2014 Farm bill COMMODITY/Crop Insurance programs: Wheat and Grain Sorghum

1. 2014 Farm bill COMMODITY/Crop Insurance programs: Wheat and Grain Sorghum Dr. Jody Campiche Department of Agricultural Economics Oklahoma State University

2. Disclaimer • This information is based on my understanding of the 2014 farm bill • Some details may be slightly different once the final rules and regulations are released • This information is intended to be for educational purposes only

3. Commodity/Crop Insurance Programs COMMODITY PROGRAMS PLC ARC-C ARC-I CROP INSURANCE SCO RP, YP, RP-HPE

4. Commodity Program/Crop Insurance Choices • PLC • PLC + SCO • ARC-County • ARC-Individual • RP, RP-HPE, YP Changes?

5. Important Points • ARC/PLC paid on 85% of base acres • SCO paid on 100% of planted acres • No premium for ARC/PLC • Premium for SCO • Payment limits for ARC/PLC • No payment limits for SCO • ARC limited to 10% of benchmark revenue • SCO/PLC payments can be higher than ARC

6. Important Points • SCO not available for all crops for 2015 • Some producers have base but are not planting a crop • Some producers have a higher level of coverage on their individual policy so SCO is less attractive • Some producers plant more than their base so SCO may be more attractive

7. PLC Reference Prices FAPRI/WASDE Price Projections

8. Sorghum PLC Payments assumingFAPRI/WASDE Price Projections

9. Wheat PLC Payments assumingFAPRI/WASDE Price Projections

10. ARC Benchmark Prices *If MYA price < reference price, replace with reference price *Wheat reference price = $5.50, Sorghum reference price =$3.95

11. Wheat

12. Which Program to Choose? • Wheat • ARC may trigger for wheat in many counties in the Southern Plains for 2014/15 if the county has a yield loss • Payments will not be large (likely < $20/acre) • PLC will likely not trigger in 2014/15 for wheat • Producers who are concerned about price declines over the life of the farm bill and a stronger overall safety net may want to elect PLC (and add SCO) • SCO is not available for the 2014/15 crop year

13. SCO Decision Tool – 70% RPFAPRI Projected Prices for Wheat

14. SCO Decision Tool – 75% RPFAPRI Projected Prices for Wheat

15. SCO Decision Tool – 80% RPFAPRI Projected Prices for Wheat

16. SCO Decision Tool – 70% RP2015 Wheat Price = $5.00

17. ARC vs. PLC 2014/15 Wheat • Art Barnaby’s Spreadsheet

18. Sorghum

19. Which Program to Choose? • Sorghum • ARC may trigger in some counties in the Southern Plains for 2014/15 • Maximum payments could range from $22-$35/acre (depending ARC county yields) • PLC may trigger in 2014/15 for sorghum if the price < $3.95 • Producers who are concerned about price declines over the life of the farm bill and a stronger overall safety net may want to elect PLC (and add SCO) • SCO is not available for the 2014 crop year

20. SCO Decision Tool – 70% RPFAPRI Projected Prices for Sorghum

21. SCO Decision Tool – 70% RP2015/16 Sorghum Price = $3.22

22. ARC vs. PLC 2014/15 Sorghum • Art Barnaby’s Spreadsheet

23. ARC vs. PLC 2014/15 Sorghum • Art Barnaby’s Spreadsheet

24. OSU Farm Policy Website • Simple SCO/ARC/PLC decision tool for winter wheat • OSU/KSU Decision Tool – available soon • Joint effort: • Jody Campiche & Eric DeVuyst – OSU • Art Barnaby & Mykel Taylor – KSU • Partially funded by SRMEC • Other videos, newsletters, etc… • www.agecon.okstate.edu/agpolicy/farm_2014.asp

26. Questions? Jody Campiche jody.campiche@okstate.edu http://agecon.okstate.edu/agpolicy/ 405-744-9811