Editor’s note: Brad Watkins and Bobby Coats are professors in the University of Arkansas Division of Agriculture
The 2014 farm bill offers producers several different choices and requires many decisions to be made by landowners and producers. Having many choices sometimes involves confusion, and this particular farm bill is the most complex yet.
One area of confusion for many producers is planting requirements for program payments. In short, some producers are wondering if they need to plant a particular program crop to obtain program payments. The answer to this question depends on which programs or products the producer’s crops are enrolling in.
Farm programs and products are administered by two different United States Department of Agriculture agencies: (1) the Farm Service Agency, and (2) the Risk Management Agency. Planting requirements differ based on the programs or products administered by each agency.
FSA administers commodity programs such as the Price Loss Coverage program (PLC) and the two Agricultural Risk Coverage programs (ARC-CO for county level revenue protection and ARC-IC for farm level revenue protection). FSA also is responsible for administration of payments on generic base acres (formerly upland cotton base acres).
Payments based on base acres – PLC and ARC-CO
Program payments for the PLC and ARC-CO programs are made on base acres rather than planted acres. Producers do not have to plant the covered program crop to receive triggered payments. For example, a rice producer with rice base acres could plant all rice acres to another crop such as corn or soybeans and still receive rice program payments under ARC-CO or PLC programs if such payments are triggered. Thus, the rice producer in this example can plant other crops based on market signals and is not tied to planting only rice to receive program payments.
Exceptions to the rule – generic base acres and ARC-IC:
Upland cotton is not considered a covered commodity for PLC or ARC programs under the 2014 farm bill. Upland cotton base acres are now classified as generic base acres. These generic base acres may be planted to any PLC/ARC covered commodity, and any triggered payments made will be based on the FSA program (ARC-CO or PLC) chosen for each planted crop. Generic base acre planting decisions may be made on a year-to-year basis.
The ARC-IC program is a kind of hybrid. When triggered, per-acre ARC-IC payments are paid on 65 percent of total base acres for the farm. However, per-acre ARC-IC payments are triggered when actual per-acre revenue for the farm falls below the farm’s benchmark per-acre revenue. Both revenue numbers (benchmark and actual) are weighted by the number of acres planted to each covered commodity on the farm. Thus, ARC-IC payments depend on both the acres planted to each covered commodity on the farm and the total number of base acres across covered commodities for the farm.
Payments based on planted acres – RMA-administered products:
The RMA administers crop insurance products such as Catastrophic Risk Protection (CAT), Yield Protection (YP), Revenue Protection (RP), the Supplemental Coverage Option (SCO), and the Stacked Income Protection Plan (STAX).
The SCO became available in the 2014 farm bill and provides additional county or area coverage for a portion of the producer’s underlying crop insurance policy deductible. The SCO is available in 2015 for most crops and locations and will be available for crops enrolled in the PLC program as well as for crops not enrolled in any commodity programs. Crops enrolled in the ARC will not be eligible for SCO coverage.
The STAX product is offered to cotton producers in the 2014 farm bill. It is an area revenue product that provides up to 20 percent coverage (between 90 and 70 percent) of expected area revenue in 5 percent increments.
Any triggered payments (indemnities) for the above mentioned insurance products, including both the SCO and STAX, are based on planted acres, and the decision to enroll in any of these insurance products is made by producers on a year-to-year basis.
In summary, payments for FSA-administered programs such as the PLC and ARC-CO are made on base acres rather than planted acres. Generic base acres planted to a covered commodity will be eligible for FSA-administered program payments. ARC-IC payments are based on both base acres and planted acres.
Payments (or indemnities) for RMA-administered products (crop insurance products including SCO and STAX) are based on planted acres, and enrollment decisions for these types of products are made on a year-to-year basis.