program

Program Payments and Base Updating: 

Program Payments and Base Updating John D. Anderson Steve Martin Charlie Forrest MSU Ag Econ

Three Payment Programs: 

Three Payment Programs Direct Payments Same as AMTA or fixed-decoupled Counter-cyclical New program establishing target prices for program crops LDPs/MLGs Marketing Assistance Loan program virtually unchanged from previous bills

An important note . . . : 

An important note . . . Direct and CC payments paid on base acres and yields—NOT on current production. won’t be getting $0.72 for the cotton you pick LDPs paid on actual current production

Direct Payments: 

Direct Payments Direct Payment = Payment Rate x (0.85 x Contract Acres x Payment Yield) Payment Limit = $40,000/person Cotton Example Base acres = 500 acres Base yield = 780 lbs DP = $0.0667 x (0.85 x 500 x 780) = $22,111

Direct Payment Rates: 

Direct Payment Rates

Direct Payment Timing: 

Direct Payment Timing For 2002 Payment ‘as soon as practicable’ Payment equal to calculated direct payment less 2002 PFC payments already made For 2003-04 Up to 50% of payment beginning Dec 1 of calendar year prior to harvest Remainder of payment in Oct of calendar year of harvest

Counter-Cyclical Payments: 

Counter-Cyclical Payments Based on target prices established for program crops Payment Limit = $65,000/person Paid on base, not on current production CCP = [Target Price – Direct Rate – (higher of loan rate or national 12-month season average price)] x 0.85 x Contract Acreage x Payment Yield

Target Prices: 

Target Prices

CCP Example: 

CCP Example CCP = ($0.724 - $0.667 - $0.52) x 0.85 x 500 x 780 = $45,514 Note that this is the maximum possible CCP assumes that 12-month national average price is below the loan rate.

Counter-Cyclical Timing: 

Counter-Cyclical Timing Payments ‘made as soon as practicable after the end of the 12 month marketing year.’ May 30 – wheat, barley, oats Aug 30 – corn, sorghum, soybeans July 30 – cotton, rice Partial payments may be made Up to 35% in Oct Up to 70% in Feb Final payment at end of marketing year

Marketing Loan Assistance Program: 

Marketing Loan Assistance Program LDPs/MLGs function just like in FAIR Act Loan rates for most commodities have been adjusted Payment Limit = $75,000 3-entity rule still applies Use of generic commodity certificates authorized

Loan Rates: 

Loan Rates

Base Acreage & Yield Updating: 

Base Acreage & Yield Updating Direct and CC payments paid on base acres and yields Current contract acres and payment yields based on 1981-85 plantings and yields FSRIA permits updating to the 1998 – 2001 period Base may exceed farm acres by amount of double-cropped acres

Key Updating Details: 

Key Updating Details Updated yields only apply to CC payment. Current payment yield will still apply to direct payments. Cannot update yields without updating acreage.

Key Updating Details: 

Key Updating Details May choose to add oilseed base without updating anything else Soybean contract acres will be 1998-01 average planted and considered planted acres. Soybean program yield will be established as 78% of 1998-01 average yield.

Key Updating Details: 

Key Updating Details Two yield updating options: 70% of change in yields from current base to 1998-01 average 93.5% of 1998-01 average yields For any 1998-01 year, may use higher of farm yield or 75% of county average yield Must update all crops using the same method

Key Updating Details: 

Key Updating Details Must make base updating decision within 180 days of enactment of FSRIA Failure to notify FSA of your updating decision results in retention of current bases with the addition of oilseed acres and yields

Slide18: 

Base Acres and Payment Yield Decision ( Applies to Fixed & Counter-cyclical payments) Retain PFC base & add oilseed acreage Update base acres using 1998-2001 average planted and prevented acreage Payment yield updated by 70% of the difference between the 1998-2001 average yields & the PFC yield (75% of the county average yield used in 1998-2001 average when actual yields are lower). Payment yield equals 93.5% of the 1998-2001 average yields & the PFC yield (75% of the county average yield used in 1998-2001 average when actual yields are lower). Oilseed acreage is the 1998-2001 average planted and prevented acreage. Oilseed yield is the 1998-2001 average farm yield multiplied by 0.78. Fixed Direct Payment Yields Counter-cyclical Payment Yields No yield update is allowed.. Counter-cyclical payment yields will be the same as for Fixed Direct Payments. No yield update is allowed for Fixed Direct Payments on PFC crops. No yield update is allowed for Fixed Direct Payments on PFC crops.                                 Base Acres Keep current payment yields

Cotton Updating & Payment Example: 

Cotton Updating & Payment Example

Updating & Payment Option 1: 

Updating & Payment Option 1

Slide21: 

Updating & Payment Option 2 x = x =

Slide22: 

Updating & Payment Option 3

Slide23: 

Updating & Payment Option 4

Summary of Options: 

Summary of Options