Overview of the 2012 Farm Bill                  Joe L. Outlaw         Professor & Extension Economist                Co-Di...
Presentation Outline• Background• Farm Bill Time Table• Ramifications for Farmers & Ranchers• Major Concerns              ...
Background• Urgency For New Farm Bill  – Current bill expires September 30th of    this year  – Better to Decide on How to...
Mandatory Spending Baseline for the2008 Farm Bill Programs and Provisions,      by Title, ($M), FY 2013-22120,000         ...
Total Payments ($M), 2013-2225,00020,000                            Stove Piping is an issue – want                       ...
Baseline Payments ($M) and Planted Acres,      Major Program Crops, 2013-22      25,000               89.1 Mil AcFor My20,...
Farm Bill Time Table
Farm Bill Time Table• A chance it is taken up in the House  soon  – Big question of whether it survives there• A better ch...
Ramifications for Farmers          and Ranchers• Need to go through a quick review of what  is in the two bills• Just so y...
Title       Description        CBO Baseline   Change Senate   Change HouseI       Commodity Programs        62,944        ...
Provisions                 Senate Agriculture Risk Coverage           House Revenue Loss Coverage                         ...
Provisions            Senate Agriculture Risk             House Revenue Loss                     Coverage (ARC) Provisions...
Provisions                           House Price Loss Coverage (PLC) ProgramPayment Acres        85% of planted acres and ...
Provisions                Senate SCO and STAX                                House SCO and STAXSCO Coverage     Producer h...
Conservation                   Senate                     House       ProvisionsSpending Cut            $6 billion        ...
AFPC Representative Farms
Comparison of FAPRI Baseline Prices andPrices Used in the Declining Price Scenario
Results Indicating the Representative Farm’sPreference for Opting Out of ARC for a Larger SCO       Payment Band or Remain...
All 64 Representative Farm’s Preferred Title I Safety Net Option of the     Senate Individual and County ARC and the House...
Evolution of Dairy Policy•   Originally “Foundation for the Future”•   Then “Dairy Security Act of 2011”•   And Now “Modif...
Summary of Results for CA1710
Major Concerns• Regardless of how conference negotiations  go there will be less of a safety net for  producers• There wil...
Net Insured Acres, 1975 to 2009                                                     (Ten Major Crops)           250       ...
Program Growth                                        Liability by Plan Type            $120            $110             O...
DECEMBER COTTON                  Feb 1-Feb 28 Oct 1-Oct31                   (cents/unit) (cents/unit)   ($/unit)2000      ...
Extension’s Role in ProvidingEducational Programs for Producers• Regardless of when bill is finished there will  be a big ...
Potential Deal Breakers• Dairy Provisions• CHOICE in crop safety net• Payment limitations on  insurance subsidies• If Tea ...
Conclusions• In the policy world, you are going to hear the term:  producers choice – a lot•   The process now will likely...
Thanks!!!   Joe Outlawjoutlaw@tamu.edu  979-845-5913www.afpc.tamu.edu
Overview of the 2012 Farm Bill
Overview of the 2012 Farm Bill
Overview of the 2012 Farm Bill
Overview of the 2012 Farm Bill
Overview of the 2012 Farm Bill
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Overview of the 2012 Farm Bill

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Overview of the 2012 Farm Bill
2012 NACAA AM/PIC Ag Econ Super Seminar Presentation

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Overview of the 2012 Farm Bill

  1. 1. Overview of the 2012 Farm Bill Joe L. Outlaw Professor & Extension Economist Co-Director, AFPCManaging Agricultural Risks Under the 2012 Farm Bill 2012 AM/PIC Meeting Charleston, South Carolina July 18, 2012
  2. 2. Presentation Outline• Background• Farm Bill Time Table• Ramifications for Farmers & Ranchers• Major Concerns Farm Policy• Extension’s Role in Providing Educational Programs for Producers• Conclusions
  3. 3. Background• Urgency For New Farm Bill – Current bill expires September 30th of this year – Better to Decide on How to Cut Ag Rather than Some Other Committee – Possibility of Flip in Control of the Senate – Presidential Elections
  4. 4. Mandatory Spending Baseline for the2008 Farm Bill Programs and Provisions, by Title, ($M), FY 2013-22120,000 XV Trade and Tax Provisions100,000 XIV Miscellaneous 6/ XIII Commodity Futures XII Crop Insurance and Disaster Assistance 80,000 XI Livestock X Hor culture and Organic Agriculture IX Energy 60,000 VIII Forestry VII Research and Related Ma ers VI Rural Development 40,000 V Credit IV Nutri on III Trade (CCC) 20,000 II Conserva on I Commodity Programs (CCC) 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBO March 2012 Baseline
  5. 5. Total Payments ($M), 2013-2225,00020,000 Stove Piping is an issue – want our share of the money after any15,000 cuts10,000 5,000 0 ns S o ts y r O ats ds y s ls M l S o rn t on m Pe e r oo lan hea ai ea rle ne c u hu Co ee ea Ri oh n O an W yP Ho Ba Co Le Up W rg yb ils Dr d he OtSource: CBO March 2012 Baseline
  6. 6. Baseline Payments ($M) and Planted Acres, Major Program Crops, 2013-22 25,000 89.1 Mil AcFor My20,000 Sanity -- It’s About the Safety Net – Not Who Gets How Much!! 15,000 54.5 Mil Ac 10,000 76.4 Mil Ac 11.25 Mil Ac Payments 2.97 Mil Ac 5,000 1.38 Mil Ac 0
  7. 7. Farm Bill Time Table
  8. 8. Farm Bill Time Table• A chance it is taken up in the House soon – Big question of whether it survives there• A better chance it never goes to the House floor – I have been advised to look at the recently passed transportation bill• For more than a year I have thought it would be 2013 and still do
  9. 9. Ramifications for Farmers and Ranchers• Need to go through a quick review of what is in the two bills• Just so you know what to look for: – The bills are similar in some respects but quite a bit different generally – The Senate bill puts all crops other than cotton in a shallow loss type of safety net program with 2 choices of yields to use OR a producer can opt out – The House bill allows producers to choose between a shallow loss or price based safety net
  10. 10. Title Description CBO Baseline Change Senate Change HouseI Commodity Programs 62,944 -19,428 -23,584II Conservation 64,067 -6,374 -6,062III Trade (CCC) 3,411 0 0IV Nutrition 772,109 -4,000 -16,075V Credit -2,665 0 0VI Rural Development 25 115 105VII Research and Related 214 681 546VIII Forestry 9 9 4IX Energy 750 780 0X Horticulture and 1,080 360 428 Organic AgXI Livestock 0XII Crop Insurance 90,867 5,036 9,524XIII Commodity Futures 0XIV Miscellaneous 0 -319 50XV Trade & Tax 0
  11. 11. Provisions Senate Agriculture Risk Coverage House Revenue Loss Coverage (ARC) Provisions (RLC) ProvisionsRevenue guarantee Starts at 89% of previous 5-year Starts at 85% of previous 5-year moving Olympic average revenue for moving Olympic average revenue for the crop the cropCounty Level or One time irrevocable selection of County levelIndividual Level either county level or individual levelCoveragePayment acres 65% of planted acres not to exceed 85% of planted acres and 30% of the average total acres planted or prevented planted acres not to prevented from being planted to exceed base acres on the farm covered commodities and upland (upland cotton base acres are cotton on the farm for the 2009 – included in total farm base acres) 2012 crop years if individual level (payment factor of 85% is applied to coverage is selected or 80% for county planted acres before checking whole level coverage farm base cap)Payment band or range 10% (89% to 79%) 10% (85% to 75%)Actual revenue Calculated using the average price Calculated using the average price during the first 5 months of the during the first 5 months of the marketing year and actual yields marketing year and actual yieldsMandatory or Optional Producer has the option to opt out of Producer has the option to select RLC ARC and select SCO with a wider or price loss coverage (PLC) coverage levelTransitional Yields Used Can replace low yields with 60% of Can replace any low yield in revenueto Replace Low Yields in transitional yields in 2012 or prior calculations with 70% of theCalculating Revenue years and 70% in 2013 or any transitional yield
  12. 12. Provisions Senate Agriculture Risk House Revenue Loss Coverage (ARC) Provisions Coverage (RLC) ProvisionsReference Prices Only applicable for rice and Wheat - $5.50/buUsed to Replace peanuts Corn - $3.70/buLow Prices in Long Grain Rice - $13.00/cwt Grain Sorghum - $3.95/buCalculating Medium Grain Rice - $13.00/cwt Barley - $4.95/buRevenue Peanuts - $530/ton Oats - $2.40/buGuarantee Long Grain Rice - $14.00/cwt Medium Grain Rice - $14.00/cwt Soybeans - $8.40/bu Other Oilseeds - $20.15/bu Peanuts - $535/ton Dry Peas - $11.00/cwt Lentils - $19.97/cwt Small Chickpeas - $19.04/cwt Large Chickpeas - $21.54/cwtPayment Limit $50,000, peanuts with a $125,000, peanuts with a separate limit separate limitChange actively Yes, all but one have to provide n/aengaged active managementAGI Limitation $750,000 $950,000Reduce crop Yes, by 15% n/ainsurance subsidy
  13. 13. Provisions House Price Loss Coverage (PLC) ProgramPayment Acres 85% of planted acres and 30% of prevented planted acres not to exceed base acres on the farm (upland cotton base acres are included in total farm base acres) (payment factor of 85% is applied to planted acres before checking whole farm base cap)Reference Prices Wheat - $5.50/bu Corn - $3.70/bu Grain Sorghum - $3.95/bu Barley - $4.95/bu Oats - $2.40/bu Long Grain Rice - $14.00/cwt Medium Grain Rice - $14.00/cwt Soybeans - $8.40/bu Other Oilseeds - $20.15/bu Peanuts - $535/ton Dry Peas - $11.00/cwt Lentils - $19.97/cwt Small Chickpeas - $19.04/cwt Large Chickpeas - $21.54/cwtPrice Trigger If the average price during the first 5 months of the marketing year falls below the reference price for the commodityPayment Yields CCP yields from the 2008 Farm Bill or establishes a methodology for producers of oilseeds without a CCP yield. Producer option to update payment yields to 90% of the average of the yield per planted acre for the crop for the 2008 to 2012 crop years, excluding any crop year in which the acreage planted was zero.Payment Limitation $125,000, peanuts with a separate limit
  14. 14. Provisions Senate SCO and STAX House SCO and STAXSCO Coverage Producer has the option of purchasing on an Producer has the option of purchasing individual yield and loss basis or an area additional coverage based on an individual yield and loss basis or an individual yield yield and loss basis or an area yield and loss and loss basis, supplemented with coverage basis or an individual yield and loss basis, based on an area yield and loss basis to supplemented with coverage based on an cover all or a part of the deductible under area yield and loss basis to cover all or a part the individual yield and loss policy, or of the deductible under the individual yield a margin basis alone or in combination and loss policy with—individual yield and loss coverage; or area yield and loss coverageSCO Band If an ARC participant, coverage from If in PLC, from individual producer insurance individual producer buyup insurance coverage level up to 90%. Not available if in coverage level up to 79%. If producer opts RLC. out of ARC, then from individual producer insurance coverage level to 90%.SCO Premium 70% 70%SubsidySTAX Coverage Producer elects coverage for revenue loss of Producer elects coverage for revenue loss ofBand not not less than 10 percent and not more than 30 less than 10 percent and not more than 30 percent percent of expected county revenue, specified in of expected county revenue, specified in increments increments of 5 percent. of 5 percent.STAX Reference None $0.6861/lbPriceSTAX Premium 80% 80%Subsidy
  15. 15. Conservation Senate House ProvisionsSpending Cut $6 billion $6 billonConsolidates Programs 23 programs combined 23 programs to 13 into four fundamental program functionsCRP 25 million acre CAP 25 million acre CAPWorking Lands EQIP, CSP, Easements EQIP, CSP, EasementsConservation Security Enrollment limited to Enrollment limited to 9Program 10.348 million acres/year million acres/year
  16. 16. AFPC Representative Farms
  17. 17. Comparison of FAPRI Baseline Prices andPrices Used in the Declining Price Scenario
  18. 18. Results Indicating the Representative Farm’sPreference for Opting Out of ARC for a Larger SCO Payment Band or Remaining in ARC
  19. 19. All 64 Representative Farm’s Preferred Title I Safety Net Option of the Senate Individual and County ARC and the House RLC and PLC Alternatives.
  20. 20. Evolution of Dairy Policy• Originally “Foundation for the Future”• Then “Dairy Security Act of 2011”• And Now “Modified Dairy Security Act”• There could be more changes before it is over
  21. 21. Summary of Results for CA1710
  22. 22. Major Concerns• Regardless of how conference negotiations go there will be less of a safety net for producers• There will be Choices that Producers will need to make – Some hate and some embrace
  23. 23. Net Insured Acres, 1975 to 2009 (Ten Major Crops) 250 200Millions 150 100 50 0 1975 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2005 2009 1977 2003 2007 27 William J. Murphy, Administrator Risk Management Agency
  24. 24. Program Growth Liability by Plan Type $120 $110 Other Group Revenue APH $100 $90 $80(Billion) $70 $60 $50 $40 $30 $20 $10 $0 2003 1996 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2010 2011 William J. Murphy, Administrator•As of 11-22-11 Risk Management Agency 28
  25. 25. DECEMBER COTTON Feb 1-Feb 28 Oct 1-Oct31 (cents/unit) (cents/unit) ($/unit)2000 61.35 63.35 0.022001 58.63 31.39 -0.272002 42.18 44.51 0.022003 59.62 74.43 0.152004 66.75 46.57 -0.202005 51.15 54.40 0.032006 60.38 49.38 -0.112007 58.00 64.01 0.062008 79.18 50.57 -0.292009 52.25 65.63 0.132010 72.39 112.33 0.402011 123.01 101.05 -0.22 Years Price Drops30 Year Average 65.68 64.70 -0.0098 1720 Year Average 67.04 64.61 -0.0243 1210 Year Average 66.49 66.29 -0.0020 4
  26. 26. Extension’s Role in ProvidingEducational Programs for Producers• Regardless of when bill is finished there will be a big shift from commodity program tools to manage risk to insurance tools – Insurance tools do not have floors• Not a problem… just different than producers are used to• Major education role for Extension
  27. 27. Potential Deal Breakers• Dairy Provisions• CHOICE in crop safety net• Payment limitations on insurance subsidies• If Tea Party House Members insist on Large SNAP cuts• Many Many more…
  28. 28. Conclusions• In the policy world, you are going to hear the term: producers choice – a lot• The process now will likely be an even bigger mess• In the end, I expect a 2013 Farm Bill – but they have made a lot more progress than I thought they would so – maybe this year• For this year, no change in policy but lots of questions for next year…
  29. 29. Thanks!!! Joe Outlawjoutlaw@tamu.edu 979-845-5913www.afpc.tamu.edu
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