2014 farm bill commodity/crop insurance programs: wheat and grain sorghum dr. jody campiche...

2014 FARM BILL COMMODITY/CROP INSURANCE PROGRAMS:

WHEAT AND GRAIN SORGHUM

Dr. Jody Campiche

Department of Agricultural Economics

Oklahoma State University

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

Commodity/Crop Insurance Programs

ARC-C

SCO

PLC

CROP INSURANCE

COMMODITY PROGRAMS

ARC-I

RP, YP, RP-HPE

Commodity Program/Crop Insurance Choices

PLC

PLC + SCO

ARC-County

ARC-Individual

RP, RP-HPE, YP Changes?

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

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

Important Points

PLC Reference Prices FAPRI/WASDE Price Projections

Crop PLC Reference Price

Grain Sorghum

3.95

Wheat 5.50

August 2014 Price Projections - Wheat

2014/15 2015/16 2016/17 2017/18 2018/19

FAPRI $6.27 $5.73 $5.72 $5.79 $5.87

USDA WASDE

$5.80-$6.80

August 2014 Price Projections - Sorghum

2014/15 2015/16 2016/17 2017/18 2018/19

FAPRI $3.63 $3.90 $3.93 $3.96 $4.02

USDA WASDE

$3.30-$4.00

Sorghum PLC Payments assumingFAPRI/WASDE Price Projections

PLC Projected Payments – Sorghum (FSA payment yield = 45)

2014/15 2015/16 2016/17 2017/18 2018/19

PLC $14.40 $2.25 $0.90 $0 $0

PLC-85% of base adj.

$12.24 $1.91 $0.77 $0 $0

August 2014 Price Projections - Sorghum

2014/15 2015/16 2016/17 2017/18 2018/19

FAPRI $3.63 $3.90 $3.93 $3.96 $4.02

USDA WASDE

$3.30-$4.00

Wheat PLC Payments assumingFAPRI/WASDE Price Projections

August 2014 Price Projections - Wheat

2014/15 2015/16 2016/17 2017/18 2018/19

FAPRI $6.27 $5.73 $5.72 $5.79 $5.87

USDA WASDE

$5.80-$6.80

PLC Projected Payments – Wheat (FSA payment yield = 40)

2014/15 2015/16 2016/17 2017/18 2018/19

PLC $0 $0 $0 $0 $0

PLC-85% of base adj.

$0 $0 $0 $0 $0

ARC Benchmark Prices

Wheat

YearMYA Price

ARC Price

Oly Avg

2009 4.87 5.50  2010 5.70 5.70  2011 7.24 7.24  2012 7.77 7.77  2013 6.87 6.87  2014 6.27 6.27 6.602015 5.73 5.73 6.792016 5.72 5.72 6.792017 5.79 5.79 6.292018 5.87 5.87 5.93

Sorghum

YearMYA Price

ARC Price

Oly Avg

2009 3.22 3.95  2010 5.02 5.02  2011 5.99 5.99  2012 6.33 6.33  2013 4.25 4.25  2014 3.63 3.95 5.092015 3.90 3.95 5.092016 3.93 3.95 4.732017 3.96 3.96 4.052018 4.02 4.02 3.95

*If MYA price < reference price, replace with reference price*Wheat reference price = $5.50, Sorghum reference price =$3.95

Wheat

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

SCO Decision Tool – 70% RPFAPRI Projected Prices for Wheat

SCO Decision Tool – 75% RPFAPRI Projected Prices for Wheat

SCO Decision Tool – 80% RPFAPRI Projected Prices for Wheat

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

ARC vs. PLC 2014/15 Wheat

Art Barnaby’s Spreadsheet

Sorghum

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

SCO Decision Tool – 70% RPFAPRI Projected Prices for Sorghum

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

ARC vs. PLC 2014/15 Sorghum

Art Barnaby’s Spreadsheet

ARC vs. PLC 2014/15 Sorghum

Art Barnaby’s Spreadsheet

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

Questions?

Jody Campiche

jody.campiche@okstate.edu

http://agecon.okstate.edu/agpolicy/

405-744-9811