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Farmers need to plan for changes in new farm bill

News Release Distributed 07/17/14

BATON ROUGE, La. – Although signup is months away, agricultural landowners and producers need to begin planning for decisions they will have to make because of the new farm bill, according to LSU AgCenter economist Mike Salassi.

The Agricultural Act of 2014, which was signed into law in February, authorizes U.S. nutrition and agriculture programs through 2018 and updates how support payments are calculated. A change in the new law is the end of direct payment subsidies, which farmers received regardless of yield, price or acreage.

Instead, farmers will have to choose between the agriculture risk coverage (ARC) and price loss coverage (PLC) income support programs. ARC is based on revenue while PLC is based on price, making the choice between the two hinge largely on which crops a farmer grows.

"Rice producers are more concerned about price risk," Salassi said. "Because rice is irrigated, the yields don't vary from year to year as much as crops like corn or soybeans, which would prefer the ARC program. Most of the rice growers are going to pick the PLC program."

Under PLC, farmers are paid if the price of rice drops below $14 per hundredweight.

Growers will have the opportunity to update their program yield for PLC, Salassi said. The updated program yield will be 90 percent of the average rice farm yield for the 2008-2012 crop years. Most program yields for rice were set in the 1980s, he said, and yields have improved significantly since then.

The ARC program could help corn and soybean growers because it addresses both yield and price risks, Salassi said. Payments are based on income per acre, so if yields drop, "that could trigger some payments," he said.

Farmers will also be able to reallocate their base acres based on their 2009-2012 planting history. Base acres, which are used to calculate both ARC and PLC payments, are the average number of acres of a crop grown over a four-year period.

"If a farm had 80 acres of rice base and 20 acres of wheat base, but in the past four years they've planted all rice, they could reallocate it," Salassi said.

A supplemental coverage option, which pays for part of the deductible of regular crop insurance, is available to farms in the PLC program. The program will begin in 2015 for corn, grain sorghum, rice, soybeans and wheat in selected Louisiana parishes.

Cotton is no longer included because of trade distortion concerns, but a new Stacked Income Protection Plan, or STAX, for those growers is in the works, Salassi said.

The deadline for signing up for the 2014 crop will be sometime in early 2015. The exact date will depend on how soon regulations for the new farm bill are written.

Olivia McClure

Last Updated: 7/17/2014 10:01:54 AM

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