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Extension > Agriculture > Agricultural Business Management > Farm bill > Title I. Commodities: Overview for crops

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Part 1 of the Agricultural Act of 2014 series

Title I. Commodities: Overview for crops

Kent Olson, Applied Economics, March 2014

The "Agricultural Act of 2014," commonly called the farm bill, changes many programs and rules affecting crop commodities. This fact sheet provides an overview of these changes for covered commodities. Others in the series describe the programs and choices in detail. Please note that the final rules and interpretations will come from the USDA at a future date.

What's gone!

Several previous programs are repealed in the new farm bill. Direct payments are gone (except for a declining amount for cotton growers). The Average Crop Revenue Election (ACRE) program and the Counter-Cyclical Program (CCP) are repealed. While the new programs may look similar to these, the new programs are different: simpler in some ways, more complicated in other ways.

Decisions and choices

Farmers and land owners have several choices to make with the new farm bill.

Updating payment yields

Landowners have a one-time opportunity to update their current payment yields established under the 2008 farm bill to 90% of their 2008-2012 average yields. This can be done on crop by crop basis. For many, the current payment yields are 93.5% of their 1998-2001 average yields, so if the 2008-2012 average yield is 3.9% higher (0.935/0.9) than the 1998-2001 average, the best choice is probably to update.

Reallocating base acres

Landowners have a one-time opportunity to update their current payment yields established under the 2008 farm bill to 90% of their 2008-2012 average yields. This can be done on crop by crop basis. For many, the current payment yields are 93.5% of their 1998-2001 average yields, so if the 2008-2012 average yield is 3.9% higher (0.935/0.9) than the 1998-2001 average, the best choice is probably to update.

Choosing crop commodity programs

Under the new farm bill, crop farmers need to make a one-time, irrevocable decision to elect either the Price Loss Coverage (PLC) program or the Agricultural Risk Coverage (ARC) program. Within the ARC program, farmers can choose between county coverage and individual farm coverage.

Farmers can make the PLC and ARC-county decision crop by crop, and coverage is by individual crop. However, the ARC individual farm coverage requires all covered commodities on the farm to be enrolled, and coverage is for losses over all covered commodities, not crop by crop.

The 2014 farm bill also creates the Supplemental Coverage Option (SCO). The SCO is a supplement to the crop insurance choices currently available. It is available for only those crops under the PLC program. Electing either of the ARC options eliminates the possibility of the SCO. The SCO will be available for the 2015-2018 crop years but not for the 2014 crop.

And here's a warning. If all the producers and owners on a farm fail to make a unanimous election of which program to enroll in, the bill says the Secretary of Agriculture may not make any payments to that farm for the 2014 crop year, and the farm will be deemed to have elected PLC for the 2015 through 2018 crop years.

Limits on payments and adjusted gross income (AGI)

Under the new farm bill, the total amount of payments received, directly or indirectly, by a person or legal entity (except a joint venture or general partnership) for any crop year under the PLC and ARC programs and as marketing loan gains or loan deficiency payments (other than for peanuts) may not exceed $125,000.

A person or legal entity with a 3-year average adjusted gross income (AGI) over $900,000 is not eligible to receive any benefit from PLC and ARC programs, supplemental agricultural disaster assistance programs (for livestock and trees), marketing loan gains, loan deficiency payments, conservation programs (starting in 2015), and some other payments (from previous bills). AGI includes both farm and nonfarm income.

Crop insurance indemnity payments (including SCO payments) are not affected or limited by these limits.

 

If all the producers and owners on a farm fail to make a unanimous election of which program to enroll in, there will be no payments for the 2014 crop year, and the farm will be deemed to have elected PLC for the 2015 through 2018 crop years.

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