Q: How can Yield Exclusion (YE) help me?
A: YE allows a producer to exclude an actual yield(s) from an eligible crop year for the county (such as a year in which a natural disaster or other extreme weather event occurs) from their production history when calculating approved APH yields used to establish their crop insurance coverage. The level of insurance coverage available to a producer is based on the producer’s average yields over the four to ten most recent crop years and excluding lower yielding eligible crop years can increase the producer’s approved APH yield. The YE option will be listed in the county actuarial documents showing the crop and eligible crop year(s) for exclusion.
Q: When will this go into effect?
A: YE will be available nationwide, as identified in the actuarial documents, beginning with selected 2015 crops.
Q: What crops are impacted?
A: For the spring 2015 crop year, the YE election is available for annual crops with a contract change date on or after November 30, 2014, if identified in the actuarial documents for the county. Eligible crops include corn, soybeans, wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn with Yield Protection, Revenue Protection, and Revenue Protection with Harvest Price Exclusion policies. Nearly 80 percent of all acres and liability covered in the federal crop insurance program will be eligible for YE beginning in the spring of 2015.
Q: How do I get this benefit?
A: To get this benefit, you must elect the YE option on a crop insurance application or policy change form by the sales closing date. Consult with your crop insurance agent to make this election.
Low crop prices are causing some to rethink the savings associated with the newest version of the Farm Bill. The fear is that taxpayers may end up paying more to subsidize farmers in this bill than the previous. What I am hearing is that the Farm Bill passed back in February may NOT save the $14 billion it once touted. The problem is the bill was constructed when commodity prices were significantly higher and now that prices are much lower it may trigger greater subsidies. If you remember, the law replaced direct payments with programs tied to price and revenue. This is very preliminary, but some are estimating that a drop in crop prices, combined with subsidies added in the new farm bill, may more than double payments in 2015 from what lawmakers had originally anticipated. There are early talks that payments could reach $6.5 billion for this year’s harvest, or about $4 billion more than anticipated. Thoughts are the new bill means that government subsidies could both be potentially larger and quicker to kick in. Previously, corn farmers were paid when the price fell below $2.63 a bushel. The new support may trigger much higher. Some sources are saying government payments may average between $30 and $40 per acre in 2014 and 2015 compared to a $24 per acre average from 2007 to 2013. Wheat, the fourth-biggest crop, is also below the threshold for subsidies. Rice and peanuts crop prices may also spur payments. Personally, I think it’s a bit early to start blaming Congress – we have to remember that no one has a crystal-ball in regard to price.
To ARC or PLC remains the question and the timeframe for making that decision is September 29, 2014 through March 31, 2015. There isn’t a day that goes by when I don’t hear questions regarding which Farm Bill program to choose. I am by no means an expert on this subject and have many unanswered question myself. Some of the folks I consider the leading guru’s keep telling me it’s best that I simply continue to wait before making my decision. I have however recently been sent a rather fantastic decision making tool that I have been playing around with. From what I am told, the Farm Bill Decision Tool was designed by Dr. Art Barnaby in conjunction with Oklahoma State University and Kansas State University, with funding from Oklahoma Cooperative Extension Service, Southern Risk Management Education Center, and Kansas Cooperative Extension Center. This spreadsheet approach is easy to work with and allows you to customize and change crops, counties, etc… I believe this is a very helpful tool and am thankful for those folks at both K-State and Oklahoma State who put it all together. Click the link to access the “Farm Bill Decision Tool.” Another great resource I’ve found is Clint Clayton’s article “Base Acre and ARC-PLC Deadlines Reported”, which is available here. As always, make certain you are communicating and working closely with your individual agent in selecting the best and most appropriate coverage or your particular operation. Remember, there is no one coverage that is right for all producers or operations. In low margin years we need to careful do our homework…it will be the difference between simply surviving and remaining a profitable business.
I wanted to share with you some of the things being passed around in regards to preparing yourself for the new farm programs to be instituted from the 2014 Farm Bill. From what I understand, we should have some concrete answers by late 2015/Early 2015. While we wait, producers and landlords should be aware that there are actions that should be taken now to prepare for the decisions that must be made during the coming months. The 2014 farm bill includes three decisions that farmers and landlords will be required to make in 2014 and 2015:
- Updating Program Yields: Owners will be permitted to update their program yields based on the farm’s actual production yields from 2008-2012.
- Reallocating Base Acres: Owners will be permitted to reallocate their base acres based on the farm’s actual planted acreage from 2009-2012.
- ARC Programs versus PLC Program: The Direct and Countercyclical Payments that were used under the 2008 farm bill have been eliminated. Producers will be permitted to choose between the new Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs that replaced the DCP program.
There are still a lot of details that have yet to be announced, including final timelines, but it is a good idea to go ahead and start collecting information for these decisions now. The general timeline I am hearing is that owners will have an opportunity to update program yields and reallocate base acres during the late summer and fall of 2014. Decisions on the ARC/PLC programs are likely to be required during late 2014 and early 2015. As far as the “Reported Commodity Crop History Summary” letter that the FSA sent out back in August, this information will be key in making decisions for 2014 and 2015. According to the Michigan State University Ag Extension, owners and producers should take the following steps as soon as possible to prepare for the new farm bill:
- Review the FSA letter and Reported Commodity Crop History Summary and inform FSA within 60 days of the letter’s date if the information is incorrect.
- Begin now to collect information on the farm’s actual planting history during 2009-2012 – how many acres of each crop were planted on the entire farm during each year from 2009-2012?) and the farm’s actual yield history (what was the yield per acre for each crop planted on the entire farm during each year from 2008-2012?). Evidence from all sources (sales receipts, crop insurance records, etc.) should be collected retained (NOTE: FSA has not yet announced the rules regarding the information required for program decisions. Consequently, all information that could prove helpful in proving actual planted acreage or actual yields could be helpful).
- Communicate with your tenants and/or your landlords. The upcoming decisions will affect the program benefits that a farm collects during 2014 to 2018. All parties have a common interest in making the best possible decisions for the farm, so good communication and cooperation between landlords and tenants will be beneficial for all parties involved.
- Stay informed about the upcoming deadlines for decisions in late 2014 and early 2015. Read all emails and newsletters from your local FSA office and consult with your local FSA office and with your tenants or landlords about these decisions.
Be patient but be alert. The farm bill was passed by Congress and signed by the President at a relatively late date, and the FSA has a major challenge in implementing the new programs in the 2014 farm bill. Landlords will need to become informed about program options and key deadlines and cooperate with tenants. Tenants can often have numerous landlords that they will need to consult and enrollment dates could fall during peak work periods. The new programs are likely to require some complex decisions in late 2014 and early 2015. Landowners and tenants should stay informed about program deadlines and program options to cooperate in the best possible decisions for each farm.