ECON 337:
Agricultural Marketing
Lee Schulz
Assistant Professor
[email protected]
Chad Hart
Associate Professor
[email protected]
Old vs. New Farm Bill
 Direct Payments (DP)
 Countercyclical
Payments (CCP)
 Marketing Loans (LDP)
 Revenue
Payments (ACRE)
 Countercyclical
Payments (PLC)
 Marketing Loans (LDP)
 Revenue
Payments (ARC)
New programs, but they have strong similarities to
previous programs
What Stayed the Same?
Loan Rates
Set by law
Two Waves
First wave: Choice on base acreage and
yield updating
Probably occurs late summer timeframe
Second wave: Choice on farm bill programs
Probably late fall/early winter
Harvest the crop and farm bill at the same time
Base Acres
Keep current base acres or do a one-time
“reallocation” of base acres
Reallocation allowed to covered
commodities planted between 2009 and
Reallocation in proportion to the ratio of 4-yr
average plantings/prevented plantings
Total number of base acres limited to total
of existing base acres
Payment Yields
Keep current CCP payment yield or do a
one-time “update” of payment yield on a
commodity-by-commodity basis
Update: 90% of 2008-2012 yield per
planted acre on the farm
If the farm yield is below 75% of the 20082012 average county yield, then the farm
yield is replaced by 75% of the 2008-2012
average county yield
County yield: planted or harvested?
Payment Acres
For PLC and ARC at the county level, 85%
of base acres
For ARC at the individual level, 65% of base
Producer Choice
Have one-time choice between:
PLC or ARC (can pick by commodity)
If ARC is chosen, pick between county and
individual coverage
If individual coverage is chosen, must be taken for
all covered commodities on the farm
2014-2018 crop years
Reference Prices
Old Target Prices
Reference Prices
PLC instead of CCP
Price-based support program
Reference prices establish targets
Works like CCP
Payment rate = Max(0, Reference price –
Max(MYA price, Loan rate))
Payment = Payment rate * Payment yield *
Payment acres
PLC vs. CCP and DP
ARC instead of ACRE
Revenue-based support program
Revenues based on 5-year Olympic
average yields and prices
Yields and prices have cups (County Tyields and reference prices)
Triggers at county or individual farm level,
instead of state level
ARC Payment Rate
Payment rate = Max(0,
Min(10% of Benchmark revenue,
Actual crop revenue – ARC guarantee))
So the basic payment structure is the same
as it was under ACRE
Revenue Programs
5-yr OA county yield * 5-yr OA
MYA price
Sum across crops of [5-yr OA
(farm yield * MYA price) *crop
Actual crop
County yield * Max(MYA price or
loan rate)
Sum across crops of [Farm
production * Max(MYA price or
loan rate)] / Total planted acres
of all covered crops
86% of benchmark
86% of benchmark
Think of ARC-County as crop-by-crop
Think of ARC-Individual as whole farm
 Conservation Reserve Program
 27.5 million acres in 2014
 26 million acres in 2015
 25 million acres in 2016
 24 million acres in 2017 and 2018
 Grassland enrollment capped at 2 million
Supplemental Coverage Option (SCO)
An additional policy to cover “shallow losses”
Shallow loss = part of the deductible on the
producer’s underlying crop insurance policy
SCO has a county-level payment trigger
Indemnities are paid when the county
experiences losses greater than 14%
Premium subsidy: 65%
Starts in 2015
Can’t have ARC and SCO together
Class web site:
Have a great weekend.
See you in lab on Tuesday.

Farm Bill