The Farm Security and Rural
Investment Act of 2002:
Program Provisions, Guidelines,
Decision Strategies, and Examples
Written By: Gary A. Hachfeld, Regional Extension Educator,
Ag. Business Management
Updated October, 2002
TABLE OF CONTENTS
|
| Item |
Page |
A. General Information / Provisions / Guidelines: (deadlines,
payments,
target prices, loan rates, planting flexibility, fruit and vegetable crops,
non-covered commodity crops, and other general provisions) . . . . . . .
. . |
1 - 4 |
| B. Updating Base Acres. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . |
4 - 6 |
| C. Updating Yields . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . |
6 - 7 |
| D. Establishing Oilseed Yield . . . . . . . . . . . . . .
. . . . . . . . . . . . . |
7 |
| E. Summary of Yield Options . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . |
7 |
| F. Production Evidence . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . |
8 |
| G. Direct Payment Calculation . . . . . . . . . . . . . .
. . . . . . . . . . . . . |
9 |
| H. Counter-Cyclical Payment Calculation |
9 - 10 |
| I. Timing of Payments . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . |
10 |
| J. Strategy Hints To Think About . . . . . . . . . . . .
. . . . . . . . . . . . . . |
10 - 12 |
| K. Profitability In The 2002 Farm Bill. . . . . . . . . .
. . . . . . . . . . . . . . |
12 - 14 |
| L. Producer Assistance . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . |
14 |
A. GENERAL INFORMATION / PROVISIONS / GUIDELINES:
Program Title: Direct and Counter-Cyclical Payment
(DCP) Program
DCP Duration: Six-year program: 2002 2007
DCP Date Deadlines:
- Begin Sign-up: October 1, 2002
- Ending Sign-up Date: June 2, 2003
- End Date for Base / Yield Option Decision: April 1, 2003
DCP Payments:
- Direct Payments (DP): continues a direct payment
similar to the previous Production Flexibility Contract (PFC) payment under
AMTA. DP are guaranteed regardless of commodity price.
- Counter-Cyclical Payment (CCP): initiates the
CCP which is similar to the old deficiency payment and replaces the former
Market Loss Assistance and Oilseed Payments under AMTA. CCP are not
guaranteed and are calculated on a 12-month marketing period. The CCP
must be earned based upon the higher of the 12-month
weighted average market price or national loan rate.
DCP Target Prices, National Loan Rates / DP Rates:
| Current
Program |
Loan Rates, Direct payments and Target
Prices for Covered Commodities |
2001 AMTA
Payment
|
2001
Loan Rate |
|
National Loan Rate |
Direct
Payment |
Target Price |
| 2002-2003 |
2004-2007 |
2002-2007
|
2002-2003 |
2004-2007 |
| $0.261 |
$1.89 |
Corn (bu) |
$1.98 |
$1.95 |
$0.28
|
$2.60 |
$2.63 |
| $0.314 |
$3.05 |
Sorghum (cwt/bu) |
$1.98 |
$1.95 |
$0.35
|
$2.54 |
$2.57 |
| $0.202 |
$1.65 |
Barley (bu) |
$1.88 |
$1.85 |
$0.24
|
$2.21 |
$2.24 |
| $0.022 |
$1.21 |
Oats (bu) |
$1.35 |
$1.33 |
$0.024
|
$1.40 |
$1.44 |
| $0.461 |
$2.58 |
Wheat (bu) |
$2.80 |
$2.75 |
$0.52
|
$3.86 |
$3.92 |
| NA |
$5.26 |
Soybeans (bu) |
$5.00 |
$5.00 |
$0.44
|
$5.80 |
$5.80 |
| NA |
$0.0930 |
Minor Oilseeds (lb) |
$0.0960 |
$0.0930 |
$0.0080
|
$0.0980 |
$0.1010 |
Data Source: Kent Thiesse, University of
Minnesota Extension Service
- County DCP loan rates can be found as follows:
- Go to www.fas.usda.gov. On the left side
of that page click on price supports. On the next page click
on loan rates. under the Price Support column on the left.
On the page that follows, go down the left side and click on Minnesota
and then simply scroll down to the county or counties you are looking
for.
Planting Flexibility / Fruits and Vegetables (FAV) Restrictions:
Non-Covered Commodity Crops (Alfalfa, Sweet Corn, Canning Peas,
Sugar beets):
- Example: planting alfalfa
- Planting alfalfa in any years, 1998-01, will reduce or limit the amount
of acres eligible for soybean base.
-
Any alfalfa acres in 1998-01 will be subtracted from total crop acres for
determine acres eligible for corn, soybeans, and other covered commodity
crop base acres.
Example:
- 150 acres of cropland
- 75 acres of PFC corn base existing
- Actual average planted: corn 50 acres, soybeans 50 acres,
alfalfa 50 acres
- Planted covered commodity crops: 100 acres (corn 50 + soybeans 50)
- Minus PFC base acres: -75 acres
- Equals eligible for soybean base acres: 25 acres
Because alfalfa is not a covered commodity crop, these acres are not eligible
for base acres and must be subtracted from cropland acres. In this example,
the producers actual average planted of 50 acres to soybeans was more
than the acres eligible for base the producer was restricted to the
lesser amount of 25 acres.
Other Provisions:
- Land owners are responsible for making base and yield decisions and for
signing off on the decision.
- Requires sign up every year. Can elect to stay out of the program in any
of the 6 years.
- Allows for updating crop base and program yields once at the beginning of
the program (decision deadline is April 1, 2003). This is a one-time
decision.
- If no base and yield decision is made by April 1, 2003, the farm defaults
to the 2002 PFC acres for covered commodity crops plus the 4-year average
of eligible oilseeds, if applicable.
- The base and yield decision stays with the farm for the 6 year duration
of the program.
- A newly purchased farm (during 1998-01 years) can be updated for base and
yield using the previous operators bases and yields.
- Landowners (producers) with a farm not previously in the farm program, can
now get their farm into the DCP program. Must be done by April 1, 2003. If
not, the farm defaults to zero base acres for the 6-year program.
- Updating base and yield is done on a farm number basis, not by tract.
- Can update base acres and yield on one farm and not on another.
- Program requires acreage reports for program participation. In the past,
acreage reports were required for only those crops that were LDP.
- Program adds new program commodities such as soybeans, sunflowers, and other
oilseeds.
- Program adds new payment program for dairy, honey, wool, and mohair.
- Expands conservation spending and adds new programs to preserve wetlands
and improve soil and water quality.
- Program continues LDP and Market Gain provisions as well as CCC commodity
loans and commodity certificates.
- The triple entity and spousal rules still apply.
B. UPDATING BASE ACRES
Provisions:
- Base acre updating will be done on a farm by farm basis that is,
by FSA farm number as they existed in 2002.
- Landowners will have a ONE TIME opportunity to
make an election of base acreage on their farm. This decision stays with that
farm for the duration of the six-year program, regardless of operator.
- The base acre decision deadline is April 1, 2003.
- Any landowner whose farm was not enrolled in the 1996 Freedom to Farm Program,
can enroll the farm in the 2002 farm program (must use Option #4 listed under
Options for Determining Base Acreage).
Options for Determining Base Acreage:
- Option # 1: Retain 2002 PFC base acres, no soybean acres added to
base.
- Option # 2: Retain 2002 PFC base acres and add minimum eligible oilseed
acres without PFC base acre offset.*
Note: Offset occurs when current PFC base acres are replaced by eligible
oilseed acres.
- Option # 3: Retain 2002 PFC base acres and add maximum eligible oilseed
acres with PFC base acre offset.
- Option # 4: Update the farms base acreage using the average
of the 1998-2001 acreage of each covered commodity planted / prevented planted
on that farm.
- Option # 5: Retain 2002 PFC base acres and add less than maximum
but more than minimum oilseed acres with PFC base acre offset.
Eligible Oilseed Acres:
- For each crop year, 1998-2001, the total planted acreage of all covered
commodity crops (corn, soybeans, wheat, oats, barley, etc.) on the farm minus
the total 2002 PFC base acreage equals the total eligible
oilseed acreage for the farms.
- One oilseed exception:
If the difference between the total planted acreage of all covered commodity
crops on the farm minus the total 2002 PFC base acreage on the farm is negative,
the eligible oilseed acreage for the specific year is 0.
Base Updating Example Data:
- Farm data:
100 acres of cropland
Current PFC base acres: 50 acres corn, 20 acres oats
1998 planted 40 acres of alfalfa. Planted corn, oats, and soybeans 98
- 01
- Farm Planted / Prevented Planted Examples:
Crop Planted
|
'98 |
'99 |
'00 |
'01 |
'02PFC |
| Corn |
20 |
60 |
50 |
60 |
50 |
| Oats |
10 |
10 |
20 |
20 |
20 |
| Soybeans |
30 |
30 |
30 |
20 |
|
Alfalfa
|
40 |
0 |
0 |
0 |
|
|
Total Planted
Covered Commodities
|
60 |
100 |
100 |
100 |
|
PFC Base
|
70 |
70 |
70 |
70 |
|
| Total PFC Base |
-10 |
30 |
30 |
30 |
|
Total Eligible Oilseed
(minimum oilseeds) |
0* |
30 |
30 |
30 |
|
| * Exception |
- Reported Acres and 4-year Average Acres Planted
Crop
|
'98 |
'99 |
'00 |
'01 |
'4-yr. Ave. |
| Corn |
20 |
60 |
50 |
60 |
47.5 |
| Oats |
10 |
10 |
20 |
20 |
15.0 |
| Soybeans |
30 |
30 |
30 |
20 |
27.5 |
| Alfalfa |
40 |
0 |
0 |
0 |
10.0 |
-
Eligible Oilseeds:
Minimum Oilseeds: equals the total acres planted / prevented planted
to covered commodity crops minus 2002 PFC base
acres.
Total eligible oilseed row, crop planted box (total planted minus PFC base)
0 ac. + 30 ac. + 30 + 30 ac. = 90 ac. ÷ 4 yrs = 22.5 acres minimum
eligible oilseeds
Maximum Oilseeds: equals the 4 year average of planted / prevented
planted soybean acres.
Soybean acres planted, reported acres box
30 ac. + 30 ac + 30 ac.+ 20 ac. = 110 ac. ÷ 4 yrs. = 27.5 acres
maximum eligible oilseeds
Base Updating Option Examples:
- Option # 1: Retain 2002 PFC base acres, no soybean acres added to
base.
Base acres:
50 acres corn base
20 acres oats base
0 acres soybean base
- Option # 2: Retain 2002 PFC base acres and add minimum eligible oilseed
acres without PFC base acre Offset
Base acres:
50 acres corn base
20 acres oats base
22.5 acres soybean base
- Option # 3: Retain 2002 PFC base acres and add maximum eligible oilseed
acres with PFC base acre offset.
Base acres:
50 acres corn base
15 acres oats base
27.5 acres soybean base
- Option # 4: Update the farms base acreage using the average
of the 1998-01 acreage of each covered commodity planted / prevented planted
(see reported acres box).
Base acres:
47.5 acres corn base
15 acres oats base
27.5 acres soybean base
- Option # 5: Retain 2002 PFC base acres and add less than maximum
but more than minimum oilseed acres with PFC base acre offset.
Base acres:
50 acres corn base
15 acres oats base
27.5 acres soybean base
C. UPDATING YIELDS
Updating yields is allowed only when updating base acres using 1998-2001 planted
/ prevented planted acreage and using Base Option # 4 only.
- Can update yields on one farm but do not have to update yields on another
farm.
- Updated yields apply to Counter-Cyclical Payments only
(PFC yields are used for Direct Payments).
- Under Base Option # 4, there are three methods for determining yield:
- retain current PFC program yields (while updating base acres).
- update yields by adding to the PFC program yield, 70% of the difference
between 1998-2001 average yield and the PFC direct yield.
- update yields by using 93.5% of the 1998-2001 average yield.
Updated Yield Example:
- Data: Crop = Corn
PFC program yield = 123 bushels
1998-2001 actual yield = 145 bushels
- Option # 4 yield options:
- keep current PFC program yield = 123 bushels
- 70% calculation
123 bushels + [(145 bu. 123 bu.) x .70] = 138
bushels
- 93.5% calculation
145 bushels x .935 = 136 bushels
- When updating yields, the same method of determining yield must be used
for all the crops on the farm being updated.
- If one crop on a farm is updated, all crops on that farm must be updated
(all crops on all tracts within the same farm number).
- Can replace any of the 1998-2001 yields with 75% of the NASS county average
yield or plug yield.
D. ESTABLISHING OILSEED YIELD
- Oilseed payment yield will be the average yield per planted acre for years
1998-2001 (prevented planted acres are not included in yield average).
- A yield ratio of 78% will be applied to the oilseed yield:
Example: 1998-01 bushel yield = 48 bushels
48 bushels x .78 = 37 bushels oilseed payment yield
- Can replace a low yield in any year 1998-2001 with 75% of the NASS county
average harvested yield (plug yield). NASS yield = 44 bu. 44 bu.
x .75 = 33 bu. 33 bu. x.78 = 26 bu. payment yield
E. SUMMARY OF YIELD OPTIONS
| Base Election |
Yield Options
|
| Direct |
Counter-Cyclical |
| PFC Crops |
Oilseeds |
PFC Crops |
Oilseeds |
OPTION 1
PFC
OPTION 2, 3 or 5
PFC + Eligible Oilseeds |
PFC Yield |
1998-2001 average yield, factored to an Historic Yield
78% |
PFC Yield |
Direct Yield |
OPTION 4
1998-2001 Average Planting (and Prevented Planting) |
PFC Yield |
1998-2001 average yield, factored to an Historic Yield
78% |
Use 1 Method for ALL crops:
1) Direct Payments Yield
2) 70.0% Partial Update Method
(1998-2001 Ave. Yield)
3) 93.5% Partial Update Method
(1998-2001 Ave. Yield) |
- All Direct Payments are calculated based upon existing
PFC yields. DP on oilseeds are calculated based upon established yield reduced
by the historic yield ratio of 78% or the county plug yield.
- Counter-Cyclical Payments for Base Option # 1, # 2, # 3, and # 5 are calculated
based upon existing PFC yields. CCP for oilseeds under Options # 1, # 2, #
3, and # 5 are calculated based upon established oilseed yields reduced by
the historic yield ratio of 78% or the county plug yield.
- CCP for Option # 4 are calculated based upon updated yields for crops by
farm number.
F. PRODUCTION EVIDENCE
Grain Producer Selling Covered Commodity Crops:
- Acceptable production evidence as of this writing includes:
- sales receipts
- settlement sheets
- assembly sheets
- warehouse receipts
- FSA bin measurements if the grain is still in the
bin (if sold, need to produce the most recent transaction which
are mentioned above
- Scale tickets or weight slips if supported by a sales document (canceled
check, receipt, etc.)
- Documents need to include producers name, commodity, buyer or storing
facility, transaction or delivery date, and quantity.
- If the producer does not have access to sales receipts, settlement sheets,
etc. they can use LDP records or CCC loan records as production evidence.
Note: LDP or CCC loan records as production evidence
can not be combined with any other form of evidence. In other words, a producer
wants to use loan bushels he/she can not produce an assembly sheet for overrun,
etc.
- Grain held, cleaned, and used for seed requires written certification indicating
disposition by planting, seeding rate, and number of acres planted.
Livestock Producers Feeding Covered Commodity Crop:
- Acceptable production evidence as of this writing includes (assuring the
producer notified FSA that all or a portion of the covered commodity crop
grain was to be fed):
- LDP records on amounts fed grain
FSA CCC loan records on amounts fed grain. Note:
LDP or CCC loan records as production evidence
can not be combined with any other form of evidence. In other words, a
producer wants to use loan
bushels he/she can not produce an assembly sheet for overrun, etc.
- Measurement service by FSA or crop insurance representative
- If grain was not measured and no LDP taken, FSA can assign a yield based
upon actual grain production for the applicable year(s) from 3 similar
farms.
- If the producer did not notify FSA of intentions to feed the grain, the
plug yield will be assigned.
- For covered commodity crops fed as hay (oateage) or silage, the FSA assigned
yield will be acceptable production evidence.
- Any grain sold by the livestock producer must have the same evidence as
the producer selling grain.
Other Production Evidence Provisions:
- The landowner(s) or representative must:
- Provide production information to establish yields.
- Must report said production on form CCC-658P.
- Keep all records for 6 years of the program.
- Provide production evidence on request anytime during the 6-year farm
bill program period.
- If the producer is not the owner of these records, he/she must insure they
can get access when asked to do so by FSA.
- The County FSA Committee (COC) will review the CCC-658P and determine the
production information is reasonable. If so, the COC will accept
the CCC-658P.
- The COC will request actual records if the CCC-658P
appears unreasonable.
- The CCC-658P must be completed to establish a soybean yield even though
you may not be updating yields under Base Option # 4.
- The COC has to accept the CCC-658P before you can complete your base acre
and yield decision (deadline is April 1, 2003).
G. DIRECT PAYMENT CALCULATION
Provisions / calculation:
- DP are guaranteed regardless of national commodity price, etc.
- DP are calculated based upon existing PFC base acres and yield. Updated
yields do not apply to DP.
- DP payment limit is $40,000 per entity per year.
- DP are based upon the current AMTA payment formula: Base Acres x .85 x Farm
Yield x Payment Rate
Example: 100 acres corn base x .85 x 118 bushel yield
x $.28 = $2,808.40
H. COUNTER-CYCLICAL PAYMENT (CCP) CALCULATION
Provisions / calculations:
- CCP are not guaranteed and have to be earned.
- CCP are based upon a 12-month marketing year and national price trigger.
- 12-month marketing year is:
corn and soybeans: Sept. 1 to Aug. 31 (year after crop produced)
wheat and other small grains: June 1 to May 31 (year after crop produced)
- Maximum CCP is calculated as follows:
Maximum CCP = Commodity Target Price National Loan Rate Direct
Payment
- CCP authorization is entirely up to the discretion of the Secretary of Agriculture.
CCP payment limit is $65,000 per entity per year.
Examples:
| Counter-Cyclical Payments |
| FOR EXAMPLE: |
|
|
| |
Corn |
Soybeans |
| National Target Price |
$2.60 |
$5.80 |
| Less National Loan Rate |
$1.98 |
$5.00 |
| Less Direct Payment |
$0.28 |
$0.44 |
Maximum CC Payment |
$0.34 |
$0.36 |
- Some CCP, Less Than Maximum:
| Counter-Cyclical Payments |
| |
Corn |
Soybeans |
| National Target Price |
$2.60 |
$5.80 |
| Less National Average Price |
$2.15 |
$5.25 |
| Less Direct Payment |
$0.28 |
$0.44 |
CC Payment |
$0.17 |
$0.11 |
| Counter-Cyclical Payments |
| |
Corn |
Soybeans |
| National Target Price |
$2.60 |
$5.80 |
| Less National Average Price |
$2.32 |
$5.36 |
| Less Direct Payment |
$0.28 |
$0.44 |
CC Payment |
$0.00 |
$0.00 |
Maximum CCP are:
| Crop |
2002-03 |
2004-07 |
| Corn |
$.34 |
$.40 |
| Soybeans |
$.36 |
$.36 |
| Wheat |
$.54 |
$.65 |
| Oats |
$.026 |
$.086 |
I. TIMING OF PAYMENTS
- Fall 2002:
- 2002 Final DP ($.019 corn, $.44 soybeans)
2002 First Advance CCP if earned (35% of maximum
CCP rate)
- Dec. 2002:
- 2003 Advance DP (50% of DP rate - $.14 corn, $.22 soybeans, $.26 wheat)
- Feb. 2003:
- 2002 Second Advance CCP if earned (35% of maximum
CCP rate)
- July 2003:
- 2002 Final Small Grain CCP if earned (30% of maximum
CCP rate)
- Fall 2003:
- 2002 Final Corn / Soybean CCP if earned (30% of
maximum CCP rate)
2003 Final DP (50% DP rate)
2003 First Advance CCP if earned (35% of maximum
CCP rate)
- Dec. 2003:
- 2004 Advance DP (50% of DP rate)
J. STRATEGY HINTS TO THINK ABOUT
Base Acre Considerations:
- Never give up corn base because it pays 2 2 _ times more than any
other base acres. Rarely would you give up corn base and only if overall the
farm made more dollars without the corn base which is unlikely.
- If you have a wheat base and you are establishing a soybean base, compare
the payment yields. If the wheat payment yield is at or above your soybean
payment yield, keep the wheat base because it will pay more than soybeans
and you do not have to plant it to receive DP or CCP (if earned).
Examples:
Wheat:
payment yield = 37 bushels
1 base acre x .85 x 37 bushels x $.52 = $16.35/base acre
Soybeans:
production records prove 48 bushels
48 bushels x .78 = 37 bushels payment yield
1 base acre x .85 x 37 bushels x $.44 = $13.84/base acre
- Always give up oats base because it pays only $.024 per bushel unless
you need it to establish alfalfa or some other good reason. Note: if, in addition
to the oat base, you have wheat base with a payment yield at or above your
soybean payment yield, keep the wheat base to establish alfalfa and give up
the oat base to soybean base if applicable.
- Remember: Acres planted to alfalfa, sweet corn, sugar beets, or canning
peas (without a history of being followed by soybeans) during 1998-2001 will
be subtracted from cropland acres eligible for base acres. This could limit
your ability to add soybean base acres.
- Planting a 100% corn / 100% soybean rotation will limit the number of eligible
soybean base acres to the total acres planted to covered commodity crops minus
2002 PFC base acres.
Example:
100 acres of cropland
50 acres corn base
Planted 100 acres corn in 1998 and 2000
Planted 100 acres soybeans in 1999 and 2001
Producer has eligible oilseeds of 50 acres
| 100% Corn, 100% Soybean Rotation Example |
| Total Cropland = 100 A |
Planted Acres |
| |
1998 |
1999 |
2000 |
2001 |
98-01 Ave. |
| Corn |
100 |
0 |
100 |
0 |
50 |
| Total Planted PFC Crops |
100 |
0 |
100 |
0 |
50
|
| |
|
|
|
|
|
| Soybeans |
0 |
100 |
0 |
100 |
50 |
| Totaled Planted Oilseeds |
0 |
100 |
0 |
100 |
50 |
| |
|
|
|
|
|
| Total Covered Crops |
100 |
100 |
100 |
100 |
100 |
| Minus 2002 PFC Acres |
50 |
50 |
50 |
50 |
50 |
| Eligible Oilseeds |
50 |
50 |
50 |
50 |
50 |
Total Covered Crops minus 2002 PFC acres equals eligible oilseeds
50 acres in 1999 plus 50 acres in 2001 = 100 acres ÷ 4 = 25 acres eligible
oilseeds
Yield Considerations:
- If you rented a farm for the first time in 2001, you will need to get the
production records from the previous operator for years 1998, 1999, and 2000.
- If you can not get them from the previous operator but the records are in
the FSA Office and they have time to retrieve them, you still need permission
from the landowner and previous operator to get / use the records.
- If you can not get the records, you will be forced to use 75% of the NASS
County Average Yield or plug yield.
Example:
Soybeans: 44 bushels NASS yield x .75 x .78 = 26 bushel payment yield
Corn: 157 bushels NASS yield x .75 = 118 bushel payment yield
- If you can prove only one years production for the 1998-01 period,
it will raise your average from 4 years of plug yields.
Example:
1) Only Plug Yields:
1998 1999 2000 2001
26 26 26 26 = 104 ÷ 4 = 26 bushel payment yield
2) One Year Proven (2001):
1998 1999 2000 2001
26 26 26 37 = 115 ÷ 4 = 29 bushel payment yield
Tract Detail Report / Bushel Production Allocation:
The FSA Office staff can issue what is called a Tract Detail Report. This
report can assist in bushel production allocation to tracts / farms.
Computer Payment Analysis:
- FSA has contracted with Texas A & M University and have developed a
computer program to analyze all 5 Base Options and calculate which option
would result in the most income. This is the official FSA calculator.
- The Texas A & M Analyzer can be reached in two ways. First, go directly
to the site at:
www.afpc.tamu.edu/models/bya/
The second method is to go to the Extension Farm Bill site and click on Base
Update Calculator:
www.extension.umn.edu/farmbill/
Six Helpful Steps In The DCP Signup Process:
Step 1: If you have not done so, plan to attend one
of the upcoming DCP informational meetings scheduled in your county or area.
Without the information presented at these meetings, you can not effectively
make the necessary decisions for DCP signup.
Step 2: If you have a farm number that for some reason
is going to be very difficult to obtain all owners signatures on required forms,
please contact your local FSA Office for options.
Step 3: You will need to complete a yield report for
at least soybeans if applicable and maybe all crops. (Option 1 requires no form,
Option 2, 3, & 5 may require soybeans and Options 4 may require all crops.)
The form is a FSA 658P and must be completed for each crop and by farm number.
Remember that if your farm number has had changes to acreage, you will need
to bring your yield information for that particular piece of ground as it applies
to acres in 2002.
Step 4: Landowners and operators will receive a base
options report for each farm number. Review your base options. You may select
any of the 5 choices. If you are still unsure of which option works for your
farm, plan to attend one of the informational meetings in your area. You may
also utilize the Texas A & M software to analyze your decisions. The website
address is www.afpc.tamu.edu/models/bya.
Step 5: Once you have your selections made and yield
information complete you are ready to start the signup process. Your FSA Office
staff will run the yield and options selections forms and will provide you with
copies for all the owners to sign. Cash rent slips and other pertinent forms
may be put together at this time.
Step 6: Once all your yield selection and base selection
forms are complete you are ready to sign up for the DCP annual contracts. You
will need to determine what month you want your 2003 advance direct payment,
and whether you wish to receive either advance for counter cyclical payments,
if earned. Advance Direct Payment for year 2003 may be issued any time after
December 1, 2002. For the 2002 program year, you may receive an additional Direct
Payment. However, if your base acres change due to your choice of options, you
may not earn this additional payment or you may need to pay back some of the
2002 program year advance already received.
K. PROFITABILITY IN THE 2002 FARM BILL
Profitability Points:
- The Farm Security and Rural Investment Act of 2002 (referred to as the 2002
Farm Bill) has additional funding compared to the 1996 Farm Bill however that
funding is directed to conservation programs in the bill, not to the commodity
payment programs.
- Rather than making Market Loss Assistance Payments and oil seed Payments,
USDA has changed to program format to include what is called Counter-Cyclical
Payments (CCP). These payments are much like the deficiency payments in the
1980 and early 1990 programs. If commodity prices are high no CCP, if prices
are low a portion of the CCP is earned. The payments are also stretched out
over a 12-month period well into the year after the crop is produced.
- Because of these two issues, there is no indication that 2002 Farm Bill
spending is sufficient to warrant increases in cash rental rates.
Profitability Calculations:
- A total of 4,234 actual farm records from producers
in 33 counties across southern Minnesota were studied for the year 1998-2001.
Current average yields were 151 bushels corn and
45 bushels soybeans. On average, the existing PFC payment yield for corn was
106 bushels. Average loan rates for the 33 counties were $1.81 for corn and
$4.88 for soybeans. Newly established soybean payment yield was 35 bushels
(45 bu. X .78 = 35 bu.). The average producer in the group has $263 per acre
investment in equipment.
- Calculation Assumptions:
- expense, rent, and labor numbers are an average of the actual numbers
reported by the 4,234 producers
- calculations are made on one base acre
- calculations are on rented land only
- producer sold crop at loan rate that is, price plus LDP
- miscellaneous income listed is crop insurance indemnity payments
- a 5% return on the $263 investment equals $13.14 per acre
- counter-cyclical payments are calculated at maximum rate
- Profitability with no base or yield update:
Profitability Analysis
Government Program Payment
(No Base / Yield Update) SW/SC/SE |
| Average Expenses / Acre |
CORN |
SOYBEANS |
| Direct / Overhead Expense |
$223.76 |
$136.18 |
| Rent / Acre |
97.05 |
96.19 |
| Labor / Acre |
27.76 |
22.85 |
| Return on Investment / Acre |
13.14 |
13.14 |
| Total Expenses / Acre |
$361.71 |
$268.36 |
| |
|
|
| Income / Acre |
|
|
| Loan Rate / Crop Sale |
$273.31 |
$219.60 |
| Misc. Income / Acre |
7.55 |
7.72 |
| Direct Payment |
25.23 |
13.09 |
| Counter-Cyclical Payment |
30.63 |
10.71 |
| Total Income / Acre |
$336.72 |
$251.12 |
| |
|
|
| Net Result (profit) |
- $24.99 |
- $17.24 |
The results is a negative net return per acre. If your rent or labor charge
is more than that listed ($97 per acre), the net return would be even more
negative. If the producer were able to market for more than loan rate, the
net return might be positive. Note: CCP are at
maximum rate. If they are less or go away, the net profit is much more negative.
- Profitability with no base or yield update:
Profitability Analysis
Government Program Payment
(No Base / Yield Update) SW/SC/SE |
| Average Expenses / Acre |
CORN |
SOYBEANS |
| Direct / Overhead Expense |
$223.76 |
$136.18 |
| Rent / Acre |
97.05 |
96.19 |
| Labor / Acre |
27.76 |
22.85 |
| Return on Investment / Acre |
13.14 |
13.14 |
| Total Expenses / Acre |
$361.71 |
$268.36 |
| |
|
|
| Income / Acre |
|
|
| Loan Rate / Crop Sale |
$273.31 |
$219.60 |
| Misc. Income / Acre |
7.55 |
7.72 |
| Direct Payment |
25.23 |
13.09 |
| Counter-Cyclical Payment |
40.75 |
12.85 |
| Total Income / Acre |
$346.84 |
$253.26 |
| |
|
|
| Net Result (profit) |
- $14.87 |
- $15.10 |
Results are again a negative net return per acre. As mentioned for the previous
calculation; rents, labor charge, market price, and CCP rate affect net profit.
Final Points:
- The 2002 Farm Bill does not warrant increases in cash farm rental rates
as shown by the examples, using actual farm records, even with maximum CCP
included, not profit is negative.
- If the producers rent is above $97 per acre, the net profit is even
more negative.
- The example showing the updated yield would imply more income. That may
not be the case for your farm so make the calculations and analysis using
the Texas A & M software.
L. PRODUCER ASSISTANCE
- Texas A & M Analyzer use the website listed earlier.
- U of M Extension Farm Bill Website use the website listed earlier.
- County Extension Offices - Each County Extension Office has a contact to
help answer farm bill questions and assist producers with access to, running,
and interpretation of the Texas A & M Analyzer.
- Nicollet County Extension Office - We have available a computer for producers
to use. We will also assist with answering questions and interpretation of
the Analyzer results. Suggest you phone ahead to make an appointment.
- USDA/Congress: Have made available a helpline on the farm bill for producers.
The number is 1-888-224-9043.


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Minnesota Extension.
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