Landowners need to be involved in 2014 Farm Bill decisions for their farms. In fact, two of the three farm bill decisions required must be made by landowners, rather than tenants. By Feb. 27, 2015, landowners must make key decisions about updating payment yields and reallocation base acres. Current producers must choose between the price loss coverage (PLC) and agricultural risk coverage (ARC) programs by March 31, 2015. Landowners should be involved in all three decisions, though, since these choices can affect land values and future rental rates.
Landowners have two choices regarding their farm?Äôs payment yields. They can either update payment yields to 90 percent of average yields from 2008 to 2012 or keep current payment yields. Yields can be updated on a crop-by-crop basis. This decision is simple; landowners should select the highest yield for each program crop. For most farms, updating the payment yield will be the best choice.
Current payment yields either reflect average yields from 1998-2001 or from 1981-1985. Yields have increased significantly since both of those time periods. Payment yields will not be updated if the landowner does nothing. The biggest challenge for landowners will be getting written evidence that documents the yields for 2008 to 2012.
Landowners again have two choices: regarding base acre reallocation. They can either reallocate base acres based on program crops planted from 2009 to 2012, or retain current base acre allocation. Total base acres cannot be increased; existing base acres can only be reallocated. Reallocated acres are based on plantings from 2009 to 2012, versus the current base acres, which reflect plantings from either 1998-2001 or from 1981-1985.
The decision to reallocate base acres is not as straightforward as the decision to update yields. Landowners may want to consult with their renters before deciding whether to reallocate acres. To minimize risk, a landowner/producer may want to allocate base acres to match as closely as possible to what is typically planted on the farm. This will result in payments more closely corresponding to price and yield changes for the crops currently being produced.
The PLC/ARC decision is made by the current producer as of the date of signing up for the program. A producer is anyone with a share in the crop and who shares in the risk of producing it. Under cash rental arrangements, the renter will make this decision rather than the landowner. Landowners are considered producers in share rental arrangements, though. Once the election is made, the PLC-or-ARC choice stays with the farm until 2018, even if the tenant changes.
The PLC and ARC programs are designed to protect producers against different types of risk. PLC provides a payment to the producer if prices are below a pre-determined reference price; it helps producers mitigate the impact of low prices. ARC provides a payment if the current year?Äôs revenue, price multiplied by yield, is lower than the revenue during the previous five years; it is capped at
10 percent of the previous five-year average. It helps producers manage shallow revenue losses resulting from declining prices or yields.
Detailed fact sheets are available on each of these topics at http://z.umn.edu/cropfarmbill. National online decision aid tools help analyze these decisions in more depth and run various price scenarios. They are at http://fsa.usapas.com.
There are upcoming educational opportunities designed for landowners and farmers to help understand the 2014 Farm Bill. These educational sessions are presented by the University of Minnesota Extension and the USDA Farm Service Agency.
Sibley County: Arlington Community Center ?Äì Tuesday, Jan. 6, 8:30?Äì11 a.m.
Carver County: Cologne Community Center ?Äì Tuesday, Jan. 6, 9-11:30 a.m.
Renville County: Renville Community Center ?Äì Tuesday, Jan. 6, 1:30-4 p.m.
Meeker County: Litchfield Eagles Club ?Äì Wednesday, Jan. 14, 1-3:30 p.m.
Contact the Meeker County Extension Office at (320) 693-5275, for further details. An extensive list of sessions can be found at the following link: http://z.umn.edu/arcplcmeetings.