There are three basic steps or decisions farmers will need to make in the 2014 Farm Bill. The first two are a one-time opportunity to reallocate base acres and update payment yields, which must be done by Feb. 27. The third decision will be to enroll in one of the three Farm Bill commodity programs -- Price Loss Coverage or County Agricultural Risk Coverage for each commodity, or Individual Agricultural Risk Coverage for entire farm. Deadline enrollment is March 31.
Landowners have received letters from the USDA Farm Service Agency informing them of their payment yields and historical planted acres from 2008 to 2012. Many wonder how these established yields were determined and why they might be low. Payment yields were first established by the 1996 Farm Bill as an average of 1981 to 1985 yields. With advancements in farming technologies, inputs and cropping practices, your farm yields might have increased and if so, landowners or tenants would benefit from updating payment yields now. Payment yields can be updated to 90 percent of 2008-12 average farm yields crop by crop. Deadline is Feb. 27. Be mindful: If ever audited, you must be able to prove those yields to USDA.
The other one-time opportunity landowners or tenants have is to decide if they want to reallocate base acres. You can retain base acres or reallocate to average plantings from 2009 to 2012. You cannot build base acres, just assign them to different proportions of the covered commodities you are growing. In many cases, the base acres no longer reflect the average planted acres of each commodity on that farm. Perpetual base acres were first established by the 1995 Farm Bill as 1991 to 1995 average acres planted. If you want your potential program payments to match the commodities you are actually planting, you would reallocate, assuming what you planted in 2009 to 2012 is similar to your crop rotation going forward. To maximize potential payments, choose which base (current or reallocated) you anticipate of receiving the highest payments for the life of the Farm Bill. This is not easy to do. The deadline for reallocating base acres is Feb. 27.
The most difficult decision will be selecting the commodity program(s) by farm number to enroll in, which you will be locked into for the life of the Farm Bill. There are many issues to think about when selecting a farm program.
If you are worried about catastrophic price loss, PLC will offer the most risk protection. It does not cap out until the maximum payment limits per year have been reached. It will pay when marketing year national prices are below the reference prices set for the life of the Farm Bill. ARC, on the other hand, provides protection for revenue losses (losses in price or yield) but caps out at 10 percent of benchmark revenue. It also has a 14 percent deductible before it kicks in, so only losses from 76 percent to 86 percent of benchmark revenue are covered. To hedge your bets, you might consider putting some commodities in PLC and some in ARC-CO.
ARC-CO vs. ARC-IC only pays on 65 percent of the entire farm base, where PLC or ARC-CO pays on 85 percent of base acres for each commodity with base. This is a large difference to overcome, so most farmers will probably not consider ARC-IC. Farmers with high yields (at least 30 percent higher) compared to the county yield might consider ARC-IC since benchmark revenue will be higher.
You will need to elect a program with FSA, which you will be locked into for the life of the farm bill. You will need to enroll each year to verify you are still farming and are eligible for payments.
Deadline to elect a program is March 31. If you fail to do so, you will give up any potential 2014 payments and be defaulted to PLC.
I would encourage landowners and tenants to visit the K-State Research and Extension Ag Economics website at www.agmanger.info for more detailed information on the Farm Bill. With one simple click of the mouse once on the website, you will have access to a wealth of information broken-out into short reads, with worksheets and examples on how to update yields and reallocate base acres. Not to mention a free downloadable 2014 Farm Bill Decision Making Tool developed by OSU and KSU in which you can input each individual farm number in an effort to try and figure the best possible decision for your farm.
K-State Research and Extension is also hosting 15 in-depth Farm Bill meetings across the state in January and February, which you can also view on the website. There will be one in Hays at the KSU Ag Research Center on Feb. 11. RSVP is requested to attend by calling (785) 628-9430 or email Theresa at email@example.com.
If you have any questions or need assistance, contact your local K-State County Extension Office.
Stacy Campbell is Kansas State Research and Extension agent for Ellis County.