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PLC or ARC? PLC or ARC?

PLC or ARC? - PowerPoint Presentation

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PLC or ARC? - PPT Presentation

Farm Bill Program Signup and Decision Aids Nick Baker Rock County UW Extension Agriculture Agent 6087575698 nickbakercesuwexedu MultiStep Process with Different Deadlines Step 1 Maintain ID: 582687

county arc base plc arc county plc base corn sco payment yields fsa acres coverage price soybeans wheat http

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Slide1

PLC or ARC? Farm Bill Program Sign-up and Decision Aids

Nick BakerRock County UW Extension Agriculture Agent608-757-5698nick.baker@ces.uwex.eduSlide2

Multi-Step Process with Different DeadlinesStep 1: Maintain or Reallocate Base Acres

Step 2: Maintain or Update Payment YieldsStep 3: Elect PLC/ARC-CO/ARC-IC 3/31/2015Step 4: Consider SCO By 3/15/2015Step 5: Enroll in PLC/ARC By Summer 2015Farmers and land owners will have to choose PLCCounty ARC by CropIndividual ARC for Whole FarmIrrevocable choice

for 2014 – 2018 crop yearsPlenty of time to make decisionsBy 2/27/151 Owner SignsProducer SignsSlide3

Updating Base AcresBase acres haven’t been updated since 2002 Farm Bill, so current base acres are based on

1998-2001 plantings2 Options1. Keep current base acres2. Keep same total base acres, but reallocate using actual 2009-2012 planted acre sharesRecommendation: Choose option that puts more base acres into Corn: crop with the highest expected paymentsIn WI: Corn > Soybeans ≥ Wheat > OatsFarm cannot increase total base acres, only reallocate total based on acreage shares planted during 2009-2012Slide4

Base Acre Updating Toolhttp:/www.fsa.usda.gov/Internet/FSA_File/evaluate_arc_plc.pdf

Scroll down, hit link, zip file to get Excel spreadsheetSlide5

Alternative enter data into an online tool: http://fsa.usapas.com/Slide6

Alternative enter data into an online tool:

http://fsa.usapas.com/Slide7

Yield UpdatingHaven’t been updated since 2002 Farm Bill, so currently based on 1997-2001

yields1. Keep your current yields2. Update yields to 90% of your 2008-2012 average, with 75% county average as “substitute yield” if your actual yield lower for a year3. If no yield data, get 90% of 75% of county averageRecommendation: Choose option giving highest Yields http://www.fsa.usda.gov/Internet/FSA_File/plc_subyields_web.xls

Substitute Yields by CropCountyCornWheatSoybeansOatsWalworth108.053.033.048.0Kenosha113.056.033.049.0Racine108.052.032.048.0Slide8

Yield Updating Tool

http://www.fsa.usda.gov/Internet/FSA_File/evaluate_arc_plc.pdfSlide9

Enter data into an online tool: http://fsa.usapas.com/Slide10

E

nter data into an online tool:

http://fsa.usapas.com/Automatically uses substitute yields for your countySlide11

CommentsCannot increase total base acresCan update base acre split and not yields, yields and not base acre split, both base acres and yields, or neitherCan update yields for each crop separately

Renters and Landlords have to work together: often the renter has the production information, but the landlord does the paperwork and signs the formsNot all landlords will understand what’s going on -- it’s been more than a decade since this last happenedGet signatures on updating base acres and yields, even if do not change, otherwise you cannot make PLC/ARC election until March 1, 2015Slide12

Multi-Step Process with Different DeadlinesStep 1: Maintain or Reallocate Base Acres

Step 2: Keep or Update YieldsStep 3: Elect PLC/ARC-CO/ARC-IC By 3/31/2015Step 4: Consider SCO By 3/15/2015Step 5: Enroll in PLC/ARC By Summer 2015Recommendations Choose option that puts most Base Acres into CornChoose option that gives you the highest Program Yields

By 2/27/15Slide13

New Commodity Support Programs3 Options

1) Price Loss Coverage (PLC)Agriculture Risk Coverage (ARC)2) County ARC (ARC-CO) by crop 85% BA3) Individual ARC (ARC-IC) for whole farm 65% BAMost farmers will find County ARC the best option, especially for corn and soybeans Farmers may find PLC

the best option for wheat and oats in some countiesThere are always exceptions!Slide14

New Commodity Support ProgramsPrice Loss Coverage (PLC)Establishes a

price floor based on national marketing year average priceEssentially Counter-cyclical payments, but higher pricesCan buy Supplemental Coverage Option (SCO) crop insurance as an add-on optionAgriculture Risk Coverage (ARC)Establishes a revenue floorEssentially a new and improved ACRE program1) County revenue by Crop (County ARC or ARC-CO)2) Individual revenue for Whole Farm (ARC-IC)Slide15

Simple PLC ExampleIf the corn National Marketing Year Average Price were $3.50

Corn Reference Price is $3.70 > $3.50, so PLC payments are triggered, Payment Rate = $3.70 – $3.50 = $0.20/buIf have 80 corn Base Acres with a existing Payment Yield of 105 bu/ac, then your PLC payment would be85% x 80 ac x 105 bu/ac x $0.20/bu = $1,428If you have an updated Payment Yield of 130 bu/ac, then your PLC payment would be85% x 80 ac x 130

bu/ac x $.020/bu = $1,768This is why if you update payment yields, pick the option that gives the highest payment yieldsSlide16

Supplemental Coverage Option (SCO)If you sign up for PLC, you have the

option to buy SCO: allows you to insure part of your RP/YP deductible with a county policy (ARP/AYP)Layer individual & county coverageCan’t exceed 86% total coverageAdd SCO to an RP policy to increase coverage up to the 86% maximumSCO will not pay until county loss exceeds 14%65% SCO premium subsidy (farmer pays 35%)SCO available in 2015, only commodities in PLCSlide17

Counties with SCO for WheatSlide18

County ARC Payment ExampleSuppose 2014 County ARC Guarantee is $750 for cornSuppose 2014 actual USDA yield is 180

bu/ac and 2014 MYA corn price is $3.60Actual revenue is 180 x 3.60 = $648/ac$648 < $750, triggers County ARC paymentARC Payment Rate = 750 – 648 = $102/ac: exceeds maxMaximum ARC payment = 10% x County guarantee ($750)So ARC Payment Rate = $75.00ARC-CO Payment = 85% x Base Acres x ARC Payment RateARC-CO Payment = 85% x $75 = $63.75 per corn base acreSlide19

Olympic Averaging: Unofficial 2014 Corn Example Walworth County

YearYieldPrice2013

1594.462012996.8920111646.2220101715.1820091563.55Olympic Average Yield = 159.7Olympic Average Price = 5.29ARC County Benchmark = 5.29 x 159.7 = $844.81ARC Guarantee = 86% x $844.81 = $726.54Maximum ARC Payment = 10% x $844.81 = $84.48Slide20

ARC CommentsCounty ARC varies by county: guarantee, maximum payments, and actual yieldsCounty ARC guarantee varies over time: 5 year moving Olympic Average

Kind of like SCO, a county-level revenue insurance with an 86% coverage level DifferencesUses 5-Year Olympic Average of prices and yield to determine guaranteeUses national marketing year average price as the actual price, not CME futures pricesSlide21

Decision Aids: U of IL with USDA Funding http://fsa.usapas.com/Slide22

SCO

PLC

ARC-COSlide23

Walworth County, FAPRI Prices, 75% RP Coverage, 5-year horizon

Corn > Soybeans ≥ Wheat > OatsCounty ARC > PLC+SCO for corn, soybeans and wheatSlide24

Racine County, FAPRI Prices, 75% RP Coverage, 5-year horizon

Corn > Soybeans ≥ Wheat > OatsCounty ARC > PLC+SCO for corn, soybeans and wheatSlide25

Kenosha County, FAPRI Prices, 75% RP Coverage, 5-year horizon

Corn > Soybeans ≥ Wheat > OatsCounty ARC > PLC+SCO for corn, soybeans and wheatSlide26

Main PointsWhen choosing Base Acre ReallocationCorn > Soybeans

≥ Wheat >OatsGet as many Corn base acres as you canWhat about County ARC versus PLC?Depends on prices use/assume, but generally ARC better for corn & soybeans in most countiesTool has 3 options for average price1) CBO futures prices: optimistic2) USDA WASDE prices: pessimistic3) FAPRI price estimates: realisticSlide27

CORN

SOYBEANSlide28

CommentsCharts use county average Payment Yields for PLCActual farm Payment Yields will be higher or lower depending on how farm yields relate to county yields

SCO payments are net of premiumsThese are estimates of average payments under different price expectationsThese are not direct payments: no guaranteed paymentsEstimates are not always correctAverages are not certainThe average of rolling two dice is 7, but this does not mean you always get a 7, you can still roll 2’s and 12’sSlide29

Summary: ARC versus PLCCorn

: In most counties ARC-CO > PLC except with pessimistic prices, and if PLC > ARC-CO, it’s not by muchAdvantage of County ARC (ARC-C), cost of being wrong is not large, unless pessimistic about pricesIs your county an exception? Are you an exception?Soybeans: ARC > PLC: I have not found an exceptionRecommend County ARC (ARC-CO)Wheat: ARC > PLC, however PLC+SCO > ARC

Recommend County ARC (ARC-CO)Slide30

Quick SummaryRelax, plenty of time to make decisions

2/27/15 for base acre/yield updates, can be done now!3/31/15 for PLC/ARC election choice3/15/15 if want SCO crop insurance with PLCSummer 2015 to signupStart playing with the tool: http://fsa.usapas.com/APAS Custom Farm: Build Your Own FarmFor most farms1) Updating yields will be worth it2) Updating base acres if you can get more corn 3) County A

RC a fine selection for corn, soybeans and wheat when PLC+SCO is not availableSlide31

Quick SummaryIndividual Farm Examples can be completed online or with assistance of County Ag Extension AgentAnnouncements via UW Extension and ag mediaOfficial FSA list

: http://www.fsa.usda.gov/wiFocus will be on the decision tool http://fsa.usapas.com/APAS Custom Farm: Build Your Own FarmGreat outreach informationhttp://farmbilltoolbox.farmdoc.illinois.edu/ Slide32

Decision Aids: U of IL with USDA Funding http://fsa.usapas.com/

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