Overview and I m pacts of Proposed Changes in the 2 0 1 2 Farm - - PowerPoint PPT Presentation

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Overview and I m pacts of Proposed Changes in the 2 0 1 2 Farm - - PowerPoint PPT Presentation

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Overview and I m pacts of Proposed Changes in the 2 0 1 2 Farm Bill Nick Paulson npaulson@illinois.edu University of I llinois 2 0 1 2 I llinois Farm Econom ics Sum m it The Profitability of I llinois Agriculture: Managing in a Turbulent W

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2 0 1 2 I llinois Farm Econom ics Sum m it

The Profitability of I llinois Agriculture: Managing in a Turbulent W orld

Overview and I m pacts of Proposed Changes in the 2 0 1 2 Farm Bill

Nick Paulson npaulson@illinois.edu University of I llinois

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2012 Farm Bill

  • Need for Savings for Deficit Reduction
  • Farm programs not the biggest piece of the

Farm Bill pie, but are the biggest target for cuts

  • Savings targets vary across political lines
  • Senate and Ag House Committee have

passed Farm Bills, process has since been stalled

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2012 Farm Bill

  • General theme of Current Bills:
  • Income Support is Out; Risk Management is In
  • Existing commodity programs replaced by

something new

  • Continued support for crop insurance
  • Cuts to:
  • Commodity programs
  • Nutrition programs
  • Conservation programs

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2 0 1 2 I llinois Farm Econom ics Sum m it

FY 2013 Projected USDA Budget

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2 0 1 2 I llinois Farm Econom ics Sum m it

CBO Score of Farm Bills

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2 0 1 2 I llinois Farm Econom ics Sum m it

Senate Bill Spending Cuts

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2 0 1 2 I llinois Farm Econom ics Sum m it

House Bill Spending Cuts

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2 0 1 2 I llinois Farm Econom ics Sum m it

Spending Cuts Comparison

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Se Senat ate Hou

  • use

Commo modit ity Programs ms (30% 30%) (38% 38%) Con Conservation

  • n

(9.4% 9.4%) (9.4% 9.4%) Nut Nutrit ition (0.5% 0.5%) (2.1 .1%) %) Cr Crop I

  • p Insu

surance +5.5% +5.5% +9.9% +9.9%

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2 0 1 2 I llinois Farm Econom ics Sum m it

Spending Cuts by Crop

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2 0 1 2 I llinois Farm Econom ics Sum m it

Changes to Commodity Programs, Crop Insurance

  • Eliminate Direct Payments, CCP, ACRE, and

SURE

  • Revenue and price programs that pay out
  • n planted acres:
  • Senate Bill: Choice between farm and county

level ARC program

  • House Bill: Choice between county level RLC

program and PLC program

  • Supplemental insurance coverage (SCO)
  • Area insurance (STAX) for Cotton

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2 0 1 2 I llinois Farm Econom ics Sum m it

Farm-level Ag Risk Coverage (ARC)

  • ARC is the Senate Bill’s revenue program
  • Choice between farm- and county-level

coverage

  • Guarantee based on Olympic average of yields

and prices

  • Payments made when actual revenues fall

below 89% of the guarantee, capped at 10% of the guarantee

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2 0 1 2 I llinois Farm Econom ics Sum m it

Farm-level Ag Risk Coverage (ARC)

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2 0 1 2 I llinois Farm Econom ics Sum m it

Revenue Loss Coverage (RLC)

  • RLC is the House Bill’s revenue program
  • ption
  • Choice between RLC and PLC
  • Guarantee based on Olympic average of yields

and prices

  • Payments made when actual revenues fall

below 85% of the guarantee, capped at 10% of the guarantee

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2 0 1 2 I llinois Farm Econom ics Sum m it

Revenue Loss Coverage (RLC)

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2 0 1 2 I llinois Farm Econom ics Sum m it

Supplemental Coverage Option (SCO)

  • SCO is an optional, supplemental insurance

program

  • County-level coverage
  • Defined by individual insurance program choice
  • Covers losses between 90% of the guarantee

and individual insurance coverage

  • Premium subsidy rate of 70%

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2 0 1 2 I llinois Farm Econom ics Sum m it

Supplemental Coverage Option (SCO)

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2 0 1 2 I llinois Farm Econom ics Sum m it

Price Loss Coverage (PLC)

  • PLC is similar in concept to current CCP

program; also default program in House Bill

  • Paid on planted acres (rather than base);

cannot receive payments on more than total base acres

  • May update payment yields to 90% of 2008

to 2012 average by crop

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2 0 1 2 I llinois Farm Econom ics Sum m it

Price Loss Coverage (PLC)

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Crop Loan Loan Rat Rate Reference ce P Price ce Corn ($/bu) $1.95 $3.70 Soybeans ($/bu) $5.00 $8.40 Wheat ($/bu) $2.94 $5.50 Cotton ($/lb) $0.47-$0.52 $0.6861* Rice ($/hwt) $6.50 $14.00 Peanuts ($/lb) $0.18 $0.27

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2 0 1 2 I llinois Farm Econom ics Sum m it

Proposed Program Comparisons

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SENAT ATE HOUSE SE BOT OTH ARC RC RLC PLC SC SCO Payment Rate Farm: 65% (45%) County: 80% (45%) 85% (30%) 85% (30%) 100% Payment Limit $50,000 per entity $125,000 per entity $125,000 per entity None Eligible for SCO? Yes No Yes

  • Subsidy

Full Full Full 70%

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Lame Duck Session Options

  • 1. House vote on House Ag Committee bill
  • Conference committee resolves Senate/House versions
  • House and Senate vote on conference agreement
  • 2. Current proposals direct to conference

committee

  • House and Senate vote on conference agreement
  • 3. Extension of current Farm Bill
  • Short-term (3 months) or long-term (1 year)
  • 4. Add Farm Bill to another bill

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farmdoc www.farmdoc.illinois.edu farmdocDaily www.farmdocdaily.illinois.edu

Thank You Questions?

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