The Agriculture Improvement Act of 2018

The Agriculture Improvement Act of 2018


• Reauthorized the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs as the commodity safety net programs

• Some modifications to ARC and PLC were made from the 2014 Farm Bill Provisions

• Implemented ARC and PLC for 2019-2023

2


What’s New – Program Election Option

• 2014 Farm Bill• ARC or PLC was elected for 2014 and that program

election was irrevocable through 2018

• 2018 Farm Bill • ARC or PLC may be elected for 2019-2020

• ARC – County or Individual Basis

• Producers may change their program election annually beginning in 2021

3


2019-2020 Program Election:

Deadline – March 15, 2020

• ARC-County (ARC-CO) or PLC may be elected on a crop by crop basis on the farm

Example: Farm 100 wheat base– PLC

corn base – ARC-CO

• If ARC-Individual (ARC-IC) is elected it applies to all covered commodities on the farm

• Program election is made on the same form as annual contract enrollment

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Program Election

• Unanimous decision by all 2019 producers on the farm; 2019 election applies for 2020

Note: New producers on the farm for 2020 will not have an opportunity to change the election

• If no 2019 election made, program election made under 2014 Farm Bill applies for 2019-2020, and the farm is ineligible for 2019 ARCPLC payments

• Election may be changed annually for 2021-2023

• If no change in 2021-2023, existing election is maintained and farm remains eligible for payments 5


22 Covered Commodities

Barley Canola Corn

Chickpeas, Large Chickpeas, Small Crambe

Flax Grain Sorghum Lentils

Mustard Oats Peanuts

Peas, Dry Rapeseed Rice, Long Grain

Rice, Medium Grain Safflower Seed Cotton

Sesame Seed Soybeans Sunflower

Wheat

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What is Price Loss Coverage (PLC)?

• Price protection program (No yield loss coverage)

• Payments are triggered when the EffectivePrice for a crop year is less than the Effective Reference Price

• Payments issued after October 1 of following year

• May be elected on a crop by crop basis7


Price Loss Coverage – Payments

Effective PLC

Reference - Effective = Payment

Price Price Rate

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PLC Reference PricesCrop Reference Prices Crop

Reference Prices

Barley 1/ $4.95 per bu. Mustard $20.15 per cwt.

Chickpeas, Large (Garbanzo Bean,

Kabuli)$21.54 per cwt. Rapeseed $20.15 per cwt.

Chickpeas, Small (Garbanzo Bean,

Desi)$19.004 per cwt. Safflower $20.15 per cwt.

Corn $3.70 per bu. Sesame Seed $20.15 per cwt.

Dry Peas $11.00 per cwt. Sunflower $20.15 per cwt.

Grain Sorghum $3.95 per bu. Peanuts $535.00 per ton

Lentils $19.97 per cwt. Rice, Long Grain $14.00 per cwt.

Oats $2.40 per bu. Rice, Medium Grain 2/ $14.00 per cwt.

Canola $20.15 per cwt. Soybeans $8.40 per bu.

Crambe $20.15 per cwt. Wheat $5.50 per bu.

Flaxseed $11.28 per bu. Seed Cotton $0.367 per lb.

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PLC Reference Price

• Established by the 2018 Farm Bill

• Unchanged from the 2014 Farm Bill

• In effect for 2019-2023

Effective Reference Price

• Sets the level of price protection under the PLC program

• allows for possible increases in reference prices used to determine PLC payments if historical Market Year Average prices are high

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PLC Effective Price -

• Represents price received for crop in a specific year

• Compared to Effective Reference Price to determine if there’s a price loss that triggers PLC payments

Effective Price

• The higher of:

• The Market Year Average (MYA) Price

OR

• National Loan Rate

Market Year Average (MYA) Price

• National weighted average of all prices received during the marketing year following harvest

o Example: September 1 – August 31 for corn

• Determined for each crop year

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Payment Rate

XFarmPLC

YieldX

Payment Acres

= Payment

Payment acres = Base Acres x 85% PLC Yield – exists for each base crop on a farm (may be updated effective for 2020 forward)

• NOTE: PLC Payments are not dependent on the planting of the crop

PLC - Farm Level Payment Amount

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PLC Payment Rate Calculation

Example – Corn

Effective Reference Price = $3.70/bu.

Effective Price = $3.57/bu.

PLC Payment Rate = $ .13/bu.

Farm 100 – 425.0 ac. corn base

PLC Yield = 165

Farm Level Payment

425.0 ac. X 85% x 165 x $0.13 = $7749

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PLC Yield Update

• 2014 Farm Bill

• Producers could update PLC Yields using their 2008-2012 average yield times a 90% factor

• 2018 Farm Bill

• Producers may update their PLC yield using the 2013-2017 average yield times a 90% factor times an additional national yield adjustment factor

• If updated, the new PLC yield will be effective for 2020 and subsequent years; if no update, the existing PLC yield for the crop is maintained

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PLC Yield Update

• Choice to update or retain current PLC yield is crop by crop

• Applicable to crops with base acres on the farm

• Simple average of certified yields for 2013-2017 crop years; IR and NI yields are blended

• Substitute yields used in years with low yields or missing records (whole or partial acres)

• Substitute yield is 75% of 2013-2017 county average yield; same substitute yield is used for all years

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PLC Yield Update

Formula:

FSA Farm’s average 2013-2017 crop yield x 90% x National Factor (see next slide for National Factor by crop)

Exclude years of zero plantings from average

PLC Yield update option is available PER Crop for producers and farms regardless of program election

National Factor: (cannot be less than 90% or greater than 100%)

• The average of the 2008-2012 National Average Yield per planted acre for the crop

divided by

• The average of the 2013-2017 National Average Yield per planted acre 16


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PLC Yield Update Example:

Crop 2013Yield

2014 Yield

2015 Yield

2016Yield

2017Yield

5 Year Average Yield

Corn 150 145 155 160 137 149

PLC YieldUpdate Formula

149 x 90% X 90%(Corn –National Factor)

= 121 Updated PLC Yield Would be 121

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PLC Yield Update

• Decision to update or retain current PLC yield is landowner’s

• Only one landowner of the farm must sign for the yield update decision

• The landowner will certify yield history and request to update yield on form CCC-867

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PLC Yield Update

• Yield and production records are not required to be provided with the yield certification form

• Landowners must be prepared to submit records if requested by FSA in the future for spotcheck (retain through 2023)

• FSA will not copy or store production records

• RMA (crop insurance) records are acceptable records

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Agriculture Risk Coverage (ARC)

Two options – County or Individual Level

1) ARC-County (ARC-CO)

• An income support program based on a benchmark (expected) county level crop revenue - guaranteed at 86%

• Uses county level yields and national average prices to determine benchmark and actual revenues by crop

• ARC-CO payments for a crop are triggered when the actual county revenue falls below the 86% guarantee

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ARC-CO:

• Revenue losses determined for a crop independent of other crops on the farm

• Covered crop does not have to be planted on the farm

• If revenue loss occurs, payments issued on 85% of farm’s base acres

• No requirement to report production

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ARC-CO

Benchmark revenue is determined for a crop by multiplying the following:

• 5 year Olympic County Average Yield

• Source – RMA Data (primary), NASS Data (secondary)

• Substitute yield used if the county yield in a benchmark year is below 80% of the county T-Yield

• FSA will now apply RMA’s trend adjustment factor to the benchmark yields used to determine the ARC-CO guarantee

• 5 year Olympic Average National Price• Source – Higher of Market Year Average (MYA) or the Effective

Reference Price

5 year average – based on 5 years prior to the preceding year of the program year

Example: for 2019, use 2017-2013 23


ARC-CO

County level actual revenue is determined for a crop by multiplying the following:

• Actual average county yield for the crop

• Source – RMA Data (primary), NASS Data (secondary)

• Higher of Market Year Average (MYA) price or National Loan Rate

Payments are triggered when the actual county revenue for a crop is less than the guarantee (86% of the benchmark revenue)

• Important: the ARC-CO payment rate is capped at 10% of the ARC-CO benchmark

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ARC-CO Benchmark Revenue Example 2019:

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Corn 2013 2014 2015 2016 2017

5 Year Olympic Average Yield

County Yield 184 163 183 112 155167 Bu80% of Transitional

Yield128 128 128 128 128

Corn 2013 2014 2015 2016 2017

5 Year Olympic Average Price

Marketing Year Average Price

$4.46 $3.70 $3.61 $3.36 $3.36$3.70

Reference Price $3.70 $3.70 $3.70 $3.70 $3.70

ARC-CO Benchmark Revenue - Corn

167 Bu $3.70 $617.90/ac.


ARC-CO Actual Crop Revenue Example:

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Crop Actual Average

County Yield

MYA Price National Loan Rate

ARC-CO Actual Crop

Revenue

Corn 135 Bu $3.80 $2.20 $513/ac


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ARC-CO Guarantee 1/

ARC-CO Actual Crop Revenue/per acre

Crop Revenue Loss 2/

$531.39 $513.00 $18.39/acre

1/Guarantee is 86% of Benchmark Revenue ($617.90)

2/ Payment rate is lesser of the calculated payment rate above -$18.39/acre OR the CAP (10% of the benchmark revenue)

(CAP: $617.90 X 10% = $61.79/acre).

ARC-CO Loss Calculation


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Corn Base Acres

85% of Base Acres

Share onContract

CropLoss

Producer Payment

100 85 100% $18.39/ac. $1563

ARC-CO Payment Example


ARC-CO - IR/NI Yields

• ARC-County has new criteria for using separate irrigated (IR) and non-irrigated (NI) county yields to determine revenues and payment rates

• Determined on a crop by crop basis

• Referred to as “HIP” crops

(HIP = Historical Irrigated Percentage)

• Crops that do not qualify use a blended county average yield 29


ARC-CO – IR/NI Yields

• New determination of HIP crops based upon:

a) In the years 2013-2017, a county/crop had IR and NI data from RMA at least 3 out of 5 years,

OR

b) Both of the following:• In the years 2013-2017, at least 10% of the crop acreage

in the county was irrigated and at least 10% was non-irrigated, AND

• An average of at least 5,000 acres was planted to that crop in the county each year 2013-2017

• Based on FSA acres

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ARC-CO - IR/NI Yields• A HIP (Historical Irrigated Percentage) will be determined

for applicable crops on each farm in the county, based upon FSA IR/NI acreage report data from 2013 through 2017

• HIP used to determine the number of base acres used in the IR revenue calculation, and the number of base acres used in the NI revenue calculation

• HIP payment factor remains on the farm for 2019-2023

Important Change– IR and NI benchmark revenues, guarantees, and actual revenues will be weighted and summarized to the farm level, to determine one overall payment rate for the farm31

The Agriculture Improvement Act of 2018ARC-CO IR/NI Example - Soybeans

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WEIGHTED BENCHMARK REVENUE, GUARANTEE

Base Acres HIP HIP

Weighted

Base Acres

Benchmark

Revenue

/ac

Benchmark

Revenue

Weighted

Benchmark

Revenue

Weighted

Guarantee

140 90%

126 IRR $588.96 $74,208.96

14 NI $490.80 $6,871.20

TOTAL 140 $81,080.16 $579.14 $498.06

WEIGHTED ACTUAL CROP REVENUE

Base Acres HIP HIP

Weighted

Base Acres

Actual Crop

Revenue/ac

Actual Crop

Revenue

Weighted Actual Crop

Revenue

140 90%

126 IRR $505.00 $63,630.00

14 NI $353.50 $4,949.00

TOTAL 140 $68,579.00 $489.85


• NOTE: “ARC-CO Revenue shortfall is LESS than the 10% “CAP” of $57.91 ($579.14x10%)

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ARC-CO Calculation

Summarized

Benchmark

Revenue

Summarized

Guarantee

(86%)

Summarized

Actual Crop

Revenue

ARC-CO

Revenue

Loss

$579.14 $498.06 $489.85 $8.21


• $579.14 X 10% = $57.91

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ARC-CO Payment Calculation

Soybean Base Acres

Payment Acres (85%)

ARC-CO Revenue Loss / acre

ARC-CO Farm Payment

140 119 $8.21 $977

The Agriculture Improvement Act of 2018ARC-CO Payment By Physical Location

• The 2018 Farm Bill requires ARC-CO revenue calculations be based on a farm’s “physical location” determined by tracts within the farm.

• The farm’s benchmarks, guarantees, and actual revenues are based on the physical location of tract(s) within a farm, as determined by FSA, and weighted by each tract’s base acres of the covered commodity.

• Weighted revenues will be summarized to the farm level to determine overall revenue for each covered commodity on the administrative farm that is enrolled in ARC-CO.

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The Agriculture Improvement Act of 2018ARC-CO Physical Location Example

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Crop CountyBase Acres

Weighted Average Benchmark Revenue

Weighted Average Guarantee

Weighted Average Actual Revenue

Soybeans

Polk32.10

{(576.69*32.10)+(601.23*16.40)}

÷(32.10+16.40)

{(495.95*32.10)+(517.06*16.40)}÷(32.10+16.40)

{(505.00*32.10)+(474.70*16.40)}÷(32.10+16.40)Warren 16.40

Total $584.99 $503.09 $494.75

Weighted/Summarized Guarantee

Weighted/Summarized Actual Revenue

Weighted/Summarized Payment Rate (uncapped)

$503.09 $494.75 $8.34 1/

1/ Weighted Cap on the farm for soybeans would be $584.99 x 10% = $58.50


Agriculture Risk Coverage (ARC)

Two options – County or Individual Level

2) ARC-Individual (ARC-IC)

• Whole farm revenue coverage – revenues weighted for all covered crops that are planted to determine farm’s overall gain/loss

• Farm must have at least .01 acre of a covered commodity actually planted to determine revenue gain/loss for ARC-IC crops

• Exception for farms with 100% approved prevented planting

• If revenue loss occurs, payments issued on 65% of farm’s base acres

• Production must be reported

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The Agriculture Improvement Act of 2018ARC-IC

• Income support is provided to producers who plant any of the 22 covered commodities, regardless of whether base acres exist on the farm for that commodity

• Producers on an ARC-IC enrolled farm who do not share in the farm’s planted covered commodities are ineligible for ARC-IC payments.

• Producers on an ARC-IC enrolled farm who do share but do not enroll, are also ineligible for ARC-IC payments.

• FSA will compute benchmark revenues for each covered commodity that is planted in the current year.

• ARC-IC enrolled farms with no planted covered commodities will

be ineligible for payment. 38


ARC-IC Eligible Commodities

• Only initially planted covered commodities are included in the revenue calculations

• Prevent Plant (PP) acres are only included in cases where 100% of the farm’s initial planted covered commodities are approved PP

• Production must be certified for the current year and the benchmark (five) years; yields are subject to spot check

• Production reporting deadline is July 15 in year following the

crop year

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• ARC-IC yields are certified as a blended yield to include production from both IR and NI acres

• ARC-IC yields must include production from all ARC-IC eligible types of the covered commodity planted• Example: Producer has winter wheat and spring wheat

• Production from acres of covered commodities that are hayed, grazed, etc. must have a conversion factor applied to determine production

• Payment acres are 65% of the total base acres on the farm, regardless of what type or how many acres of covered commodities are planted.

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ARC-IC

ARC-IC payments trigger when the current year revenue from all planted covered commodities on the producer’s “ARC-IC farm” falls below the guaranteed revenue for the ARC-IC farm.

• ARC-IC farm is defined as the producer’s share of all planted covered commodities from all ARC-IC enrolled farms in the state.

• Revenue from ARC-IC farms that are not enrolled in the current year is not included in the revenue calculations

• The farm’s revenue does not include crop insurance indemnities.

Note: Revenue from one farm or crop can potentially eliminate the

revenue loss from another farm or crop

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• Each producer will have a unique benchmark revenue calculated across all planted covered commodities, based on their share on all ARC-IC enrolled farms in the state

• A weighted average of the benchmark revenues is guaranteed at 86%

• An actual revenue is calculated across all planted covered commodities and compared to the guarantee to determine if there was a loss

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Example –Weighted Benchmark

Wheat BM Revenue: ($258.32 X 62.50%) = $161.45

Barley BM Revenue: ($291.00 X 37.50%) = $ 109.13

Weighted Farm Benchmark Revenue = $270.58/Acre

Guarantee = $270.58 x 86% = $232.70/Ac.

Covered Commodities on ARC-IC Farm

Planted Acres Planted/Total Planted Covered Commodities

% of Planted Covered Commodities

Wheat 1000 1000/1600 62.50%

Barley 600 600/1600 37.50%

Total 1600

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Example – Actual Revenue & Loss Calculation

Guarantee = $232.70 Payment rate = $27.06/ac.*

Actual Revenue = $196.55

Loss = $36.15/ac.

*Note: Payment cap (10% benchmark) applies

Crop Certified Yield per Acre for 2019

MYA Price*

Acres Planted

Revenue Revenue per Acre

ProducerShare of Crop

Producer’s Revenue per Acre

Wheat 35 $5.20 1000 $182,000 100%

Barley 48 $4.60 600 $132,480 100%

Totals 1600 $314,480 $196.55 100% $196.55

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Payment Calculation:

• Farm 225, 100% Share to Operator

• 500 base acres of barley• 200 base acres of corn• 50 base acres of oats

65% total base acres X producer’s share of planted covered commodities X producer’s calculated payment rate per acre

750 acres X 65% = 487.5 (payment acres) X 100% share to operator X$27.06 (Payment Rate per Acre) = $13,192

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ARC-IC and Prevent Plant

Farm 1000, Enrolled in ARC-IC

• No other farms enrolled in ARC-IC

• 200 cropland acres

• 200 base acres

• 100 acres wheat, FSA approved prevent plant

• 100 acres barley, FSA approved prevent plant

Benchmark Revenues and Guarantee calculated based on 100 acres of wheat and 100 acres of barley. Actual revenue is $0 based on 100% prevent plant.

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The Agriculture Improvement Act of 2018ARC-IC & Prevent Plant

Example of a one producer farm, entirely approved PP

Wheat BM Revenue: ($258.32 X 50%) = $129.16

Barley BM Revenue: ($291.00 X 50%) = $145.50

Weighted Farm Benchmark Revenue = $274.66/ac. x 86% = $236.21/ac. Guarantee

$236.21/ac. - $0 (Actual Revenue) = $236.21/ac.

Payment Cap = $27.47 (Actual Revenue is $0, so cap will be payment rate.)

Payment = 200 base acres x .65 x $27.47 = $3571

Covered Commodities on ARC-IC Farm

Planted Acres (*Prevent Plant)

Planted*/Total Planted* Covered Commodities

% of Planted* Covered Commodities

Wheat 100 100/200 50%

Barley 100 100/200 50%

Total 200

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ARC-IC & Prevent Plant

What if, in addition to Farm 1000, the producer had a second ARC-IC enrolled farm (FSN 2000) which had 100 acres of base and was planted to 50 acres of corn?

• Benchmark revenue and guarantee will be based on 100 acres PP wheat &100 acres PP barley (FSN 1000), and 50 acres of planted corn (FSN 2000).

• Actual revenue from the additional farm will be based on 50 acres of corn. Actual revenue from Farm 1000 will still be $0 for the PP acres, but that revenue is now blended with the actual revenue from the planted corn.

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The Agriculture Improvement Act of 2018ARC-IC & Prevent Plant

Corn BM Revenue: ($625.00 X 20%) = $125.00

Wheat BM Revenue: ($258.32 X 40%) = $103.33

Barley BM Revenue: ($291.00 X 40%) = $116.40

Weighted Farm Benchmark Revenue = $344.73/ac. X 86% = $296.47/ac.

Cap = $34.47/ac.

Revenue from 50 acres corn/190 bu. corn yield/$4.20 price = $39,900

Actual Revenue on the whole ARC-IC farm = $39,900/250 acres = $159.60/ac.

Payment Rate = $296.47 – $159.60 = $136.87/ac.* *Cap of $34.47/ac. applies

Covered Commodities on ARC-IC Farms

Planted Acres (*Prevent Plant)

Planted*/Total Planted* Covered Commodities

% of Planted* Covered Commodities

Wheat 100 100/250 40%

Barley 100 100/250 40%

Corn 50 50/250 20%

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Agriculture Improvement Act of 2018

ARC and PLC Recap

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Coverage Type

Price Yield Payment Acres

Required Planting

PLC Price Only

NationalMYA

N/A 85% Crop Base Acres

No

ARC-CO

PriceandYield

National MYA

County AverageYields

85% Crop Base Acres

No

ARC-IC

Price andYield

National MYA

Individual (ARC-ICFarm) Yields

65% TotalBase Acres

Yes –(Exception- 100%

PP)

Agriculture Improvement Act of 2018

New Provision For Grass Farms

• Farms identified as Grass/Idle/Fallow from January 1, 2009 – December 31, 2017 will be ineligible to receive ARCPLC payments for the 2019-2023 program years

• These farms may be eligible for the Grassland Conservation Initiative (NRCS-CSP) program (5-year contract/$18 per acre)

• G/I/F farms will maintain base acres

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Fruits and Vegetables (FAV’s)

• Planting FAV on payment acres enrolled in ARCPLC is permitted

• Program benefits will be reduced for each payment acre planted to FAV, unless the FAV is destroyed without benefit before harvest

• Exceptions –• Planted in a mixture impractical as human food source

• Home Garden

• Planted and reported with intended use of cover, forage, green manure, left standing, or silage

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Payment Eligibility Requirements

• Actively Engaged in Farming

• Cash Rent Tenant Provisions

• Adjusted Gross Income - $900,000 or less• Applies to individual, entities, and entity members

Payment Limitation:

• ARCPLC - $125,000 per person or legal entity

• Direct Attribution Applies

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What’s New - Recap:

• New program election in 2019/2020

• Option to change election annually (2021-2023)

• No election in 2019 = no payments

• Opportunity to update PLC yields

• ARC-CO Changes

• Primary source of yield data is RMA

• Expanded use of IR/NI yields

• Use of physical location payment rates

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Timelines To Note:

2019/2020 Program Election- March 15, 2020

2019 Enrollment – March 15, 2020

2020 Enrollment – June 30, 2020

PLC Yield Update – September 30, 2020

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For More Information:

ARCPLC Website: fsa.usda.gov/arc-plc

Nebraska FSA Website: fsa.usda.gov/ne

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Documents

The Agriculture Improvement Act of 2018