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2014 Farm Bill Changes Programs Available to Producers

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Do you understand all the programs?

Reforms to the 2008 Farm Bill have changed the programs available to producers. The 2014 Farm Bill authorizes the program from 2014 – 2018. 

Commodity Programs

The new Farm Bill repealed direct payments and the ACRE program. The bill does provide for transition payment for cotton producers. In their place, producers can choose between Price Loss Coverage and Agricultural Risk Coverage. Once producers have made a decision, they are locked into that program for the life of the 2014 Farm Bill. If producers do not elect, the default program they will be enrolled in is the Price Loss Coverage. Payments received by producers under the new programs are limited to $125,000 per producer or $250,000 for a producer and a spouse. Total base acres for farms will remain the same unless producers elect to reallocate base acres. The definition of “actively engaged” will remain the same in 2014, but USDA plans to change that definition in 2015.

Price Loss Coverage payments will occur if the US average market price for the crop year is less that the crop’s reference price. Crop years begin in September and run through August. The payment rates are equal to the difference in the actual price and the reference price and payments are made on 85% of base acres regardless of actual acres planted. Reference prices are:

  • Wheat – $5.50/bu
  • Corn – $3.70/bu
  • Soybeans – $8.40/bu

 Agricultural Risk Coverage (ARC) can be at the county or individual level. Producers must elect one program or the other and cannot choose on a crop by crop basis.  Electing ARC coverage makes producers ineligible to also elect supplemental coverage options provided in the crop insurance program.

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County ARC payments occur when the actual county revenue for the crop year is below the county ARC guarantee. Payments are made on 85% of base acres for the producer. Actual revenue for a county is derived by multiplying the average county yield for a particular crop by the higher of the market year average or the commodity’s loan rate ($5.00 for soybeans and $1.95 for corn). Calculating the ARC is not easy, but basically the 5-year yield average is multiplied by the 5-year market price average.

Individual ARC payments occur when actual revenue falls below average revenue. Payments under this program are made on 65% of the base acres for the producer, not 85% like the other 2 programs. Actual revenue is calculated by using a weighted average of each crop. The weighted average considers crops and acres planted. Actual revenue is the yield multiplied by price (higher of market average or commodity loan rate). The guarantee is your revenue for the past 5 years is calculated by multiplying actual yield with national price averages.

Conservations Programs

Under the new Farm Bill, producers will be required to comply with conservation provisions for soil and wetland conservation in order to receive crop insurance premium subsidies. These conservation provisions will not take effect until the 2015 crop year.

Funding for conservation programs has been cut in the 2014 Farm Bill. The conservation stewardship program will remain intact, but the enrollment has been reduced from 12.8 million acres down to 10 million acres. The Conservation Reserve Program will be faced with similar cuts. This program allowed for 32 million acre in 2013 and this number will be reduced to 24 million acres by 2017. Funding for EQUIP, however, will increase from $1.35 billion in 2014 to $1.75 billion in 2018.

from Legal Counsel, Michelle Mellendorf

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Written By

Michelle Goeke

Michelle Goeke

General Counsel & Business Design Specialist

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