Farm Bill 2002

COMMODITY PROVISIONS
IN THE NEW FARM BILL

Written By: Kent Thiesse, Extension Educator, University of Minnesota

Updated September 9, 2002

DETAILS OF THE NEW FARM PROGRAM

Official Title : "Direct and Counter-Cyclical Payment" ( DCP ) Program

Length of the Farm Bill : Six years (2002 - 2007).

DCP Farm Program Sign-up :October 1st, 2002 through April 1st, 2003
Landowners must sign-up for the new DCP Program.

Loan Rates, Direct Payment Rates, and Target Prices : Please refer to the following Table ……

Timing of Payments : Farm Operators have some choices ……

• Direct Payments --- Producers may elect to receive up to 50 percent of the Direct payment after December 1st, the year prior to the crop year, and the balance after October 1st during the crop year.
  
• Counter-Cyclical Payments --- A producer can receive up to 35 percent of the projected payment after October 1st in the year the crop is harvested, an additional 35 percent of the projected payment in February of the following year, and the balance at the end of the 12 month marketing year for a specific crop.

Base Acres : Landowners will choose from five Base Acre options for the new DCP Farm Program ……

• Retain existing 2002 PFC Crop Base acres and do not add Oilseed (soybeans) Base acres.
• Retain existing 2002 PFC Base acres, and add allowable Oilseed Base acres.
• Retain some existing PFC Base, eliminate some existing PFC Base, and add maximum
  Oilseed Base acres. (Use a “PFC Offset” to eliminate existing PFC Base acres.)
• Update Crop Base acres, using 1998 - 2001 average planted and prevented planted acres.
• Combination of Options #2 and #3. (A partial “PFC Offset”. )

Payment Yields :

Current PFC payment yields will be used to calculate all “direct payments” . A payment yield will be assigned for soybean “direct payments” that is about 78 percent of the 1998-2001 average soybean yield. (Example --- 45 Bu./A. X .78 = 35 Bu./A.)

Landowners that keep current PFC Base acres (Options 1, 2, 3, & 5) must also use current PFC yields and assigned soybean yields for calculation of “counter-cyclical payments”. Producers that update Base acres (Option #4) have three choices for Payment Yields used to calculate “counter-cyclical payments” ……

• Keep existing PFC payment yields.
• 70 percent of the difference between the actual average yield from 1998 - 2001
  and the existing PFC payment yields for each crop plus the PFC payment yield.
  Examples --- Corn : 115 Bu./A. + (150 Bu./A. - 115 BU./A. X .70) = 139 Bu./A.
      Soybeans : 35 Bu./A. + (45 Bu./A. - 35 Bu./A. X .70) = 42 Bu./A.
• 93.5 percent of the 1998 - 2001 average yields on planted acres.
  Examples --- Corn : 150 Bu./A. X .935 = 140 Bu./A.
      Soybeans : 45 Bu./A. X .935 = 42 Bu./A.

Notes --- Yield documentation, as defined by FSA Offices, is required for yield updates. A "plug yield”, which is 75 percent of the County average yield, is used when actual yields for a crop in a given year are below the County average, or if yield documentation is not available for a given year.

Payment Calculations : Following are the payment calculation formulas ……

• Direct Payments = (Base Acres X .85) X Payment Yield X Payment Rate
• Counter-Cyclical = (Base Acres X .85) X Payment Yield X Payment Rate
  • Payment Yields may be updated (described earlier).
  • Payment Rate = Target Price minus
    (Higher of National Loan Rate or 12 month average price) + Direct Payment Rate
    Examples --- Corn : $2.60/ Bu. - ($1.98/ Bu. + $.28/ Bu.) = $.34/ Bu.
    Soybeans : $5.80/ Bu. - ($5.00/ Bu. + $.44/ Bu.) = $.36/ Bu.

Payment Limits : Current payment limits, with some adjustments, will be used for the 2002 crop year.

Payment limits per individual beginning with the 2003 crop will be as follows ……

• Direct Payments -------------------- $40,000 per year
• Counter-Cyclical Payments ------ $65,000 per year
• LDP & Marketing Loan Gains --- $75,000 per year

The "Triple Entity Rule" and full spouse payment limit allowance will continue, which essentially doubles the allowable payment limits. Total maximum payment limit would be $360,000 per year.

Generic commodity certificates may be used and are not counted toward the $75,000 LDP and Marketing Loan Gain payment limit.
Person with average "Adjusted Gross Income" of $2.5 million or more will not be eligible for participation in Farm Programs or to receive payments.

New Farm Bill Payment Example : The example below compares estimated payments with the new DCP Farm Program to payments under the current Program.

For More Information : Go to the U of M Extension Service Web site.
The web site address is: http://www.extension.umn.edu/farmbill

Produced by Communication and Educational Technology Services, University of Minnesota Extension.

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