For most farmers and agribusiness people the 2014 is very confusing. As more and more folks try to learn about all the decisions needed to be made, the first you need to know is DON’T PANIC. You shouldn’t panic because there is plenty of time before any critical deadlines regarding the 2014 Farm Bill (except for cotton transition payment which has already passed). Most folks are starting to worry about what they should do or which program they should enroll in. My recommendation would be to finish out this year first and worry about the new farm programs in late December or early January. There are several reasons why.
1) Your decision to reallocate base acres and/or update program yields is not due until Feb. 27, 2015. This may seem like a relatively easy task but it is actually very complex. The yield update allows you to update yields (to be used in either ARC or PLC) based on crop history from 2009-2012. Years in which a crop is not planted do not count against yield (if no peanuts planted in 2009, then a 0 will not be put in year 2009, it will be omitted.) In Georgia, most people will probably want to update their yields as 2002 was the last yield update in any Farm Bill and yields have definitely gone up since then. Reallocating base is not as simple. Total base acres for a farm cannot increase, but can be reallocated among crops planted in 2009-2012. Years a crop was not planted do count against your base numbers (if no peanuts planted in 2009, then a 0 gets averaged in for year 2009). This may be something you would like to start thinking about now, but without sitting down and looking at each farm individually, it will be really hard to figure out how you should allocate your base. Also cotton base acres are now called generic base acres. Generic base acres cannot be reallocated to other base acres but are designated yearly depending on what is planted. For example, if you have 500 acres of cotton base, then now you have 500 acres of generic base. When you go to FSA to reallocate base and/or update yield you will specify what program crops you might plant from 2015-2018 on that generic base. Each year your generic base will shift depending on what you plant, and those acres of generic base are only paid on planted acres. Your other base acres work in the same manner as with other farm bills, meaning payments are made purely on base acres and not planted acres. Therefore this becomes extremely confusing between farms and cannot be figured out over coffee, you must sit down and work this out on paper.
2) You have until March 31, 2015 before you need to elect ARC or PLC program. Again, time is not pressing on this issue. Actually I think it is better to wait until February to really start looking hard at ARC and PLC. Both ARC and PLC are triggered by prices and revenue declines. With prices continuing to decline in the last couple of months, each program looks different depending on the prices at the time. No one has a crystal ball to know what prices are, so the safest move would be to wait until closer to the deadline to choose your program. More on this in part 2.
3) You won’t sign any FSA contracts until April 2015. Once you enroll in either ARC or PLC you will not actually sign a contract with FSA until April 2015.
4) STAX and SCO are not that confusing! I’ve heard multiple times over the last 5 or 6 months about how confusing the new STAX and SCO programs are. Well, don’t panic because lots of people think that these programs are confusing but they really are not. More on this topic in a later blog, but please note that STAX/SCO work very similar to regular crop insurance except that they are shallow loss programs and cover a band of revenue. This means that they are triggered at a smaller loss of revenue and cover a “band” of revenue (for STAX 20% coverage band from 90% down to 70% of expected revenue). Again, I will dedicated a whole blog to this later. STAX/SCO can be purchased at the same time you purchase other crop insurance, so don’t panic now as most folks buy insurance until after the new year.
In closing I want to reiterate that there is no need to panic right now. There is plenty of time to sit down over the winter and figure these things out. I think most folks are getting anxious because of the complexity of the 2014 Farm Bill. This is true as the last several farm bills just required a producer to go into FSA and tell them how many acres of each crop (excluding the ACRE program from the ’08 Farm Bill; not many southerners enrolled in it though). Now each farm will have to be looked at individually to see which program works best for it. As I’ve written before, there are numerous tools for farmers to use to help make this decision. Visit our homepage and click one of the icons on the right side to view the online decision tool of your choice.