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Base acreage reallocation decisions

pdf fileAgDM Newsletter
July 2014
UPDATED August 2014

The USDA Farm Service Agency (FSA) will be mail­ing letters to farmland own­ers and operators mid-summer. These letters will designate by FSA farm number the 2014 base acreage, the planted acres for commodity crops during each year from 2009-12 and the Coun­ter-Cyclical (CC) Yield associated with the yields on that farm from a previous period of time.

The first option will be a one-time opportunity for the landowner to reallocate base acres, but not increase base acres on a farm by doing one of the following:

  •  Retain the farm’s 2014 base acres through 2018, or
  •  Reallocate base acres on a farm, not to exceed the total base acres in effect as of Sept. 30, 2013. The election to reallocate bases will use the same acreage of each covered commodity in proportion to the four-year average of planted acres to the covered commodity, during the 2009-12 crop years.

The choice to retain or reallocate base acres is an “all or nothing” proposition. Partial retention of bases or partial reallocation of bases on a farm is not possible.

In addition, landowners can also choose to update the program payment yields for each covered commodity crop on a farm based on 90 percent of the farm’s 2008-12 average yield per planted acre.

This would exclude any year when no commodity crop acreage was planted. Yields in any of the 2008-12 years that are less than 75 percent of the county average can substitute that yield in the calculation. This would exclude any year when no commodity crop acreage was planted. Yields in any of the 2008-12 years that are less than 75% of the county average can substitute that yield in the calculation.

ARC or PLC election and enrollment

Sometime next fall or winter, farmland owners or their operators can then elect by FSA farm number between a revenue program that covers price and yield losses - Agricultural Risk Coverage (ARC) and a price-only program known as Price Loss Coverage (PLC).

If ARC is elected, they will have to choose between a county ARC (ARC-CO) on a commodity-by-commodity basis or choose an individual farm ARC (ARC-IC) that combines all the program commodities on the farm together.

Payments for the county ARC are issued when the actual county crop revenue of a covered commodity is less than ARC-CO benchmark revenue. Payments are not dependent on the planting of a covered commodity crop or planting of the applicable base acre crop on the farm. If a payment is made, it is based on 85 percent of the base acres of the covered commodity times the difference between ARC-CO guarantee and actual county crop revenue for the covered commodity. Payments may not exceed 10 percent of the ARC-CO benchmark county revenue.

Potential ARC-CO payments occur when actual county yield times the national marketing year cash price for a commodity is below the ARC revenue guarantee for that crop year. The ARC-IC potential payments depend on whole farm revenue, since program commodities are combined. The program covers losses on 85 percent of the base acres for the ARC-CO, but only 65 percent of base acres for ARC-IC.

PLC is a target-price program that makes payments when national average cash crop prices drop below a “reference price” set in the farm bill. The reference prices are: $3.70 per bushel for corn, $8.40 per bushel for soybeans and $5.50 per bushel for wheat. Beginning in 2015, PLC enrollment also allows the purchase of SCO insurance to reduce the traditional crop insurance deductible levels. Only farmers enrolled in the PLC program may buy SCO insurance and county yields are used.

The farmland owner or their operator have to make a one-time, irrevocable election to enroll a farm in ARC or PLC for the life of the five-year farm bill. If no decision is made, that farm is automatically enrolled in PLC beginning in 2015.

Payment triggers for both the ARC and PLC programs are based on marketing year average cash prices. Thus, any payments for revenue or price losses won’t be made until the year following a loss when these prices are known. The party at risk on the farm - the operator on a cash rent farm - must still enroll annually the farm in the ARC or PLC program as designated by the election. That enrollment is not expected until early 2015 for the 2014 crop year.

More information available

It is still unclear when local county FSA offices will be actually processing forms that allow base acreage reallocation and yield updates, which won’t happen until software is developed and training is provided to the county FSA staff.

Also, it is uncertain whether FSA will honor existing power of attorney forms that were signed and put in place after the 2008 farm program was enacted.

The FSA Notice ARCPLC-7 provides further explanation of this process and screenshots of the online base acreage reallocation calculator.

 

Steven D. Johnson, farm and ag business management specialist, 515-957-5790, sdjohns@iastate.edu