 1. Federal Farm Policy in Context 2. Production Policy 3. Conservation Policy 4. Risk Management Policy Context and Policies
  • 19.  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)
  • 21. Conservation Compliance Highly 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
  • 22.  Conservation CHIMPS.  Farm Bills set mandatory spending levels; appropriators nonetheless do otherwise.
  • 23. 1. Federal Farm Policy in Context 2. Production Policy 3. Conservation Policy 4. Risk Management Policy Context and Policies
  • 24.  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.
  • 25.  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.
  • 26.  Participation in Crop insurance is high across major commodities.  Premium subsidies, Revenue policies have been growing rapidly.
  • 27.  Revenue insurance is dominant with high coverage levels.
  • 28.  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 insured like a deductible, select from sequence 50% - 85% Price – generally, higher of spring/harvest price average futures prices Feb or Oct Acres – acres planted to insured crop optional “units,” e.g. all acres of one crop in county
  • 29. Approved Projected Price: $5.65 Approved Harvest Price: $4.39
  • 30.  Crop Insurance dominant in Farm Bill policy and budget.  2014 again saw near/record production & yield for major crops.  Extended low-price cycle is challenge to revenue insurance.  Climate change is challenge to APH (provisions already enacted).
  • 31.  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.