Food, Conservation, and Energy Act of 2008 (Farm Bill)

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Food, Conservation, Food, Conservation, and Energy Act of and Energy Act of 2008 2008 (Farm Bill)(Farm Bill)

Disclaimer: Provisions provided in this presentation are subject to change or interpretive differences.

–PL 110-246 – PL 110-246 – Farm BillFarm Bill(Signed May 22, 2008, Effective June 18, 2008)(Signed May 22, 2008, Effective June 18, 2008)

–PL 110-398 –PL 110-398 – Technical Corrections Technical Corrections(October 13, 2008)(October 13, 2008)

–PL 111-16 – PL 111-16 – Stimulus BillStimulus Bill(February 17, 2009)(February 17, 2009)

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Farm Bill Program Deadlines

• 2008 Noninsured Crop Disaster Assistance Program (NAP) Fees– Application period for “buy-in” has been re-opened

until May 18, 2009

• 2009 Noninsured Crop Disaster Assistance Program (NAP) Fees– Application periods have closed for all crops

• 2008 Supplemental Agricultural Disaster Assistance (Disaster-Related Programs)– Program signup will be announced for the disaster

programs at a later date

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Farm Bill Program Deadlines

• 2009 Direct and Counter-Cyclical Program

– Signup began on December 22, 2008, and is scheduled to end August 14, 2009

– ACRE Program election and enrollment will begin April 27, 2009, and is scheduled to end on August 14, 2009, for the 2009 program year.

• 2009 Acreage Reporting– Total farm acreage report is required

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Significant FSA Provisions

• 2009 Payment Limitation Changes

– New AGI requirements• Average AGI (3 year average) may not exceed:

– $500,000 (Non-farm) for all Non-Conservation Payments

– $750,000 (Farm) for DCP and ACRE direct payments

– $1,000,000 (Non-farm) for Conservation Program Payments, unless 66.66% of the AGI or more comes from farm income

• “Farm” Income, for AGI purposes, now includes income from land and water sales, processing and storage of farm commodities, and easements. It may also include income from services and inputs for the production of ag. products

• Annual Certification on FSA form CCC-926 and must provide documentation to support certification 1 of every 3 years

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– Direct Attribution • Payment limitation now based on direct and

indirect payments attributed to entities and individuals

• Eliminates the previous “Permitted Entity Rule”

John Doe (Individual)$25,000

Doe Farms LLC25% of $20,000

Doe & Sons Corp33% of $30,000

$10,000

$5,000

$25,000

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– Husband and Wife Rule

• Spouses may each receive a limitation

• Labor and Management contributions by one spouse may be attributed to both spouses

• Previously, spouses were “combined” unless exceptions applied

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– Substantive Change Rule (for increases in the number of “limitations”)

• Substantive change must occur:– for each increase in members of a Joint Operation– when a new business farms land previously in the

farming operation of some of the same shareholders

• Payments will not be issued for added shareholder or new business until there is a substantial change

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– Actively Engaged in Farming Determinations for Corporations, LLCs, LPs, and Similar Entities

• All owners/members now must make a distinct and separate contribution of Labor or Management

• Payment reductions will be applied if requirement is not met.

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FSA Commodity Programs

• 2008 Farm Bill authorized two commodity programs:

– Direct and Counter-cyclical Program (DCP)– Average Crop Revenue Election Program (ACRE)

• A farm may only enroll in one of the programs

• Only farms with base acreage of commodity crops may participate

• Both programs issue “direct” payments

• Difference:

– DCP provides counter-cyclical payments when market prices drop for base acreage crops

– ACRE provides payments when State and Farm “Revenue” drops for planted commodity crops

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Direct and Counter-Cyclical Program (DCP)

• DCP is the commodity program that has been in effect since 2002, and will continue through 2012

• Available to producers on farms with established historical base acreage of commodity crops

– Wheat, Barley, Oats, Corn, Grain Sorghum– Rice– Upland Cotton– Soybeans– Oilseeds (sunflower, safflower, canola, rapeseed, flaxseed,

mustard seed, crambe, and sesame)– NEW: Pulse Crops (lentils, dry peas, chickpeas)– AND: Peanuts

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• Entities and individuals on enrolled farms may receive:

– “Direct” payments, up to $40,000

– “Counter-cyclical” payments (CC), up to $65,000, if the national market price drops below specified levels

Oklahoma has more than 125,000 producers on farms enrolled in DCP.

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• Payments are:

– based on the “base” acreage of the crop, not on the actual plantings

– reduced if fruits or vegetables (FAVs) are planted on the base acreage.

Thus, payments are issued as long as the land is not planted to FAVs.

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2009 – 2012 Direct and Counter-Cyclical Program (DCP)

• Direct Payment Acreage decreases from historical 85% to 83.3% through 2011 (85% in 2012)

• Combination leases (both share and cash terms) now considered as “Cash” leases

– Cash rent tenant rule will apply for “eligibility” purposes• Labor or • Management and Equipment must be contributed

– Lease must be submitted

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2009 – 2012 Direct and Counter-Cyclical Program (DCP)

Base Acreage

– Farms with 10 acres of base or less not eligible for payments unless the farm is wholly owned by socially disadvantaged or limited resource farmers or ranchers

– Additional base crops: dry peas, lentils, and chickpeas

Average Crop Revenue Election (ACRE) Program

available beginning in 2009

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• By making a 1-time election into ACRE, the producers on a farm agree to:

– reduce direct payment amount by 20% for base crops on the farm– not receive counter-cyclical payments– reduce market assistance loan rates by 30%

• ACRE payments can be issued for planted or considered planted acreage of any commodity crop, not just crops with base acreage on the farm

ACRE is an alternative to the DCP

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• ACRE payments are calculated when there is a reduction in revenue for a planted commodity crop

– “Revenue” considers the National Average Market Prices (for entire marketing year) and crop production

– Producers must submit the previous five years of production to establish historical farm production

– Program year production must also be provided to determine if the farm’s revenue was less than historical revenue

– Individual market data not needed.

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• To be eligible to receive payments for a planted commodity crop, both must occur:

– State Trigger must be met: 90% of State’s Historical Revenue must exceed Current year state revenue

– Farm Trigger must be met: Farm’s Historical Revenue must exceed Current year farm Revenue


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ACRE State Trigger

Acre Program Guarantee

90%

x

State Benchmark Yield (5 yr Olympic Average)

x

ACRE Guarantee Price (2 year National Avg. Market Price)

>Actual State Revenue

Actual State Yield

x

Higher of:

National Average Market Price

or70% National Loan Rate

ACRE Program Guarantee cannot change by more than 10% from the previous year’s Program Guarantee

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ACRE Farm Trigger

Farm Acre Benchmark Revenue

Farm Expected Yield (5 yr Olympic Average)

x

ACRE Guarantee Price (2 year National Avg. Market Price)

plus

Crop insurance premium/acre

>Actual Farm Revenue

Actual Farm Yield

x

Higher of:

National Average Market Price or

70% National Loan Rate

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• Direct and ACRE payments are reduced if fruits and vegetables are planted on base acreage

• Maximum payment per individual or entity on an ACRE farm is:

– $32,000 for direct payments – $65,000 plus direct payment reduction for the ACRE payment

• Payment issued after October 1 of the subsequent year

– 2009 payments, if applicable, issued after October 1, 2010– No advance payments

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• Election must be made by June 1 of the applicable year (August 14 for 2009)

– If the ACRE program is not elected or all producers do not agree, the farm will continue to only be eligible to participate in DCP

• Farms with base acreage may be enrolled in the program if all producers elect to participate.

– All crops and producers on the farm are in ACRE and not DCP

– Producers may enroll in ACRE on one farm, and DCP on other farms

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• Once elected, the farm may only enroll in ACRE (not DCP with CC payments) in the year elected through 2012

– Elected in 2009: May only enroll in ACRE for 2009 through 2012– Elected in 2010: May only enroll in ACRE for 2010 through 2012– Elected in 2011: May only enroll in ACRE for 2011 through 2012– Elected in 2012: May only enroll in ACRE for 2012

• The farm must annually enroll in ACRE by June 1 (August 14 for 2009) of each applicable year in order to receive benefits


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Possible situations that may favor ACRE:

• Producers have low value base crops (oats, grain sorghum) who will plant potential ACRE crops

• Planted commodity crops may have potential for high ACRE payments:

– Higher prices in previous two years– Anticipated declining revenue in the planted crop

• Potential ACRE payment exceeds base crop CC payment and reduction of the direct payment.


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Producers contemplating ACRE must consider:

• Once in ACRE, they cannot switch back to DCP for the remainder of the farm bill (through 2012)

• Higher than normal production will result in higher revenue for the current year, thus there is a possibility the State or Farm trigger will not be met even if prices drop

• Prices are national average prices and do not consider the actual prices received by the producer.


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Supplemental Agricultural Disaster Assistance

• Authorized Five Disaster Programs for 2008 – 2011

– Supplemental Revenue Assistance Payments (SURE)

– Livestock Indemnity Payments (LIP)

– Livestock Forage Disaster Program (LFP)

– Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish (ELAP)

– Tree Assistance Program (TAP)

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Risk Management Purchase Requirement

• Risk Management Purchase Requirement is applicable to:

– SURE, TAP, and ELAP. All crops (excluding grazed forage and crops planted after a disaster) must be covered if insurance or NAP is available

– LFP. Only grazed forage must be covered.

– LIP does not require crop insurance or NAP coverage.

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Risk Management Purchase Requirement

• Requirement is waived for:

– socially disadvantaged producers, limited resource producers, or beginning farmers/ranchers

– insured crops that are not of economic significance (less than 5% of value)

– NAP crop value is less than $9090.

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Supplemental Agricultural Disaster Assistance

• General Payment Provisions:

– Payment Limitation:

• Limited to $100,000 combined for all programs except TAP

• TAP has a separate $100,000 limitation

– Adjusted Gross Income

• Producers not eligible if the average nonfarm AGI exceeds $500,000

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Supplemental Revenue Assistance Payments (SURE)

• Successor to Ad Hoc Crop Disaster Programs

• Similar to Crop Insurance’s Adjusted Gross Revenue Policy

• Based on overall revenue losses on the farm, not individual crop production losses

• Payments are based on a Farm’s “Guarantee” and “Revenue”

For this program, “farm” refers to all acreage in all counties that is planted or intended to be planted by the producer.

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Supplemental Revenue Assistance Payments (SURE)

• Available to eligible producers on farms in:

– counties covered by a qualifying natural disaster declaration (Secretarial Declarations only), and contiguous counties

OR

– any “farm” in which there is a greater than 50% overall farm loss in production because of adverse weather

• At least one crop of economic significance on the farm must have at least a 10% production loss

• SURE will provide benefits for lower revenue, including revenue losses from prevented plantings of covered crops

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Supplemental Revenue Program(SURE)

Total Expected Revenue

Disaster Program Guarantee

(Sum of all crops)

Total Farm Revenue

(Sum of all crops)

Payment: 60% of difference

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• Disaster Assistance Program Guarantee

– Covered insured crops: yield guarantee (or % of DCP CC Yield) x price election x acres x 115% (for 2008 only, 120%)

– Covered NAP crops: yield (APH or CC) x NAP Price x 50% x acres x 120% (for 2008 only, 125%)

(Guarantee cannot exceed 90% of the expected revenue for the farm.)

• Total Farm Revenue

– Sum of: estimated crop value, CI indemnities, NAP payments, Market Assistance Loan proceeds, other disaster payments, DCP payments (15% of direct payments, cc payments, and ACRE payments).

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SURE Program considerations:

• The higher the level of coverage, the higher the guarantee

– Increases likelihood of payment– Increase payment amount

• An overall revenue loss (from all crops on “farm”) is required in order to receive benefits

• Crops that could not have coverage are not included in the Guarantee or Revenue calculation, including

– Uncoverable crops– Crops waived due to economic significance

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Livestock Indemnity Program(LIP)

• Similar to previous Livestock Indemnity Programs

• Covers livestock deaths in excess of normal mortality due to adverse weather

• Disaster declaration is not required

• NAP or crop insurance is not required

• Payment Rate for eligible losses: 75%

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Livestock Forage Disaster Program (LFP)

• Successor to previous Livestock Compensation Programs

• Provides assistance for forage losses due to:

– drought– fire on public managed land

• Counties must be designated by the Drought Monitor as severe, extreme, or exceptional

– Disaster declaration not required.

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Livestock Forage Disaster Program (LFP)

• Payments for:

– drought, based on 60% of the feed costs for a month and the severity of the drought

• 1x Payment: D2 (severe drought) for at least 8 consecutive weeks

• 2x: D3 (extreme) at any time• 3x: D3 for at least 4 weeks or D4 (exceptional) at any time

– fire on public land, based on 50% of the feed costs for a month for the total number of livestock covered by the Federal lease not to exceed 180 calendar days.

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Tree Assistance Program (TAP)

• Orchardists and nursery tree growers may receive cost-share benefits if losses exceed 15%

– Includes eligible trees, bushes, vines, and nursery trees for commercial sale.

• Loss must be due to natural disaster

• Provides for partial reimbursement of costs

– 75% for replanting– 50% for removal, salvage, and land preparation

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Emergency Assistance for Livestock, Honey Bees, and Farm-raised Fish

(ELAP)

• Emergency relief to producers of livestock (including horses), honey bees, and farm-raised fish

• Covers losses from disasters such as adverse weather or other conditions, such as blizzards and wildfires not adequately covered by any other disaster program.

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Additional Information

• Contact your local Farm Service Agency for additional information or

• Find current information on the web at:

www.fsa.usda.gov

http://www.fsa.usda.gov/

Documents

Food, Conservation, and Energy Act of 2008 (Farm Bill)