Marra Farm Bill 6 17 09

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Talk for the NC Ag Agents meeting in Raleigh, NC.

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Marra Farm Bill 6 17 09

  1. 1. <ul><li>Michele Marra </li></ul><ul><li>Professor </li></ul><ul><li>Department of Agricultural and Resource Economics </li></ul><ul><li>NCSU </li></ul><ul><li>June, 2009 </li></ul>
  2. 2. <ul><li>The basic commodity programs remain, including direct and countercyclical payments, and loan programs. </li></ul><ul><li>Two new safety net features have been added: </li></ul><ul><ul><li>The ACRE program – an optional program </li></ul></ul><ul><ul><li>The SURE program – a permanent, dedicated disaster assistance program, also optional </li></ul></ul><ul><li>More funding for “working lands” conservation programs. </li></ul><ul><li>More funding for nutrition programs. </li></ul>
  3. 4. <ul><li>First Option: Business as usual. Farmers can choose to retain the full amount of the direct, and counter cyclical payments and loan programs. </li></ul><ul><li>Second Option: Average Crop Revenue Election ( ACRE ) program. </li></ul><ul><li>One-time choice for the life of the Farm Bill – can sign up before any crop year, but once signed in, you’re in for the life of the Bill. </li></ul>
  4. 5. <ul><li>To enroll, a grower must accept a 20% reduction in direct payments, a 30% reduction in the loan rate (totally irrelevant this year for most crops) and receive no CCP. </li></ul><ul><li>Revenue payments from a program tied to the national price and state-level production outcomes. </li></ul><ul><li>If you sign up for ACRE, you must sign up for all your acres and for all crops for the life of this Farm Bill. </li></ul><ul><li>Signup ends August 14 th for this crop year. </li></ul>
  5. 7. <ul><li>The decision is complicated, but decision aids are available. See the following websites: </li></ul><ul><li>http://www.card.iastate.edu/ag_risk_tools/acre/ </li></ul><ul><li>http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landing </li></ul><ul><li>Two triggers: </li></ul><ul><ul><li>If Actual State Revenue is below State ACRE Guarantee and </li></ul></ul><ul><ul><li>If your actual farm revenue is below your Farm Acre Benchmark </li></ul></ul><ul><ul><li>Then , you will get a payment </li></ul></ul>
  6. 8. STATE ACRE Guarantee = 90% * 5- year Olympic State Avg. Yield * 2-year Natl. Average Marketing Year Price Restricted to < 10% change/ year Actual State Revenue = Actual State Planted Acre Yield * MAX [ Natl. Average Marketing Year Price OR 70% of the loan rate]. Farm ACRE Benchmark = Farm’s 5-yr. Olympic Avg. Yield * 2-year Natl. Average Marketing Year Price + Crop Insurance Premium per acre Actual Farm Revenue = Actual Farm’s Planted Acre Yield * MAX [Natl. Average Marketing Year Price OR 70% of the loan rate] > AND > THEN Farm Payment = 0.833 (.85 in 2012) * Actual Planted or Considered Planted Acres * [Farm’s 5-year Olympic Average Yield/State’s 5-year Olympic Average Yield] * MIN[State ACRE Guarantee – Actual State Revenue) OR State Acre Guarantee * 25%] Note: All Yields are Planted Acre Yields IF
  7. 9. Source: USDA, FSA
  8. 10. Source: USDA, FSA State-Level Guarantees – Estimated as of 6/11/09
  9. 12. <ul><li>The total number of payment acres cannot exceed base acres on the farm. </li></ul><ul><li>Provisions for assigning yields, etc. by using yields from a “similar state.” </li></ul><ul><li>BUT… ACRE is NOT a substitute for crop insurance! </li></ul><ul><ul><li>It only pays up to 25% of the revenue guarantee, while crop insurance pays up to 85-90% of the yield guarantee and 100% of the price guarantee and is based on only your farm’s performance. </li></ul></ul><ul><ul><li>It has been shown (by me and others) that state yields are much less variable than individual farm yields, so state trigger should activate less often. </li></ul></ul>
  10. 13. <ul><li>Studies have shown that a payout occurs about 30% of the time (national average). </li></ul><ul><li>However, studies have shown that ACRE is more likely to benefit producers if: </li></ul><ul><ul><li>A state has higher yield variability (Southeast, Mid-Atlantic) </li></ul></ul><ul><ul><li>Crops with prices well above the loan rate (soybeans, corn, wheat) </li></ul></ul><ul><ul><li>States where yield does not impact national price (NC) </li></ul></ul><ul><ul><li>Crops with higher increases in yields in the recent past (corn) </li></ul></ul>
  11. 15. <ul><li>Where to go for updates: </li></ul><ul><li>http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=landing </li></ul><ul><li>I will email this slide set to all county directors and ask them to forward to their ag agents. If you don’t get a copy in one week, and want one, ask your county director or email me: </li></ul><ul><li>[email_address] </li></ul>
  12. 16. <ul><li>CAP AND TRADE </li></ul><ul><li>Renewable fuels and carbon intensity </li></ul><ul><ul><li>Feds will apply “weights” to each fuel source </li></ul></ul><ul><ul><li>Looks like ethanol and biodiesel will be “punished” by adding a penalty for “land use changes” </li></ul></ul><ul><ul><li>Comment period </li></ul></ul><ul><li>Carbon sequestration with reduced tillage </li></ul><ul><ul><li>A possibility, but not a dead cert </li></ul></ul><ul><ul><li>No market yet. Need certification process. </li></ul></ul>
  13. 17. <ul><li>World incomes and the demand for food. </li></ul><ul><li>Biotechnology and market access. </li></ul><ul><li>Others? </li></ul>

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