Farm Bill 2002

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:

  • DCP has the same planting flexibility as in the Freedom to Farm Program. Producers with a given covered commodity crop base do not have to plant that base in order to receive the DP or CCP (if earned).
  • DCP does restrict FAV planting. FAV include sweet corn, canning peas, and sugar beets (in our area). Base acres can not be planted to FAV crop.

    EXCEPTION: canning peas followed by soybeans in southern Minnesota. If a producer has a history of following peas with soybeans, the acres are exempt from the FAV rules.

    1. If a producer has a history of planting FAV crops (1991-95) and planted FAV crops in 2002, there will be an acre for acre reduction in payment if updating base acres increases base and results in FAV crops being planted on base acres
    2. If a producer does not have a history of planting FAV crops, planted FAV crops the first time in 2002, and makes a base update decision that results in FAV crops on base acres in 2002, there will be a payment reduction plus a penalty.
    3. Producers will have the option to select or choose the years they take as FAV history. The choice includes taking the 1991-95 period or the 1998-01 prior history. Check with your FSA Office.
    4. If a producer planted FAV crops 1998-01 (except canning peas followed by soybeans in southern Minnesota), the FAV acres are subtracted from planted acres to determine acres eligible for base acres. Planting FAV crops in 1998-01 can restrict the number of acres eligible for base acres and the number of soybean acres eligible for base acres.

      Example:

      • 150 acres of cropland
      • 75 acres of PFC corn base existing
      • Actual average planted: corn – 50 acres, soybeans – 50 acres, sweet corn – 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 the sweet corn acres are subtracted from the cropland acres, total acres eligible for base equals 100 acres. Then you must subtract existing PFC base acres (75 acres) which leaves only 25 acres eligible for soybean base even though an average of 50 acres of soybeans were planted.

    5. If a producer has a history of planting FAV crops, wants to continue to do so, makes a base acre decision that increases base so there are no free acres for FAV crops, the producer can take an acre for acre reduction in base to free up acres for FAV crops. Once done, this is a permanent reduction.
    6. If a producer gets a fabulous deal on a FAV crop contract in any year of the DCP program, wants to take advantage of the contract, the producer can elect to stay out of the DCP program for that year (annual sign-up) on that farm and raise the FAV crop with no penalty.
    7. Under the DCP, farms can be split apart or what is called “reconstitution”. If a landowner (producer) does this, there may be base acre changes. These changes could result in fewer eligible base acres and if FAV crops are involved, this could create a FAV violation. Check with your FSA Office before doing this.

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 producer’s 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 operator’s 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 farm’s 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 farm’s 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:
    1. retain current PFC program yields (while updating base acres).
    2. update yields by adding to the PFC program yield, 70% of the difference between 1998-2001 average yield and the PFC direct yield.
    3. 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:
      1. keep current PFC program yield = 123 bushels
      2. 70% calculation
        123 bushels + [(145 bu. – 123 bu.) x .70] = 138 bushels
      3. 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 producer’s 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:

  • Maximum CCP:
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
  • No CCP:
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 year’s 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 producer’s 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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