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New farm bill offers new farm program choices

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Producers who choose the ARC program option will have another choice to make, whether to have benchmark revenues and potential ARC payments determined by county-level yields or individual farm-level yields. There are several aspects to consider regarding this decision.

County ARC program payments will occur for a given crop when the actual county-level calculated revenue (county yield x 12-month MYA price) is below 86% of the county benchmark revenue for that year. The maximum county ARC coverage is 10%, from 76% to 86%, of the county benchmark revenue for a crop. The county benchmark revenue for any crop in a given year is the 5-year Olympic average county yield times the 5-year MYA crop price for the preceding five years. The MYA crop prices are based on the 12-month national average crop prices for each of the five years, with the high and low price removed. In any year that the MYA price is lower than the new reference price for a crop, the reference price will be used for calculations for that year. County ARC payments will be paid on 85% of eligible crop base acres. (Corn Example: 100 base acres x $50/acre payment x .85 = $4,250 payment.)

The individual ARC program combines all crops on a farm unit to calculate payments, rather than the crop-specific approach used in the county ARC program. The individual ARC benchmarks are based on 5-year Olympic average farm-level yields for each crop times the Olympic average 5-year MYA price for each crop. The total revenue is the sum of all crops, which is then factored by the average percentage of acres for each crop on that farm, in order to arrive at a final benchmark revenue for that farm unit. The actual revenue for a crop in a given year is a weighted average of the actual farm-level crop yield times the 12-month MYA price. Similar to the county ARC program, payments are made when the actual weighted farm-level revenue is between 76% and 86% of the benchmark revenue, a maximum of 10%. Individual ARC payments are made on 65% of the eligible crop base acres on a farm unit. (Example: 100 acres x $60/acre payment x .65 = $3,900 payment.)

The basic commodity farm programs in the new farm bill will be implemented by USDA for the 2014 crop year, so farm operators will have some big decisions to make in the coming months. Since the farm program decisions are for multiple years, land owners will also be required to sign-off on farm program choices on cash rental farms, and will need to be part of the decision making process. Farm program sign-up will likely not begin until sometime this summer at local Farm Service Agency (FSA) offices, and will probably continue into the Fall months. This should allow farm operators and land owners plenty of time to research and evaluate the various options and alternatives that will be available under the new farm bill. Local FSA offices do not yet have the sign-up dates, or other official details on the new farm program options. 

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on Mar 14, 2014

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