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

1. Overview of the 2012 Farm Bill
Joe L. Outlaw
Professor & Extension Economist
Co-Director, AFPC
Managing Agricultural Risks Under the 2012 Farm Bill
2012 AM/PIC Meeting
Charleston, South Carolina
July 18, 2012

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. 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. Mandatory Spending Baseline for the
2008 Farm Bill Programs and Provisions,
by Title, ($M), FY 2013-22
120,000
XV Trade and Tax Provisions
100,000 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. Total Payments ($M), 2013-22
25,000
20,000 Stove Piping is an issue – want
our share of the money after any
15,000 cuts
10,000
5,000
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Source: CBO March 2012 Baseline

6. Baseline Payments ($M) and Planted Acres,
Major Program Crops, 2013-22
25,000
89.1 Mil Ac
For 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. Farm Bill Time Table

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. 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. Title Description CBO Baseline Change Senate Change House
I Commodity Programs 62,944 -19,428 -23,584
II Conservation 64,067 -6,374 -6,062
III Trade (CCC) 3,411 0 0
IV Nutrition 772,109 -4,000 -16,075
V Credit -2,665 0 0
VI Rural Development 25 115 105
VII Research and Related 214 681 546
VIII Forestry 9 9 4
IX Energy 750 780 0
X Horticulture and 1,080 360 428
Organic Ag
XI Livestock 0
XII Crop Insurance 90,867 5,036 9,524
XIII Commodity Futures 0
XIV Miscellaneous 0 -319 50
XV Trade & Tax 0

11. Provisions Senate Agriculture Risk Coverage House Revenue Loss Coverage
(ARC) Provisions (RLC) Provisions
Revenue 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 crop
County Level or One time irrevocable selection of County level
Individual Level either county level or individual level
Coverage
Payment 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 yields
Mandatory 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 level
Transitional Yields Used Can replace low yields with 60% of Can replace any low yield in revenue
to Replace Low Yields in transitional yields in 2012 or prior calculations with 70% of the
Calculating Revenue years and 70% in 2013 or any transitional yield

12. Provisions Senate Agriculture Risk House Revenue Loss
Coverage (ARC) Provisions Coverage (RLC) Provisions
Reference Prices Only applicable for rice and Wheat - $5.50/bu
Used to Replace peanuts Corn - $3.70/bu
Low Prices in Long Grain Rice - $13.00/cwt Grain Sorghum - $3.95/bu
Calculating Medium Grain Rice - $13.00/cwt Barley - $4.95/bu
Revenue Peanuts - $530/ton Oats - $2.40/bu
Guarantee 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/cwt
Payment Limit $50,000, peanuts with a $125,000, peanuts with a
separate limit separate limit
Change actively Yes, all but one have to provide n/a
engaged active management
AGI Limitation $750,000 $950,000
Reduce crop Yes, by 15% n/a
insurance subsidy

13. Provisions House Price Loss Coverage (PLC) Program
Payment 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/cwt
Price Trigger If the average price during the first 5 months of the marketing year falls below
the reference price for the commodity
Payment 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. Provisions Senate SCO and STAX House SCO and STAX
SCO 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 coverage
SCO 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%
Subsidy
STAX Coverage Producer elects coverage for revenue loss of Producer elects coverage for revenue loss of
Band 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/lb
Price
STAX Premium 80% 80%
Subsidy

15. Conservation Senate House
Provisions
Spending Cut $6 billion $6 billon
Consolidates Programs 23 programs combined 23 programs to 13
into four fundamental
program functions
CRP 25 million acre CAP 25 million acre CAP
Working Lands EQIP, CSP, Easements EQIP, CSP, Easements
Conservation Security Enrollment limited to Enrollment limited to 9
Program 10.348 million acres/year million acres/year

17. AFPC Representative Farms

18. Comparison of FAPRI Baseline Prices and
Prices Used in the Declining Price Scenario

19. Results Indicating the Representative Farm’s
Preference for Opting Out of ARC for a Larger SCO
Payment Band or Remaining in ARC

20. 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.

23. 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

24. Summary of Results for CA1710

26. 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

27. Net Insured Acres, 1975 to 2009
(Ten Major Crops)
250
200
Millions
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

28. 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

29. DECEMBER COTTON
Feb 1-Feb 28 Oct 1-Oct31
(cents/unit) (cents/unit) ($/unit)
2000 61.35 63.35 0.02
2001 58.63 31.39 -0.27
2002 42.18 44.51 0.02
2003 59.62 74.43 0.15
2004 66.75 46.57 -0.20
2005 51.15 54.40 0.03
2006 60.38 49.38 -0.11
2007 58.00 64.01 0.06
2008 79.18 50.57 -0.29
2009 52.25 65.63 0.13
2010 72.39 112.33 0.40
2011 123.01 101.05 -0.22 Years Price Drops
30 Year Average 65.68 64.70 -0.0098 17
20 Year Average 67.04 64.61 -0.0243 12
10 Year Average 66.49 66.29 -0.0020 4

31. Extension’s Role in Providing
Educational 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

32. 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…

33. 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…

34. Thanks!!!
Joe Outlaw
joutlaw@tamu.edu
979-845-5913
www.afpc.tamu.edu