Farm Bill Programs Update and Outlook Jonathan Coppess - - PowerPoint PPT Presentation

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Farm Bill Programs Update and Outlook Jonathan Coppess - - PowerPoint PPT Presentation

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Farm Bill Programs Update and Outlook Jonathan Coppess jwcoppes@illinois.edu Nick Paulson npaulson@Illinois.edu www.farmdocdaily.illinois.edu www.farmdoc.illinois.edu 2014 Farm Bill Review Eliminated Direct Payments, CCP Program

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Farm Bill Programs Update and Outlook

Jonathan Coppess jwcoppes@illinois.edu Nick Paulson npaulson@Illinois.edu

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2014 Farm Bill Review

  • Eliminated Direct Payments, CCP Program
  • Allowed program yield updates, base acre

reallocation

  • Choice of commodity program support:

– Revenue program: ARC (county or individual coverage) – Price program: PLC (similar to CCP, higher reference prices)

  • Use of MYA to calculate prices and specific language

– Shift payments into later FY – 2014 payments received in 2015, 2015 payments in 2016

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2014 FARM PROGRAM ELECTION

 Locked through 2014 Farm Bill expiration in 2018; unless Congress Acts.  Vast majority of base acres are in corn and soybeans; revenue program.  Farmer elections represent the regional dispute over farm policy

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

LONG GRAIN RICE PEANUTS CANOLA MEDIUM GRAIN RICE (SOUTHERN) SESAME BARLEY GRAIN SORGHUM SAFFLOWER CRAMBE TEMPERATE JAPONICA RICE FLAXSEED MUSTARD LENTILS SUNFLOWERS DRY PEAS RAPESEED WHEAT LARGE CHICKPEAS OATS SMALL CHICKPEAS CORN SOYBEANS

Percent of Base Acres

Figure 1. Percent of Base Acres Enrolled in ARC and PLC.

ARC-CO ARC-IC PLC Source: Farm Service Agency

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ARC-CO vs PLC

Input State County Crop Type PLC Payment Yield 137 What-If Input County MYA ARC ARC Year Yield Price1 Yield2 Price3 Guarantee4 Payment5 Payment6 2009 190 3.55 2010 169 5.18 2011 164 6.22 2012 123 6.89 2013 168 4.46

$/acre $/acre

2014 216 3.70 167 5.29 760 0.00 2015 189 3.61 167 5.29 760 61.36 10 2016 183 3.35 174 4.79 717 70.85 41 2017 185 3.55 180 3.95 611 0.00 17 2018 187 3.75 186 3.70 592 0.00 Five-Year Average 26.44 14

National loan rate equals: Reference price equals:

2015 ARC and PLC payments 2015 ARC-CO and PLC payments are estimated on a per base acre basis. Payments are adjusted to account for the fact that payments are made on 85% of base acres. 2015 payments are adjusted for a 6.8% sequester. The 2015 payment is multiplied by .932 (1 - .068).

Illinois Corn Champaign All

Change the county yields and Market Year Average (MYA) prices for 2015 and 2018 to see payments under ARC- County and PLC. Payments are stated per base acre, as such they are multiplied by .85. If there are 100 base acres per farm, multiple the result below by 100.

Price Loss Coverage (PLC) ARC-CO PLC Payment Estimator Agricultural Risk Coverage (ARC) - County

3.70 1.95

Benchmark Use Defaults Help Print

  • ARC-CO:

– 5-year Olympic moving averages (MYA and county yields) to calculate benchmark; – Guarantee is 86% of benchmark

  • PLC: fixed reference price

– $3.70 for corn – $8.40 for soybeans – $5.50 for wheat

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Corn: 2014 ARC-CO Payments

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Soybeans: 2014 ARC-CO Payments

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Wheat: 2014 ARC-CO Payments

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Corn: 2015 ARC-CO Payments

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2015 ARC-CO Payments in Illinois: Corn

  • $5.29 ARC benchmark,

$3.61 actual price

  • High corn yields
  • Large, price-driven

payments in most counties

– Piatt, Pope exceptions

  • Small PLC payments
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Soybeans: 2015 ARC-CO Payments

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2015 ARC-CO Payments in Illinois: Soybeans

  • $12.27 ARC benchmark,

$8.95 actual price

  • High soybean yields
  • Larger payments in

northern and west central region

  • No payment in many east

central and southern counties

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Wheat: 2015 ARC-CO Payments

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2015 ARC-CO Payments in Illinois: Wheat

  • $6.70 ARC benchmark,

$4.89 actual price

  • High yields
  • Large payments

throughout state, but also counties with no payment

  • Sizeable PLC payments
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Corn: 2016 Payment Projections

  • Final prices and

yields still not determined

  • Payments

expected in some northern and southern IL counties

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Soybeans: 2016 Payment Projections

  • Final prices and

yields still not determined

  • Small to moderate

payments expected in a few counties

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Wheat: 2016 Payment Projections

  • Final prices and yields

still not determined

  • Moderate payments

expected for most counties

  • MYA price expected to be

very low – also large PLC payments expected

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ARC-CO Experience and Outlook Summary

  • Payments for corn, soybeans, and wheat in

2014 and 2015 driven by low price levels relative to benchmark

  • Generally high yields, varies across counties
  • Continued low prices for 2016/17 and beyond:

– Price and revenue benchmarks adjusting down – Decreases likelihood and potential size of payments for future years

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Issues with ARC-CO Payments

  • Large variation in county-level payments

– $0 to $80 per acre for corn in IL – Variation between neighboring counties

  • Piatt ($0) vs Champaign ($61)
  • Pope ($0) vs Johnson ($52)
  • Timing of payments
  • Process transparency
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LOW PRICES & FARM PROGRAM DEBATE

  • Large harvests =

lower prices since 2014 Farm Bill

  • Sustained lower

prices expected to impact farm program debate

  • Difference

between fixed price and 5 year Olympic moving average

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 Jan-11 APR JUL OCT Jan-12 APR JUL OCT Jan-13 APR JUL OCT Jan-14 APR JUL OCT Jan-15 APR JUL OCT Jan-16 APR JUL $/POUND COTTON $/BUSHEL Corn Wheat Soybeans Corn Reference Wheat Reference Soybean Reference Cotton

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FARM POLICY DISPUTE: PLC

  • 2014 Farm Bill

eliminated direct payments

  • Opened regional

dispute over farm programs

  • Price-based

(South) vs. Revenue-based (Midwest)

$3.00 $3.20 $3.40 $3.60 $3.80 $4.00 $4.20 $4.40 2013 2014 2015 2016 2017 2018 Deficiency Payment Market Price Reference Price

Corn Example: Price Policy

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FARM POLICY DISPUTE: ARC & REVENUE

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 20 40 60 80 100 120 140 160 180 200 2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f

Corn Example-Revenue Policy

  • Co. Yield

Benchmark Yld MYA Prices

  • Ref. Price

Benchmark MYA

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REVENUE POLICY IMPACT ON BASELINE

$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00 $1,000.00 $0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00 2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f

Corn Example

Guarantee Actual Rev. Benchmark Rev.

Note: forecasted yields are estimated trend; prices CBO 2016 baseline

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2018 FARM BILL: SPENDING & PRIORITIES

  • With budget

pressure: partisan and difficult; competition for resources

  • A question of

priorities within the farm policy budget baseline.

$3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00

CBO March 2016 Baseline (Billions)

CCC Commodities Crop Insurance Conservation

Baseline for Next Farm Bill?

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COMMODITY TITLE SPENDING BY COMMODITY

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 2014A 2015A 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

CBO Outlays (Millions)

Corn Soybeans Wheat Cotton* Rice Peanuts Dairy Disaster