The 2018 Farm Bill: Overview & Outlook Jonathan Coppess & - - PowerPoint PPT Presentation

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The 2018 Farm Bill: Overview & Outlook

Jonathan Coppess & Nick Paulson

2018 FARM BILL.—CBO BASELINE

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Outlays, CBO April 2018 Baseline

Commodities Conservation Crop Insurance Nutrition

• CBO projected spending,

mandatory programs:

• 1. Farm Programs (Title I);
• 2. Conservation (Title II)
• 3. Nutrition and SNAP (Title

IV)

• 4. Crop Insurance (Title XI).

Source: Congressional Budget Office

REVIEW: AGRICULTURAL ACT OF 2014

• $12,000
• $10,000
• $8,000
• $6,000
• $4,000
• $2,000

$0 $2,000 $4,000 $6,000 $8,000 Year 1 Year 2 Year 3 Year 4 Year 5

Millions in Outlays

Difference In Spending (2014 Baseline Estimate-Revised 2018)

Commodity Conservation Nutrition Crop Insurance Source: Congressional Budget Office

BACKGROUND: SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM

10,000 20,000 30,000 40,000 50,000 60,000 $0.00 $10,000.00 $20,000.00 $30,000.00 $40,000.00 $50,000.00 $60,000.00 $70,000.00 $80,000.00 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019p 2021p 2023p 2025p 2027p

Thousands of People Millions of Dollars

Historic & Estimated SNAP Spending & Participation (USDA and CBO)

Participation Spending

• Largest program by

spending and people.

• Low-income

assistance; counter- cyclical.

• House partisan

dispute; dropped in conference; no changes.

Conservation Program: Spending & 2018 Baseline

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Millions in Outlays

Conservation Program Outlays, Revised (CBO)

CRP CSP EQIP ACEP RCPP

REVIEW: CONSERVATION PROGRAMS

• CRP is dominant

source of conservation funds;

• IL benefits more

from CSP ($212m) than EQIP ($151m).

• IL receives on

average 9.8% of EQIP funds and 13.7% of CSP funds nationally.

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Millions

Total Conservation Spending by Program, 2009-2017; top 20 states (USDA)

EQIP CSP Easement CRP RCPP

2018 FARM BILL: CONSERVATION

 Expanded CRP: 27m acres; 30-year contracts; limits on rental payments.  Blended CSP and EQIP with fixed funding levels; increased EQIP.  Acreage-based CSP eliminated, existing contracts continue; potential for 1-year extension for 2019.

2018 FARM BILL: CROP INSURANCE

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2019p 2020p 2021p 2022p 2023p 2024p 2025p 2026p 2027p 2028p

Millions in Outlays

Crop Insurance Baseline (CBO)

• Prem. Sub.

Delivery Exp. Underwriting

 Crop Insurance is largely unchanged; New provisions for cover crops:  defines termination (NRCS or local expert);  Cover crops considered a good farming practice; termination should not impact insurability.

REVIEW: AGRICULTURAL ACT OF 2014; TITLE I SPENDING

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Millions in Outlays

Title I Total Payments (CBO, through April 2018)

Corn Soybeans Wheat Upland Cotton* Rice Peanuts Other Commodities Dairy

ARC-CO CORN EXAMPLE

Input State County Crop Type PLC Payment Yield 130 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 9 2016 210 3.36 174 4.79 717 8.86 35 2017 207 3.36 189 3.95 642 0.00 35 2018 187 3.60 202 3.70 643 0.00 10 Five-Year Average 14.04 18

National loan rate equals: Reference price equals:

Illinois Corn Champaign All

Change the county yields and Market Year Average (MYA) prices for 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 SOYBEAN EXAMPLE

Input State County Crop Type PLC Payment Yield 42 What-If Input County MYA ARC ARC Year Yield Price1 Yield2 Price3 Guarantee4 Payment5 Payment6 2009 56 9.59 2010 56 11.30 2011 51 12.50 2012 47 14.40 2013 53 13.00

$/acre $/acre

2014 64 10.10 53 12.27 559 0.00 2015 64 8.95 53 12.27 559 0.00 2016 67 9.47 56 11.87 572 0.00 2017 64 9.33 60 10.86 560 0.00 2018 65 8.60 64 9.63 530 0.00 Five-Year Average 0.00

National loan rate equals: Reference price equals:

Illinois Soybeans Champaign All

Change the county yields and Market Year Average (MYA) prices for 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

8.40 5.00

Benchmark Use Defaults Help Print

ADDITIONAL CHALLENGES FOR COMMODITIES

• Trump Administration

& tariff conflict;

• Especially with China

and for soybeans;

• Market Facilitation

Program (MFP) payments.

UPDATED SITUATION FOR TITLE I

• Continued lower prices = increased spending in ARC/PLC
• Addition of Seed Cotton + MFP + Cotton Ginning
• MFP: 2 Rounds ($0.01-corn; $1.65-soybeans); 2nd just announced ($4.8b)

AGRICULTURAL IMPROVEMENT ACT OF 2018

 Election for 2019 & 2020 crops between ARC and PLC;  Revisit election for 2021 through 2023 crops;  ARC-CO: administrative county; to use 80% t-yield plug and crop insurance trend adjusted yields;  PLC: Optional yield update.

2014

90% 2008- 2012 (175 avg.) 157.5 update

2018

0.81 2013- 2017 (192.5 avg.) 155.9; no update

AGRICULTURAL IMPROVEMENT ACT OF 2018

 PLC: reference price escalator;  Effective reference = 85% of 5-year Olympic moving average; up to 115% of statutory reference.  MAL/LDP: increased loan rates.

2018 FARM BILL: FARM PROGRAMS — CORN

$1.95 $2.45 $2.95 $3.45 $3.95 $4.45 $4.95

$/bu

Corn Price Example

• Ref. Price

MYA 85% 5YOMA

 USDA Chief Economist forecast;  MYA expected above Reference Price ($3.70) thru 2026;  Effective reference price “escalator” (85% of 5 year Olympic moving average) not effective.

Sources: USDA NASS (actual) and OCE (projections)

2018 FARM BILL: FARM PROGRAMS — SOYBEANS

$5.00 $6.00 $7.00 $8.00 $9.00 $10.00 $11.00

$/bu

Soybeans Price Example

• Ref. Price

MYA 85% 5YOMA

 USDA Chief Economist forecast;  MYA expected above Reference Price ($8.40) all years;  Effective reference price “escalator” (85% of 5 year Olympic moving average) not effective.

Sources: USDA NASS (actual) and OCE (projections)

2018 FARM BILL: FARM PROGRAMS — WHEAT

$2.94 $3.44 $3.94 $4.44 $4.94 $5.44 $5.94 $6.44

$/bu

Wheat Price Example

• Ref. Price

MYA 85% 5YOMA

• USDA Chief Economist

forecast;

• MYA expected to remain

below Reference Price ($5.50);

• Effective reference price

“escalator+ (85% of 5 year Olympic moving average) not effective.

Sources: USDA NASS (actual) and OCE (projections)

2018 FARM BILL: ARC/PLC SIMULATION

FARMDOC TOOL

Gardner Agriculture Policy Program and National Center for Supercomputing Applications.

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

THANK YOU

Jonathan Coppess (jwcoppes@illinois.edu) Nick Paulson (npaulson@illinois.edu)