2014 Farm bill: Collaboration and Education strategies

1. 2014 Farm bill: Collaboration andEducation strategies Jody Campiche 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. Decision Aid Effectiveness

4. Decision Aid Effectiveness: Oklahoma Experience • For the 2008 farm bill, OK had one of the highest ACRE enrollments in the nation • A large extension effort focused on educating producers on ACRE and developing an Excel-based decision tool to assist producers with the decision • Based on feedback from producers and extension educators across the state, the decision tool was extremely helpful in the decision process

5. Decision Aid Effectiveness: Oklahoma Experience • 1. Presentations covering the basics of each program (for producers and extension educators) • 2. Decision tool available via the web or through county extension educators • 3. Extension educator training on the decision tool • 4. Producer meetings to discuss how to use the tool, information needed, and specific scenarios relevant to the area • 5. Producer workshops (with portable computer lab) to assist with entering data into the tool

6. Producer Feedback:Farm Bill Extension Programs • Availability of decision tools is important • Need options to obtain extra help (county educators, producer workshops, etc…) • Want to see specific examples for their area • Of course results will vary by farm (crop mix, farm size, yields, etc…) • Easier for producers to understand if they can see some examples similar to their operations

7. Producer Feedback:Farm Bill Extension Programs • What do producers want to know? • Which programs provide the best safety net? • Which programs provide the highest payments • First year of sign-up • Life of the farm bill

8. 2014 Farm Bill: Extension Education

9. Extension Education • Educate producers/landowners/bankers on the differences between past programs and new programs • New programs are similar to previous programs – key differences • Emphasize the interaction between commodity and crop insurance programs and the increased complexity • Start with the details of each program • Provide examples (representative farms for the area) of how each program works • Provide examples comparing previous programs to current programs (such as the differences between ACRE and ARC)

10. Eliminated Programs DP CCP ACRE SURE

11. Changes to Commodity/Crop Insurance Programs • Elimination of direct payments, countercyclical payments, ACRE payments, and SURE payments • One time election of: • Price loss coverage (PLC) • Agricultural risk coverage (ARC) – county or individual • If landowners/tenants don’t reach agreement, no payments for 2014 crop and automatically enrolled in PLC for 2015 • New supplemental crop insurance program (SCO) for PLC participants • New supplemental crop insurance program (STAX) for cotton producers

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

13. Commodity Program/Crop Insurance Choices for Covered Commodities • PLC • PLC + SCO • ARC-County • ARC-Individual • RP, RP-HPE, YP changes?

14. 2014 Farm Bill • One-time decision to reallocate base acres • **total base acres cannot increase (will be the same as on Sept. 30, 2013) • One-time decision to update CC yields on a farm

15. Decisions at the FSA office • Update base acreage? • Update FSA payment yields? • Enroll each crop/farm in ARC or PLC?

16. Decisions at the crop insurance office • Purchase SCO for 2015? • If the crop/farm is not in ARC • SCO is a county-level product • SCO only pays if the county has a loss but the premium is much cheaper than an RP policy • If the drought continues, is it likely that both the individual farm and county will have a loss?

17. SCO Covered Commodities:2015 crop year • Corn • Cotton • Grain sorghum • Rice • Soybeans • Spring barley • Spring wheat • Winter wheat

18. Plant a different crop than base crop

19. Payment Acres • ARC/PLC paid on base acres • Do NOT have to plant to receive ARC/PLC on base acres (not including cotton base acres) • PLC calculation uses the FSA payment yield

20. Price loss coverage (PLC) • Similar to the CCP in the 2008 farm bill • Payments when price falls below the reference price • Does not account for yield loss • Payments tied to base acreage and FSA program yields

21. Agricultural Risk coverage (ARC) • Similar to the ACRE program in the 2008 farm bill • Key Differences • Paid on base acreage, not planted acreage • Tied to county or farm yield (ACRE tied to state yield) • Limited to 10% of the benchmark revenue (lower payments than ACRE)

22. Base Update • Reallocate base acres? • Cannot increase base acres, but can reallocate current base acres • Reallocation based on 2009-12 planted and prevented planted (and double crops if an approved practice)

24. Base Reallocation Example

26. Yield Update • Updated payment yield = 90% of the average of the yield per planted acre for the 2008-2012 crop years • Exclude any year when no acreage was planted to the covered commodity • Will likely use crop insurance APH yield data for 2008-2012 • Producers with yields in any of the 2008-2012 years that are < 75% of the county average yield can use 75% of the 2008-2012 county average yield as a substitute

27. Yield Update Example • Wheat CC yield = 35 bu • Garfield Co., OK: 75% of 2008-12 yield = 24 (75% of 24 = 18)

28. Important Points • The decision to enroll in ARC/PLC varies by crop, region, farm size, etc… • SCO may not be an attractive option for some crops/regions/farms

29. 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 • PLC/SCO may have higher limits than ARC

30. 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

31. Farm Program Choices • Interaction between programs • Choices will all take place at different times • This may be particularly confusing for ARC/PLC and SCO • No SCO for 2014 crop year • SCO sign-up for the 2015 crop year will occur before ARC/PLC sign-up for the 2014 crop year (for fall planted wheat)

32. SCO: Slightly Confusing PLC/ARC Details • Example 1 • Producer has 100 acres wheat base and enrolls the wheat in ARC – plants 100 acres of wheat – CANNOT enroll wheat in SCO • Example 2 • Producer has 100 acres of wheat base, enrolls the wheat in ARC - plants 100 acres of corn – CAN enroll the corn in SCO

33. Payment Timing • 2014/15 ARC/PLC payments – will receive around October 2015 • 2015 SCO payments – may not receive until Spring 2016 (when county yields are final)

34. SCO/RP/YP/ARC/PLC Decisions • Is SCO offered for the crop/county? • Is ARC a better option for the crop/farm? • Is the base acreage different than current planted acreage? • Will the producer reallocate base acreage? • What is the current RP/YP coverage level? • What is the cost of higher RP/YP coverage vs adding SCO? • Does the producer have enterprise units? • Is the producer planting a large amount of acreage over your base?

35. Decision Tools – Many Options

36. SCO Decision Tool – Winter Wheat

37. OSU/KSU Farm Bill Decision Tool Jody Campiche Eric DeVuyst Oklahoma State University Art Barnaby Mykel Taylor Kansas State University

40. Results

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