Cover crop field

OFBF Podcast: Farm Bill programs, ‘top-up’ payments

The enrollment period is now open for the Agriculture Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs. But should you sign up your acres for these programs right away or wait? And what exactly are these “top-up” payments? Ohio Farm Bureau Director of Media Relations Ty Higgins visits with American Farm Bureau’s Chief Economist Dr. John Newton and Ohio State Ag Economist Ben Brown to find out more about the options farmers have.

 

Transcription

Ty Higgins The 2020 enrollment period for some farm bill programs is now open. USDA is reaching out to farmers with an interest in the Agriculture Risk Coverage or ARC and the Price Loss Coverage (PLC) programs, but should you sign up your acres for these programs right away or wait? This is the Ohio Farm Bureau podcast. I’m Ty Higgins, along with Dr. John Newton, American Farm Bureau Federation chief economist, and Ben Brown, assistant professor of professional practice in Ag Risk Management. Gentlemen, thank you very much for being with us. Dr. Newton, let’s start with you. Before we get into some of the strategies and the thought process about ARC and PLC, give us a quick refresher, if you would, about these two programs and what they do.

John Newton Well, ARC and PLC were both introduced in the 2014 Farm Bill. ARC is a revenue-based program that determines an Olympic moving average price and county yield that determines benchmark revenue. And you receive a program payment under ARC County. If your actual revenue, actual county revenue falls below that five year Olympic, moving average benchmark revenue guarantee payments under ARC are based on the farm’s base acres.

John Newton PLC is a price-based program which provides a deficiency payment to a producer when the marketing year average price falls below a reference price. The 2018 Farm Bill made some modifications to both of those programs and for the most part, they remain mostly the same as what they did in prior years.

Ty Higgins Ben the end date for signing up for these 2020 programs isn’t until June 30th. So a wide window and a lot of time to consider the options. Is this a decision that should be made sooner or later?

Ben Brown Well, so maybe one clarification real quick. So the 2019 and 2020 decision will be made together. The same election, if you will. And the 2019 decision has been made by March 15th. The enrollment for 2020 allows some flexibility if some farm ownership or farm characteristics change and you can go back in and make that enrollment. We’re now in a period where we’re in October and you can enroll for both periods and elect at the same time. And so, we hope producers will just go ahead and enroll for 2020. And if they do make some changes before June of 2020, that’s an option to them as well. But we definitely want to emphasize that March 15th date to make sure that they get in for 2019. If you if you miss the March 15th date, you lose your option. If a 2019 payment is made and then your election defaults back to what you had in the previous farm bill, which may or may not be what you want to do. So in this case, more information is always useful. And that’s true for a lot of things, for in some censes, you have programs that when you enroll earlier, you can start getting the benefit a little bit earlier. Today, Agriculture Risk Coverage and the Price Loss Coverage program payments are still made in October of the following marketing or after the marketing year is closed. So whether you enroll now or whether you wait till February, for instance, your payments if triggered or your risk management benefit won’t come until October of 2020. So there is no strong incentive to enroll earlier. There are a couple, if you will. But, I think given where we had crops and weather at 2019 in terms of just general conditions, it’s at least beneficial to to wait till we get through harvest to get an idea of where county yields might be. But then also some of these national marketing year prices get a little more information into the data set.

Ty Higgins So Dr. Newton, between ARC and PLC, which program has been more widely used and why?

John Newton Well, it really depends on the commodity that we’re talking about. If you look back at the 2014 Farm Bill, a majority of the corn and soybean acres enrolled in the ARC County program make a big reason for that. Going back to the educational effort that we did with Ohio State University when I was at University in Illinois, the Decision Tools Project. You knew that the benefits for ARC County in the first few years of the program were going to exceed that of PLC for corn and soybeans. So it’s pretty safe to say that ARC outperformed PLC on the corn and soybean side. Not so much for the wheat. I believe the program payments that are wheat were higher under the PLC for the ’14 Farm Bill because we saw some very low wheat prices in recent years. And then for some of the other commodities, maybe, you know, those that aren’t really grown in Ohio, but our southern brethren for peanuts, riche and now in this new farm bill, seed cotton, the PLC program was much more popular. Same with some of the minor oilseeds.

Ty Higgins Ben made a great point with these deadlines. So there are two deadlines to keep in mind for the 2019 crop year, March 15th for ARC and PLC. For the 2020, as we mentioned just a couple of minutes ago, that is the June 30th date. Both can be done at the same time by visiting your local FSA office. Dr. John Newton, American Farm Bureau Federation chief economist, and Ben Brown with the Ohio State University joins us. Let’s stay on the row crop side of things and talk about some disaster assistance for Ohio farmers following record flooding, historic delays in planting the farm disaster assistance package passed earlier this year included more than $3 billion in funding to help farmers recover after these and other natural disasters. Notable for provision of the disaster package provides additional financial assistance called “top up” payments to farmers unable to plant a crop this year. And Ben, with everything that’s gone on in 2019, it’s easy to confuse some assistance details and programs with others. What exactly are these “top up” payments and who qualifies for them and who doesn’t?

Ben Brown Yeah, you make a great point. With everything going on, you can get exhausted with everything and all the information and everything you need to keep up with. In terms of these” top up” payments. This is really a clarification from the disaster bill that was passed in then signed by the president back in June. And then we saw the implementation program of it. We had no idea. There was a huge range of what the possibilities were and what was potentially authorized in terms of getting a program rolled out.

Ben Brown So this is just really some clarification. I think the nice part about all of this is that the producers are not going to really have to do anything to it to get this” top up” payment taken care of. It should automatically go through their risk management or crop insurance agent, and that money should come out. But the idea behind it was that for those producers that had to take prevent plant because of weather conditions, they were at a limit and the mercy of Mother Nature and weren’t able to benefit from some of the other challenges, I shouldn’t even say challenges. But there were programs that were helping in other areas of the sector. If you didn’t have a crop, you aren’t able to get some of those benefits. And so this “top up” payment was really to help level the playing field from that standpoint. We had no idea at planting or even really during most of the growing season what was going to be the outcome of all of this. And so it is nice to see that these “top up” payments, but to define what the “top up” payment actually is, is it’s going to be 15% of your crop insurance prevent plant indemnity. The indemnity, not the guarantee, for producers that had the Harvest Price Option. It will be 10% for those producers that do not have the harvest price option. So that is that is what the program is. It should happen automatically. And I credit USDA for doing something and working across agencies like this to help producers at a time when there’s a lot of stuff going on taking some of that responsibility off.

Ty Higgins There are some farmers that won’t be getting this, though.

Ben Brown Oh, absolutely. Yes. So, yeah, these are prevent plant “top up” payments. And there are other components of this disaster bill. And I’ll defer to Dr. Newton to kind of talk a little bit about the WHIP plus program that was a part of this as well. But there was, you know, to qualify for it, for that, you had to be in areas that were declared disaster counties or you had to prove they you had enough evidence that made you as an individual, qualified for a disaster even if you weren’t a disaster county. And so those are some of the limitations. If producers have questions, I encourage them to reach out their Farm Service Agency just to kind of ask about  their qualification eligibility moving forward.

Ty Higgins It’s hard to believe, but all 88 counties have been declared disaster areas in Ohio in 2019, just unprecedented. Dr. Newton kind of put this into numbers and you put this on paper for us, because when farmers hear 10 or 15% top up payments that some of them think, well, 10 or 15% on top of what? So can you spell it out for us how it actually works on paper?

John Newton Well, I think, Ben pointed out, it’s gonna be 10 to 15% of your prevent plant indemnity. So what’s going to drive higher payments to farmers across the country is really going to be their yield and their coverage level on their crop insurance. So anyone that had buy up levels of crop insurance or they’re in counties with a higher APH are going see higher top up payments. I believe for corn, for example, the weighted average top up payment somewhere in the neighborhood of $20 to 30 per acre, maybe close to $50 an acre in parts of the Corn Belt, Illinois, Iowa. Soybeans, similar around $20-25 an acre is a weighted average top up payment. And again, that’s going to be higher in parts of the Corn Belt, where farmers typically have higher coverage level elections, higher utilizations of the harvest price option, as well as higher APHs. And so when you look at all the numbers, I’ve crunched the numbers with RMA data, I think we’re looking at close to a billion dollars in top up payments across corn and soybeans. But it should be noted that any crop that was prevented from being planted is eligible for the top up payments. So with 20 million acres of prevent plant across the country, a lot of folks are going to be eligible to receive top up benefits.

Ty Higgins Dr. John Newton is the chief economist with the American Farm Bureau Federation. Ben Brown, assistant professor of professional practice in Ag Risk Management with The Ohio State University. Before I let you two go, I want to talk about some available help for dairy farmers. The dairy industry and farmers earn more than $300 million from the Dairy Margin Protection Program, or DMC, in 2019 so far. Producers are encouraged to take advantage of this very important risk management tool for 2020 before the Dec. 13th deadline. That’s when that sign-up period ends. Ben Brown, how does DMC work?

Ben Brown Yeah, it’s a margin-based program where we look at the difference between the milk price, all milk price per hundredweight and then a calculated feed cost. And you can think of it in terms of an insurance where producers get the opportunity to buy elected insurance coverage, at different coverage levels that then allow it to protect against higher, lower margin rates. One of the things that the 2018 Farm Bill did was it allowed for higher margin coverage rates to provide a little bit more cash on the top end. And we did see those programs definitely help here in 2019. And so when we when we think about this going forward, a lot of producers had the option, excuse me all producers had the option to sign up for a five-year total coverage, get a discount, 25% discount if they were to do that. And we saw a good majority or a good percentage of it do it and sign up for that five year option. So for some people, they’re not going to have to make that coverage election. They’ve just got to, you know, make sure they get all their bills and everything paid related to the program. For others, we do now have that enrollment period open after 2020 and they can start making decisions about coverage level, election, moving or even if they want to participate for that 2020 season.

Ty Higgins So been tough sledding for the dairy industry. You know, I was in a farm in northeast Ohio in a county, and the farmer told me before I left, you know, that one thing I didn’t tell you is I’m the last dairy farm in the county. That’s hard to believe there’s any last dairy farm in any county in the Buckeye State, but that’s kind of where the industry has gone over the past four years. Dr. Newton, is there any glimmer of hope for the dairy industry that has been struggling with low milk prices for quite a while now?

John Newton Well Ty, I’ll tell you. I cut my teeth working on dairy at Ohio State University with Dr. Cam Thraen and continue back a little bit on what been talked about with DMC. I think when you go into 2020, folks need to need to run the numbers. They need to look at what the expected margin is going to be for 2020. They need to look at the premium rates. We’re moving from a long environmental milk supply to one that’s a little bit shorter, not only in the United States, but globally. So I think milk prices are moving higher in 2020 at the same time. We’ve seen feed prices move substantially lower than where they were during the planting season. We had the historic delays. So, you know, DMC. It’s like insurance. But folks need to remember it’s not insurance. The premiums are fixed. I would run the numbers, make sure it pluses out for you. But it’s fairly inexpensive as a risk management tool. You know, 11 cents or 15 cents for the 950 coverage option. Pretty safe purchase for folks. But again, run the numbers. I would also encourage them to run the numbers on Dairy Revenue Protection drp.com, that’s a daily insurance product developed by the Farm Bureau that’s available through crop insurance. And so if milk prices do continue to move higher, you can use the DMC as well as DRP to try to protect your bottom line. You also have WHIP payments under the dairy program for milk that had to be dumped and then dairy farmers are also eligible for trade assistance payments. I’d estimate that close to a billion dollars in direct payments have been paid out to dairy farmers the last two years between NPP, DMC, WHIP payments.

Ty Higgins It is a busy season for Mr. Brown. He’s going be traveling the state meeting season. You told me starts next week and then you’re going to be from here and there and everywhere. So what is going be the focus for you as you visit with farmers across Ohio to end this year and start a new tune in 2020?

Ben Brown  Yeah, and I would say my colleagues and I enjoy going out and visiting with producers all across the Buckeye State. It’s what I love most about my job. And so we’re excited about it. Ask us in March when we’re on the back end of this dragging and a little bit.

Ben Brown But, you know, it is  fun. It’s a real and tangible. And you get to meet with real individuals. And it’s really rewarding. But, you know, when we go out and we’ve got a couple of rounds of different stakeholders that we meet with, our first one that we tend to always start with is our ag lenders groups starting to talk about a little bit the farm financial conditions moving into 2020, but then also kind of what their members are starting to think about and face as they’re making decisions for the following year or even future year. So we’ll start there. But then when we get into our producer meetings, where we’re talking directly with producers and working with them, it’s anything from farm financial planning and management to grain marketing and market analysis. Dr. Newton talked a little bit about dairy pricing. We throw that in there as well from time to time in areas where there is still some dairies in the county, preferably more than one. But we do have a range of products and we feel like we’re really delivering something of value to the producers in the state. This year, we’ll have the farm bill implementation for ARC and PLC for both ’19 and ’20. So we’ll be doing meetings to help producers at least analyze their decisions. We feel like there’s a couple of things that producers need to think through in terms of these programs, rather than just looking at relative payments or the comparison of an ARC payment versus a PLC payment. We think there’s at least a decision, some considerations in this year since it is a two-year decision. Maybe that’ll change when we move to the annual elections. But, you know, we feel like there is some management that needs to be least considered within these programs. So we try to help with that and encourage producers in that area too. It is an exciting time. It’s fun. And we get asked a lot of questions that we don’t necessarily know the answer to, but it makes us better for the next meeting. So we appreciate all the folks that show up.

Ty Higgins It’s hard to keep track of you on the road, but it’s pretty easy to keep track of both of you on Twitter. You both have some valuable information on there. Pretty much every single day. So before I let you go, Ben. Give me your Twitter handle.

Ben Brown That’s a good question. I think it’s been benbrownosu, but I need to check this, Ty. I’m not 100%.

Ty Higgins Dr. Newton while he’s checking his…

John Newton Mine is @New10_agecon. Yeah, I’m all over Twitter. A lot of the stuff that we’re working on we do put out there for our members across country, keep them as informed as possible, either through Twitter or the Farm Bureau website, fb.org/marketintel.

Ty Higgins Ok, Ben Brown, where can we find you?

Ben Brown It’s @benbrownosu. No special capitalizations just benbrownosu.

Ty Higgins Dr. John Newton, he is the chief economist at the American Farm Bureau Federation. Ben Brown, assistant professor of professional practice and Ag Risk Management at Ohio State University, thank you both. Hey, tell Ben he forgot the T (laughter).

Ben Brown The capital T. I am sorry. That is my mistake. Thank you, though, Ty. We appreciate it.

Ty Higgins For the Ohio Farm Bureau. I’m Ty Higgins. We’ll see you down the road.