dr. jody campiche oklahoma state university may 16, 2013 acre vs. dcp

Dr. Jody Campiche

Oklahoma State University

May 16, 2013

ACRE vs. DCP

ACRE vs. DCP

American Taxpayer Relief Act extended the ACRE program for the 2013 crop year

Deadline for ACRE enrollment: June 3, 2013

Deadline for DCP enrollment: August 2, 2013

Can enroll in ACRE or DCP (regardless of what you were previously enrolled in)Must re-enroll in either ACRE or DCP (even if you were in

ACRE last year)

Direct Payments Paid on historical base acreage – not tied to current prices or production Average $15/acre payment for wheat

CCP Paid on historical base acreage and current prices Target price program No CCP payments on wheat

ACRE Based on a state and farm level trigger Payment based on state benchmark yield (not individual or county)

2008 Commodity Programs - Reminder

ACRE Details

• Alternative to the DCP program

• Designed to protect against short-term revenue loss (from a decrease in yield, price, or combination of both)

• Paid on planted acres (up to # of base acres)

• Enroll by FSA farm # • Do not have to enroll all farms in ACRE

• State level revenue guarantee• Based on the five-year state Olympic average yield and the

two-year national average price

DCP vs. ACRE

DCP ACRE

Direct Payments 20% reduction in Direct Payments

Counter-Cyclical Payments ACRE Payments

Marketing Assistance Loan 30% reduction in Marketing Assistance Loan Rates

What is the ACRE Program?

Two triggers must be met for an ACRE payment

1) State TriggerActual State Revenue < State ACRE Guarantee

2) Farm TriggerActual Farm Revenue < Farm ACRE Guarantee

State Trigger

State ACRE Guarantee

90%times

Benchmark State Yieldtimes

ACRE Guarantee Price

Actual State Revenue

Actual State Yield

times

2013 MYA Price

(not final until June/July 2014)

Farm Trigger

Farm ACRE Guarantee

Benchmark Farm Yieldtimes

ACRE Guarantee Priceplus

Crop Insurance Premium (per acre)

Actual Farm Revenue

Actual Farm Yield

times

2013 MYA Price (not final until mid to late 2014)

Benchmark Farm Yield

Olympic average of 2008-2012 farm yieldsDrop the highest and lowest and average the remaining

three

Example:2008 402009 362010 45 (highest)2011 20 (lowest)2012 39

Farm Benchmark Yield = average (40,36,39) = 38.3


Several options:Certify your own yield data

If you certify yield data and it is higher than the county average, your yield will be used to calculate the benchmark farm yield

Use 95% of the ACRE county plug yield

Use a combination of both


Can only prove yields back to the 1st “break in continuity”What is a “break in continuity”

Any year when yield evidence is not available excluding years when the crop was not produced on the farm

For any years preceding the “break in continuity”, 95% of the ACRE plug yield will be used


It is in the producer’s best interest to certify yields and establish a high benchmark yield

Higher benchmark yieldHigher farm revenue guaranteeMore likely to meet the farm triggerHigher ACRE payment if the farm

benchmark yield > state benchmark yield

Sequestration – Automatic Cuts

8.5% cut to 2013 direct payments

2013 ACRE vs. DCP

2009/10 Average U.S. Direct Payments

Corn Grain Sorghum

Wheat Upland Cotton

Rice Peanuts Soybeans$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2009/10 Average CCP Payments for Cotton

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

0

10

20

30

40

50

60

70

80$

per

Bas

e A

cre

What do you lose in DP due to sequestration?

Average payment

8.5% sequestration

Loss

DP

Wheat $15.00 $1.27 $13.72Sorghum $17.00 $1.45 $15.55Soybeans $10.00 $0.85 $9.15I Corn $32.67 $2.78 $29.89

NI Corn $16.33 $1.39 $14.94

I Cotton $50.00 $4.25 $45.75NI Cotton $23.34 $1.98 $21.36Peanuts $40.60 $3.45 $37.15

What do you lose in DP if you enroll in ACRE?

Average payment

20% Loss (ACRE payment needed to

break even)

RemainingDP

Wheat $13.72 $2.72 $11.00Sorghum $15.55 $3.11 $12.44Soybeans $9.15 $1.83 $7.32I Corn $29.89 $5.98 $23.91NI Corn $14.94 $2.99 $11.96I Cotton $45.75 $9.15 $36.60NI Cotton $21.36 $4.27 $17.09Peanuts $37.15 $7.43 $29.72

2013 Maximum ACRE payments

Crop Max base ACRE Payment (may be higher/lower if bench farm yield is

higher/lower than state)

Wheat $37

Oats $20

Sorghum $42

Irrigated Cotton $177

Non Irrigated Cotton $72

Irrigated Corn $162

Non Irrigated Corn $74

Peanuts $159

Soybeans $47

Canola $37

ACRE for Wheat

OK State Wheat Yield

ACRE Payment (per

acre)

Benchmark Revenue Guarantee

2009 21.9 $46.84 $187.36

2010 31.0 $0.00 $168.62

2011 18.3 $19.27 $151.76

2012 36.0* Probably $0.00 $156.64

2013 30 or 25.4 ? $172.30

2013 Wheat Estimates

Total production

Yield per acre

NASS 114,000,000 30

OK Wheat Tour 85,000,000 24.5

ACRE vs. DCP for Wheat

17 18 19 20 21 2205

1015202530354045ACRE Payment - $7.80 MYA Price

ACRE Payment

State Wheat Yield

$/ac

re

$2.72 Breakeven Point (21.8 bu/acre)


17 18 19 20 21 220

5

10

15

20

25

30

35

ACRE Payment - $8.20 MYA Price

ACRE Payment

State Wheat Yield

$/ac

re

Breakeven Point (20.7 bu/acre)$2.72


7

7.2

7.4

7.6

7.8

0

4

8

12

16

20

ACRE Payment 22 bu/acre State Wheat Yield

ACRE Payment

2013/14 MYA Price

$/ac

re

Breakeven Point ($7.72)

$2.72

2013 Wheat

2013/14 MYA Price State Yield Needed to Trigger ACRE and make at least $2.72

$8.20 20.70 or lower

$7.80 21.75 or lower

$7.50 22.60 or lower

$7.10 23.90 or lower

ACRE vs. DCP for Irrigated Cotton

OK State Yield ACRE Payment (per acre)


2009 1232 $0.00 $472.27

2010 1097 $0.00 $517.55

2011 85 $142.33 $569.31

2012 ? ? $626.24

2013 ? ? $699.60 (not final)

ACRE: Irrigated Cotton

Breakeven Point (968 lbs/acre)

$9.15 610 700 750 775 800

$0$20$40$60$80

$100$120$140$160$180$200

MYA Price $0.701

ACRE payment

State Yield

$/ac

re

Max ACRE payment $171/acre

ACRE: Irrigated Cotton


$9.15

610 700 750 775 8000

25

50

75

100

125

150

175

200MYA Price $0.85

ACRE payment

State Yield

$/ac

re

ACRE vs. DCP for Non-Irrigated Cotton

OK State Yield ACRE Payment (per acre)


2009 367 $0.00 $221.42

2010 503 $0.00 $209.91

2011 21 $57.33 $230.90

2012 ? ? $253.99

2013 ? ? $278.30 (not final)



300 350 375 395$0

$10$20$30$40$50$60$70$80

MYA Price $0.701

ACRE payment

State Yield

$/ac

re

$4.17



250 275 300 325$0

$10$20$30$40$50$60$70$80

MYA Price $0.85

ACRE payment

State Yield

$/ac

re

$4.17

Enrolling in ACRE: Things to Consider

• Are you willing to give up 20% of your direct payments to potentially get an ACRE payment for the 2013 crop year

• Get the 2013 DP in October 2013• Get the 2013 ACRE payment in Oct/Nov 2014

• Wheat producers will have a better idea of the state wheat yield after May 10


• When you put a farm in ACRE, every crop on the farm is enrolled in ACRE

Even if wheat may receive a 2013 ACRE payment, need to consider loss in DP for all crops on the farm


• For each FSA farm #, how many acres are you planting compared to your base?

• ACRE is only paid on planted acres

• May not want to enroll a farm in ACRE if you are planting much less than your base

ACRE Decision Tool

• http://agecon.okstate.edu/agpolicy/decisionTool_comm.asp

ACRE Decision Tool

Benchmark Yield

ACRE Decision Tool

2013 House vs. Senate Farm Bill

House vs. Senate Commodity, Crop Insurance, and Livestock Programs

Component Senate House

Direct Payments No No

CCP Payments No No

ACRE No No

SURE No No

County Revenue Protection Yes Yes

Farm Revenue Protection Yes No

Price Protection Yes Yes

STAX Yes Yes

SCO Yes Yes

Marketing Loans Yes Yes

Livestock Disaster Programs Yes Yes

2013 Senate vs. House Farm Bill

No CCP payments, ACRE payments, or DP payments after 2013 (with the exception of cotton in the House bill)

House phases out direct payments for cotton in 2014 and 2015

New revenue and price protection commodity programs

Livestock Disaster Assistance – would cover 2012 and 2013 losses

Senate bill combines Livestock Disaster Program and NAP


New county based average yield insurance to supplement individual policy (SCO & STAX)


Supplemental Coverage Option (SCO) Government subsidy – 65% (reduced from 70% in 2012

drafts)

Stacked Income Protection Plan (STAX) for cotton Government subsidy -80%

Coverage of revenue loss between 10%-30%

House removed reference price that was included in 2012 draft

2013 Senate Farm BillAgriculture, Reform, Food and Jobs Act of 2013

Similar to 2012 draft – but added back in counter-cyclical payment program

Choose between 2 commodity programs:

(1) Agriculture Risk Coverage - ARC (revenue coverage)

-individual (65% of planted acres)

-county coverage (85% of planted acres)

(2) Adverse Market Payments (price coverage)


Adverse Market Payments Actual price = higher of national

average marketing year price or loan rate

Reference Price = target prices in 2008 farm bill (except rice and peanuts)

Payment rate = reference price – actual price

Payment amount = payment rate * payment acres * payment yield

Crop Reference Price

Wheat $4.17

Corn $2.63

Sorghum $2.63

Barley $2.63

Oats $1.79

Soybeans $6.00

Peanuts $523.77

Rice $13.30


Agriculture Risk Coverage (ARC)

Actual crop revenue < ARC guarantee

Actual crop revenue = average yield (individual or county) * higher of (MYA price or reference price)

Guarantee = 88% of benchmark revenue

Benchmark revenue = Olympic average yield * Olympic average MYA price


Agriculture Risk Coverage (ARC)

Payment rate = lesser of:10% of benchmark revenueARC guarantee – actual crop revenue


SCOIf enrolled in ARC – deductible 22%Not enrolled in ARC – deductible 10%

2013 House Farm Bill Draft

Similar to 2012 farm bill draft – but dropped the reference price in STAX

Choose between two commodity programs

(1) Revenue Loss Coverage – RLC (revenue coverage)Not eligible for SCO

(2) Price Loss Coverage – PLC (revenue coverage)Eligible for SCO


Price Loss Coverage (PLC)Payment when the effective price <

reference price

Effective price = higher of midseason price or loan rate

Payment rate = reference price – effective price

Payment amount = payment rate & payment yield * payment acres

Crop Reference Price

Wheat $5.50

Corn $3.70

Sorghum $3.95

Barley $4.95

Oats $2.40

Soybeans $8.40

Peanuts $535

Comparison of House vs. Senate Reference Prices

Crop Senate House

Wheat $4.17 $5.50

Corn $2.63 $3.70

Sorghum $2.63 $3.95

Barley $2.63 $4.95

Oats $1.79 $2.40

Soybeans $6.00 $8.40

Peanuts $523.77 $535.00

Rice $13.30 $14.00


Revenue Loss Coverage (RLC)Payment when the actual county revenue < county revenue

loss coverage trigger

Actual county revenue = actual county yield * higher of midseason price or loan rate

County revenue loss coverage trigger = 85% of benchmark county revenueBenchmark county revenue = Olympic average

county yield * Olympic average MYA price (use reference price if MYA < reference price)


Payment rate = lesser of: • 10% of benchmark county revenue• County revenue loss coverage trigger – actual county

revenue

Payment amount = payment rate * payment acres

Questions from Webinar

Q) What % of planted acres are ACRE payments paid on?A) ACRE payments are paid on 85% of planted + considered

planted (up to the # of base acres).Prevented planted acres are counted as considered planted.

Q) Are prevented planted acres included in the failed acre calculation?

A) No, prevented planted acres are not included in the failed acre calculation.

Q) Is the June 3 ACRE deadline for all crops?A) Yes.

Questions from Webinar

Q) Are payment limitations for each program per individual/farm?

A) No, payment limits are basically by individual (or ID #).Beginning in 2009, the 2008 Farm Bill established a system of

“direct attribution” to match program payments with a natural person i.e., the total amount of payments must be attributed (linked) to an individual by taking into account the individual’s direct and indirect ownership interest in a legal entity while retaining the payment limits that applied to the entities themselves.

Therefore, every payment made directly to a person is combined with that person’s pro rata interest in payments received by a legal entity

in which the person has an ownership interest, and every payment made to a legal entity is attributed to those persons with an ownership interest in the entity.

Jody Campiche528 Ag Hall

[email protected]

http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters

dr. jody campiche oklahoma state university may 16, 2013 acre vs. dcp

Documents