LSU AgCenter economist Mike Salassi discusses farm bill changes at an educational meeting on Oct. 15 in Crowley. Photo by Olivia McClure/LSU AgCenter

LSU AgCenter economist Kurt Guidry discusses farm bill changes at an educational meeting on Oct. 15 in Crowley. Photo by Olivia McClure/LSU AgCenter

News Release Distributed 10/16/14

CROWLEY, La. – Farmers soon will have to make several choices that will stand for the life of the new farm bill, which will expire in 2018. They must enroll in one of two new income support programs and decide whether to update acreage and yield information that affects payments they receive from the U.S. Department of Agriculture Farm Service Agency.

Louisiana FSA personnel and LSU AgCenter economists told farmers about the upcoming changes on Oct. 15 at an educational meeting in Crowley. Several other meetings will take place in October and November at locations throughout the state.

The Agricultural Act of 2014, which was signed into law in February after a two-year delay, eliminates direct payment subsidies that farmers had received regardless of yield, price or acreage. They must now pick either price loss coverage (PLC) or agriculture risk coverage (ARC).

PLC payments are triggered when prices dip below a set level, while ARC payments are made if revenue falls below a guaranteed level, said FSA district director Steve Dooley. Program election will begin on Nov. 17 and end on March 31.

Two options within the ARC program are ARC-CO, which uses parish-level data, and ARC-IC, which uses individual farm data. ARC-CO kicks in when parish revenues drop below a guarantee that is recalculated every year using actual yields and the higher of the market year average and national loan rate.

“Even if you perform very well, if the county does poorly, that triggers payments,” Dooley said.

Yields do not figure in with PLC, which is the default program in this farm bill, Dooley said. PLC payments are made if crop prices fall below reference prices that Congress set for 21 covered commodities. For example, the reference price for rice is $14 per hundredweight; corn is $3.70 per bushel, and soybeans is $8.40 per bushel.

“PLC is generally going to pay better for rice,” said AgCenter economist Mike Salassi. “With ARC, a good yield will wipe out payments even if the price is declining.”

Salassi said corn and soybean farmers were a driving force behind the creation of the ARC program. With corn prices dropping, however, PLC may end up being the better option because the support level is fixed, he said. Soybean farmers may still fare better under ARC, which recalculates the support level every year.

“However, producers will have to decide what program choice works best for their operation,” Salassi said.

PLC payments are not dependent on planting the commodity. Rather, they are based on 2009-2012 average planted acres of each crop that farmers report to FSA.

Farmers have until Feb. 27 to reallocate their base acres. Some farmers may benefit by retaining their current base acres while others should reallocate, said AgCenter research associate Michael Deliberto.

For example, if a farmer has 300 acres of rice base and 100 of wheat base but plants all 400 in rice, he could reallocate to “strengthen the rice base” and net higher support payments, Deliberto said. By keeping the 100 acres of wheat base, payments through ARC would provide less money for the whole farm.

This farm bill introduces a new concept of generic base acres, which can be planted to any of the 21 covered commodities. Cotton, however, is no longer covered, putting those farmers in a unique situation.

Cotton acres can be allocated as generic acres, but they still won’t be covered under ARC or PLC. Instead, a new Stacked Income Protection Plan, or STAX, is being developed just for cotton farmers. In the meantime, a temporary Cotton Transition Assistance Program will provide payments.

Farmers also must decide if they want to update program payment yields, which are only used in determining PLC payments. Dooley said if a producer’s yields fall below 75 percent of the parish-level yield, FSA substitutes the parish-level yield when calculating PLC payments.

All farmers should considering updating yields, even if they don’t participate in PLC, said AgCenter economist Kurt Guidry.

“Let’s say you’ve never grown grain sorghum and you have grain sorghum on generic base acres in 2016,” he said. “Those generic base acres become grain sorghum, but you don’t have a PLC yield established for it. What FSA’s going to have to do is use a parish average for PLC yields.”

If everyone in the parish updates their yields, that means better payments.

Guidry also told meeting attendees about tools that can aid in making farm bill decisions, including one developed by Texas A&M. Users can plug in data from their farm and get an idea of the implications of various choices.

Olivia McClure