Last night the 2014 Farm Bill review took place in West Lafayette, Indiana to a crowd of nearly 400 farmers, FSA agents and agriculture professionals. As the years of direct payments to farmers have come to an end, a new and more complex safety net has been created to help farmers in time of duress while simultaneously putting a ‘dent’ in the Federal deficit.
The new farm bill and its 959 pages is a difficult read at best, fortunately for farmers in Indiana, Farm Credit Mid-America is helping weed through the muck to educate farmers on deadlines and decisions that have a real impact on their operations – continuing to raise the bar as an industry leader.
Dubbed ARC (Ag Risk Coverage) and PLC (Price Loss Coverage) the two new programs in the farm bill have created quite the stir among the farming community. Designed to help farmers producing a variety of covered commodities across the nation, these programs seek to address the fundamental challenges that exist in the market – low prices, low yields and low revenues. As more and more agricultural economists talk about risk management, ARC and PLC are meant to be a tool in the farming tool box that reduce risk and give farmers a choice in how they are protected by the USDA. Given the complex nature of the Farm Bill and the formulas for calculating payments, the crowd heard from a variety of industry professionals including Kyle Cline, policy advisor for national government relation for Indiana Farm Bureau, Farm Credit Mid-America professionals and Dr. Chris Hurt, renowned agricultural economist from Purdue University.
While the entire room appreciated what the Indiana Farm Bureau provides in terms of a voice in Washington, the message from Kyle was clear, Agriculture is a minority voice on capital hill. Changes in the farm bill means it’s time for every farmer to make a choice in how they run their operations and it’s a crucial time to be heard.
According to Cline, “only 25 members of Congress claim agriculture as a previous occupation” and while he remained optimistic about the future of the Farm Bill, he cautioned the crowd that now is the time for the voices of the agriculture community to stand up. “Speak with your congressmen, senators and build relationships so your voice continues to be heard.”
On the schedule to help farmers understand how ARC and PLC are calculated was the Executive Director of the Farm Service Agency, Julia Wickard. To the crowds slight surprise, Julia was unable to attend as she was in Washington D.C. working on behalf of each and every farmer in the room – a challenging and noble job. In her stead, Farm Credit Mid-America took the stage and addressed the crowd on how payments are calculated using the complex formulas of ARC and PLC. Agricultural economics is not my strong suit and judging from the looks of frustration, and the whispers of more red tape that resonated through the crowd, getting assigned some math homework wasn’t at the top of the to-do list for those in attendance. Making decisions on updates, elections and enrollment into the new USDA Farm Bill programs requires research, time and effort – this process may be easy for some farming operations and quite challenging for others. Thank you to Farm Credit for educating and leading the way.
Taking the complex nature of the Farm Bill and turning it into something tangible and easily understood is part art and part science, that job fell on the plate of Dr. Chris Hurt of Purdue Agricultural Economics, who knocked it out of the park.
Dr. Hurt got down to business, tackling a question seemingly on everyone’s mind ‘What do you recommend we do?’
5 Things to Consider as a Farmer & Producer:
- Updating your yields if they are higher
- Build your base with crops that offer the strongest returns
- Consider the ARC-County program first
- Ask yourself, “What conditions beat ARC-County?”
- In bear conditions, PLC may make more sense
Long story short, Dr. Hurt and other agricultural economists from around the country predict that the majority of farming operations will choose to enroll in the ARC-CO program as the yield data is based on a county by county basis. The ARC-CO program does not require a crop to be planted for payments to trigger, whereas its counterpart the ARC-IC does.
With a difference in payments of 85% vs. 65% of base acres, it may take yields that are “31% higher than the county average for ARC-IC to make sense,” said Dr. Hurt. Those with irrigated farmland may be more likely to fall into the ARC-IC program election.
In conclusion, these meetings are great learning experience and we encourage you to attend. Consulting with your FSA agent, farm manager, accountant and banker are a vital step to your understanding of the financial impact of the Farm Bill – our advice is to continue to have conversations about farm risk management with those you trust the most to determine what is best for you and your farming operation.
About the Author
Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms, recreational property and development land in West Central Indiana. Born and raised on a local farm, his commentary on issues that are important to the farming and real estate community can be found at www.PrairieFarmland.com/blog