Livestock producers tend to be an independent lot.&nbsp;&nbsp;We can identify – we both have livestock backgrounds.&nbsp;&nbsp;It’s not uncommon for us to hear that there’s really nothing in the farm bill – or in farm policy in general – for livestock producers.&nbsp;&nbsp;In fact, livestock producers often wear it as a badge of honor, arguing they get nothing from the federal government and would prefer the federal government just stay out of their way in return.&nbsp;&nbsp;The problem: that’s not really the case…at least not anymore.



While it’s true that the farm safety net historically has been focused on row crops – with dairy being a very notable exception – there has been a significant shift over the past 25 years. Below, we highlight four of the major changes.



<ul>
<li>Environmental Quality Incentives Program (EQIP).&nbsp;&nbsp;The 1996 Farm Bill initiated the EQIP program to provide cost share assistance to crop and livestock producers.&nbsp;&nbsp;Fifty percent of the funding available for technical assistance, cost-share payments, incentive payments, and education under EQIP was targeted at practices relating to livestock production.</li>
</ul>



<ul>
<li>Livestock Disaster Programs.&nbsp;&nbsp;The 2008 Farm Bill was the first to authorize the livestock disaster programs, including the Livestock Forage Program (LFP), the Livestock Indemnity Program (LIP), and the Emergency Assistance for Livestock, Honey Bees, and Farm-raised Fish Program (ELAP).&nbsp;&nbsp;Unfortunately, the 2008 Farm Bill authorization was short-lived, and all three programs expired in 2011.&nbsp;&nbsp;The 2014 Farm Bill resurrected all three programs, providing permanent baseline funding going forward.&nbsp;&nbsp;As of February 2023, the Congressional Budget Office (CBO) estimates that those 3 programs will provide $5.6 billion in assistance to livestock producers over the next 10 years.</li>
</ul>



<ul>
<li>Disaster Preparedness.&nbsp;&nbsp;The 2018 Farm Bill maintained the livestock disaster programs and provided $300 million over 10 years for animal disease prevention and management programs in addition to authorizing supplemental funding through the appropriations process.&nbsp;&nbsp;The bill established a vaccine bank to respond to the accidental or intentional introduction of animal diseases like foot‐and‐mouth disease (FMD) and established the National Animal Disease Preparedness and Response Program to leverage local, state, and national resources to prevent and respond to animal disease threats.</li>
</ul>



<ul>
<li>Federal Crop Insurance.&nbsp;&nbsp;Historically, USDA’s Risk Management Agency (RMA) was limited to spending $20 million per fiscal year on livestock insurance policies.&nbsp;&nbsp;The Bipartisan Budget Act of 2018 eliminated the restriction.&nbsp;&nbsp;Since then, the liability insured by livestock policies has increased from just over $500 million in 2018 to more than $21 billion in 2022 – a 4,000% increase in just 5 years (Figure 1).&nbsp;&nbsp;There are also new insurance policies on the horizon, including one that would provide revenue coverage for weaned calves for cow-calf producers.</li>
</ul>



Bottom line: livestock producers have a vested interest in the farm bill.&nbsp;&nbsp;With that said, despite the rapid growth in liability insured by livestock policies, it still represents a small share of the value of livestock production in the United States and there are significant opportunities for expansion going forward.&nbsp;&nbsp;For policymakers, it’s likely worth exploring if the current infrastructure – including things like RMA’s Livestock Price Reinsurance Agreement (LPRA) – are up to the task.



Figure 1.&nbsp;&nbsp;Liability Insured by Livestock Policy Type and Year


<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="3135" height="1595" src="https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4.png" alt="" class="wp-image-38197" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4.png 3135w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4-1024x521.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4-768x391.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4-1536x781.png 1536w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/03/3.11.4-2048x1042.png 2048w" sizes="(max-width: 3135px) 100vw, 3135px" /><figcaption class="wp-element-caption">Source:&nbsp;&nbsp;Authors’ calculations of USDA-RMA Summary of Business data.</figcaption></figure></div>


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Fischer, Bart L., and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2023/03/08/whats-in-the-farm-bill-for-livestock-producers/">What’s in the Farm Bill for Livestock Producers?</a>&#8221; Southern Ag Today 3(11.4). March 16, 2023. <a href="http://whats-in-the-farm-bill-for-livestock-producers" rel="nofollow">Permalink</a>

What’s in the Farm Bill for Livestock Producers?

Producers have until March 15th&nbsp;to make their sign-up elections (agriculture risk coverage (ARC) or price loss coverage (PLC)) with FSA and enroll for the 2023 crop year. Based on the number of calls we have been receiving, relatively high but volatile commodity prices for many of the covered commodities have at least a few producers confused as to what would be the best choice to make. Unlike in many previous years, based on price forecasts for the 2023 marketing year average prices, there appears to be very little chance that the safety net for many of the major Southern commodities will trigger support based on price alone. Except for peanuts, marketing year average prices are projected to be well above reference prices used to calculate PLC payments. In other words, if the price projections come true, there would be no payments for the 2023 crop (Table 1).&nbsp;&nbsp;



This is the reason for many of the calls we receive. The caller usually says they are going to select ARC since it covers both price and yield. While this makes sense, it just isn’t that easy. With respect to price, ARC and PLC are counter-cyclical safety net programs. They were developed to provide little to no support when marketing year average prices are high, with support increasing as prices move lower year to year. Since ARC is a revenue program, there is protection against both low prices and low yields or some combination of low prices and low yields.&nbsp;



It is easy to see that a projected $6.80/bushel price for corn for the 2023 crop, for example, is well above the $3.70/bushel reference price, which means there is almost no way a PLC payment would be triggered for corn. But the same holds for ARC as well. Under ARC, the 2023 benchmark price for corn is $3.98/bushel. This is calculated taking the last 5 years of prices from the 2017 marketing year to the 2021 marketing year and calculating an Olympic average (dropping the high ($6.00) and low ($3.70) and averaging the remaining three years ($3.70, $3.70 and $4.53). Using yield data for Autauga County, Alabama, indicates a 2023 benchmark yield for corn of 174.70 bushels. That means the benchmark revenue is $3.98 * 174.70 or $695.31 per acre. Multiplying by 0.86 gets you to a guaranteed revenue for 2023 of $597.97. Without a yield loss, 2023 corn marketing year average prices would have to fall below $3.42/bushel for ARC to trigger payments for Autauga County, Alabama, corn producers. Using a 25% yield reduction (131 bushels/acre instead of 174.7) would require a corn price lower than $4.56/bushel to trigger an ARC payment for this year. That is still well below the $6.80/bushel that is projected for this crop year.&nbsp;



So, what should you do?  We aren’t in the business of telling you exactly what to do because frankly we don’t know what will end up being the best choice. We do have a decision aid available at <a href="http://www.afpc.tamu.edu/">www.afpc.tamu.edu</a> where you can input your info, and it will show you expected payments under as many different price scenarios as you want to look at. We also have students who will input your information for you and call you to discuss results. All you need to do is call (979) 845-5913 and ask for decision aid help.   



With ARC and PLC unlikely to trigger, your crop insurance decisions take on even more importance. You may also want to look at tools like the Supplemental Coverage Option (SCO) or the new Enhanced Coverage Option (ECO), both of which provide area-wide coverage for part of the deductible not covered by your underlying policy. Importantly, you must choose between ARC and SCO – you can’t have both.



Hopefully we have given you something to think about as you consider your signup decisions.&nbsp;&nbsp;We wish you luck, and don’t hesitate to call for assistance.&nbsp;



Table 1.&nbsp;&nbsp;USDA 2023 Effective Reference Prices and Marketing Year Average Price Forecasts for Select Southern Commodities.&nbsp;



<figure class="wp-block-table aligncenter is-style-stripes"><table><tbody><tr><td>Commodity</td><td class="has-text-align-center" data-align="center">2023 Effective Reference Price</td><td class="has-text-align-center" data-align="center">2023 Marketing Year Average Price</td></tr><tr><td>Wheat ($/bu)</td><td class="has-text-align-center" data-align="center">$5.50</td><td class="has-text-align-center" data-align="center">$9.20</td></tr><tr><td>Peanuts ($/lb)</td><td class="has-text-align-center" data-align="center">$0.2675</td><td class="has-text-align-center" data-align="center">$0.265</td></tr><tr><td>Corn ($/bu)</td><td class="has-text-align-center" data-align="center">$3.70</td><td class="has-text-align-center" data-align="center">$6.80</td></tr><tr><td>Grain Sorghum ($/bu)</td><td class="has-text-align-center" data-align="center">$3.95</td><td class="has-text-align-center" data-align="center">$6.65</td></tr><tr><td>Soybeans ($/bu)</td><td class="has-text-align-center" data-align="center">$8.40</td><td class="has-text-align-center" data-align="center">$14.00</td></tr><tr><td>Seed Cotton ($/lb)</td><td class="has-text-align-center" data-align="center">$0.3670</td><td class="has-text-align-center" data-align="center">$0.4645</td></tr><tr><td>Long Grain Rice ($/cwt)</td><td class="has-text-align-center" data-align="center">$14.00</td><td class="has-text-align-center" data-align="center">$16.50</td></tr></tbody></table></figure>

ARC/PLC Sign-up Deadline Just Days Away

Yesterday, the Congressional Budget Office (CBO)&nbsp;<a href="https://www.cbo.gov/publication/58848">released</a>&nbsp;its February 2023 budget projections for a number of Federal programs, including farm-related programs and the Supplemental Nutrition Assistance Program (SNAP).&nbsp;&nbsp;All eyes are on the farm bill, which expires on September 30, 2023, and this latest update gives us an initial glimpse of the budget baseline that will be available to the farm bill authors this year.&nbsp;&nbsp;



CBO typically updates their budget projections early in the year, and yesterday’s release follows that pattern.&nbsp;&nbsp;Following the release of the President’s budget in February, CBO will often release a revised outlook in March.&nbsp;&nbsp;If the President’s budget is delayed, the updated outlook from CBO can stretch into late Spring or early summer – for example, in 2021, the update was released in July.&nbsp;&nbsp;Why does this matter?&nbsp;&nbsp;It is generally the update following the release of the President’s budget that is the baseline against which the cost of legislative proposals is “scored” throughout the year.&nbsp;&nbsp;In other words, while the current release will get a lot of attention, CBO may choose to update their projections again this spring; if they do, that baseline likely will be used for writing the farm bill.&nbsp;&nbsp;CBO will also typically release – at least to policymakers – their baseline projections by farm bill title.



In the meantime, there is much to glean from the information made publicly available in yesterday’s release.&nbsp;&nbsp;As we noted in a Southern Ag Today&nbsp;<a href="https://southernagtoday.org/2022/07/the-trillion-dollar-farm-bill/">article</a>&nbsp;last summer, if we look back to the April 2018 baseline (the scoring baseline for the 2018 Farm Bill), the spending projections for CCC Price Support and Related Activities, Conservation, SNAP, and Crop Insurance accounted for $865.9 billion (Table 1), or 99.85% of the $867.2 billion in projected total baseline outlays for the farm bill.&nbsp;&nbsp;Applying the same methodology to CBO’s most recent February 2023 baseline update, those four categories are projected to spend approximately $1.45 trillion over the next 10 years (Table 1).&nbsp;&nbsp;The significant increase is due to an 81.6% increase in projected spending on SNAP, with SNAP now projected to account for $1.2 trillion, or 83.3% of the total farm bill baseline.&nbsp;&nbsp;By contrast, the income support provisions for agricultural producers that make up the largest component of Title 1 – the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs – are projected to spend $48.6 billion over the next 10 years, or just 3.4% of the total farm bill baseline. Following are a few initial observations from Table 1:



<ul>
<li>While some may look to the $71.8 billion in CCC Price Support &amp; Related Activities (a $7.5 billion increase) as additional resources with which to write the farm bill, it’s not that simple.&nbsp;&nbsp;In January 2020, CBO began including $100 million per year in the baseline as an estimate of the amount they project the Secretary of Agriculture to spend using discretionary authority available under the CCC.&nbsp;&nbsp;In May 2022, CBO increased that amount to $1 billion per year (or $10 billion over 10 years).&nbsp;&nbsp;In other words, absent the amount that CBO includes in the baseline as a guess of what they expect the Secretary to spend using discretionary CCC authority, the baseline for CCC Price Support &amp; Related Activities would be going down.&nbsp;&nbsp;</li>
</ul>



<ul>
<li>These estimates would also likely be considerably lower if one were using USDA’s latest market projections which were also&nbsp;<a href="https://www.ers.usda.gov/webdocs/outlooks/105853/oce-2023-01.pdf?v=1403.9">released</a>&nbsp;yesterday.&nbsp;&nbsp;For example, USDA projects cotton prices in the long run that are 16% higher than CBO.&nbsp;&nbsp;If USDA’s projections were to materialize, ARC and PLC spending would be considerably less and the safety net would still be doing nothing to address the high cost of inputs.</li>
</ul>



<ul>
<li>The increase in conservation spending is almost entirely due to the infusion provided in the Inflation Reduction Act (IRA) of 2022, although CBO has revised downward the amount they expect USDA to spend on these efforts (by roughly $1.5 billion).</li>
</ul>



<ul>
<li>On crop insurance, the increase in projected spending is generally attributable to expanded product availability over the last 5 years along with projected increases in liability coverage due to higher market prices.</li>
</ul>



Table 1. Congressional Budget Office (CBO) 10-Year Outlays in Million$



<figure class="wp-block-table aligncenter is-style-stripes has-small-font-size"><table class="has-white-background-color has-background has-fixed-layout"><tbody><tr><td>&nbsp;</td><td class="has-text-align-center" data-align="center">April 2018</td><td class="has-text-align-center" data-align="center">February 2023</td><td class="has-text-align-center" data-align="center">Change ($)</td><td class="has-text-align-center" data-align="center">Change (%)</td></tr><tr><td>CCC Price Support &amp; Related Activities&nbsp;1/</td><td class="has-text-align-center" data-align="center">64,305</td><td class="has-text-align-center" data-align="center">71,806</td><td class="has-text-align-center" data-align="center">+7,501</td><td class="has-text-align-center" data-align="center">+11.7%</td></tr><tr><td>Conservation&nbsp;2/</td><td class="has-text-align-center" data-align="center">59,689</td><td class="has-text-align-center" data-align="center">72,610</td><td class="has-text-align-center" data-align="center">+12,921</td><td class="has-text-align-center" data-align="center">+21.6%</td></tr><tr><td>SNAP&nbsp;3/</td><td class="has-text-align-center" data-align="center">663,828</td><td class="has-text-align-center" data-align="center">1,205,440</td><td class="has-text-align-center" data-align="center">+541,612</td><td class="has-text-align-center" data-align="center">+81.6%</td></tr><tr><td>Crop Insurance</td><td class="has-text-align-center" data-align="center">78,037</td><td class="has-text-align-center" data-align="center">96,974</td><td class="has-text-align-center" data-align="center">+18,937</td><td class="has-text-align-center" data-align="center">+24.3%</td></tr><tr><td>Total</td><td class="has-text-align-center" data-align="center">865,859</td><td class="has-text-align-center" data-align="center">1,446,830</td><td class="has-text-align-center" data-align="center">+580,971</td><td class="has-text-align-center" data-align="center">+67.1%</td></tr></tbody></table><figcaption class="wp-element-caption">1/ This includes an estimated $10 billion in “Other Administrative CCC Spending” which accounts for CBO’s estimate of the amount that the Secretary may spend from the CCC using his/her discretionary authority. 2/ The total for the February 2023 update includes $15.1 billion in estimated outlays for conservation spending authorized in the Inflation Reduction Act (IRA) of 2022.&nbsp;&nbsp;3/ Revised economic assumptions and administrative changes to the Thrifty Food Plan (TFP) resulted in the Office of Management and Budget (OMB) projecting an additional $254 billion in SNAP outlays from FY2022-31 (<a href="https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf</a>).</figcaption></figure>



Bottom line:&nbsp;the already relatively small 10-year baseline for writing Title 1 may ultimately be an overestimate, especially when comparing with USDA’s economic outlook.&nbsp;&nbsp;Even now, it pales in comparison to the almost $88 billion in unbudgeted ad hoc assistance that was provided to agricultural producers over the past 5 years alone.&nbsp;&nbsp;If Congress plans to move away from ad hoc assistance to a more sustainable risk management framework for producers, additional resources will be needed for the farm safety net.







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Author: Bart L. Fischer



Research Assistant Professor and Co-Director Agricultural &amp; Food Policy Center at Texas A&amp;M University



Author: Joe Outlaw



Professor and Extension Economist 



Co-Director Agricultural &amp; Food Policy Center at Texas A&amp;M University



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Fischer, Bart, and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2023/02/cbos-february-2023-baseline-update/">CBO&#8217;s February 2023 Baseline Update.</a>&#8221; Southern Ag Today 3(7.4). February 16, 2023. <a href="http://cbos-february-2023-baseline-update">Permalink</a>



Photo by Karolina Grabowska: https://www.pexels.com/photo/image-of-old-building-on-american-banknote-4386157/

CBO’s February 2023 Baseline Update

During Extension and commodity group meetings this winter, we have been asked over and over what will be in the next farm bill.&nbsp;&nbsp;After answering with “it depends” – based on money and interest in bi-partisanship on Capitol Hill – we then go on to give our thoughts on what we think will be in the next farm bill.&nbsp;&nbsp;At that point, the audience is generally happy…and ready to see if they won a door prize…until we ask them the question: what is it that you want or need in the next farm bill?



The expressions on the audiences’ faces generally remind us of the pained looks on the faces of the kids in the Scripts National Spelling Bee competition.&nbsp;&nbsp;Google it…it’s intense.&nbsp;&nbsp;After some reflection, below is a summary of what we tend to hear.



There is just so much more risk in farming now than there has been in the past.&nbsp;&nbsp;Producers need as much help defraying as much of the risk as they can get.&nbsp;&nbsp;Title I programs like ARC and PLC have not helped much at all during the current run up in most input costs.&nbsp;&nbsp;Neither are triggering since market prices are too high to generate payments (despite the fact that those market prices are still not high enough to cover costs in some cases).&nbsp;&nbsp;Overall, there is a lot of interest in raising the reference prices that are used in both the ARC and PLC payment calculations.



On the other hand, producers almost universally acknowledge that crop insurance has provided significant protection as the revenue guarantees have risen along with market prices (since they are based on futures prices for most covered commodities).&nbsp;&nbsp;Additionally, there are a wide variety of products for producers to choose from to tailor their coverage to their operations such as different coverage types (yield or revenue) across different units (basic, optional or enterprise).&nbsp;&nbsp;Producers can also purchase supplemental, area-wide coverage such as the Stacked Income Protection Plan (STAX), the Supplemental Coverage Option (SCO), or the Enhanced Coverage Option (ECO).&nbsp;&nbsp;&nbsp;Some producers will say that the cost of the supplemental policies (and the complicated array of choices) makes them less attractive options.&nbsp;&nbsp;At the same time, producers are not looking forward to sustained price declines (that everyone knows are coming eventually) that will lower price guarantees and reduce the effectiveness of insurance as a safety net – especially if production costs have not declined.&nbsp;



A few producers will say that the safety net needs to be bankable – a term that generally refers to lenders allowing prospective safety net payments to be added to loan packages which would aid in showing their operating loan request is viable.&nbsp;&nbsp;While the ad hoc assistance over the last several years has been vital – particularly against the backdrop of Title 1 providing less support – that assistance arrives long after the disaster has come and gone.&nbsp;&nbsp;If and when the markets begin to fall, bankability of the safety net will be even more important.&nbsp;



Overall, producers are quick to point out how much they appreciate the safety net support they receive; however, some are looking for Congress to be innovative in providing programs that are bankable and more aligned with the amount of risk exposure modern farms have today.



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Outlaw, Joe and Bart Fischer. &#8220;<a href="https://southernagtoday.org/2023/01/what-do-producers-want-need-in-a-safety-net/">What Do Producers Want/Need in a Safety Net?</a>&#8221; Southern Ag Today 3(5.4). February 2, 2023. <a href="http://what-do-producers-want-need-in-a-safety-net">Permalink</a>

What Do Producers Want/Need in a Safety Net?

The&nbsp;Consolidated Appropriations Act, 2023&nbsp;(P.L. 117-328) was signed into law by President Biden on December 29, 2022.&nbsp;&nbsp;Among other things, the $1.7 trillion bill funds the federal government for fiscal year 2023.&nbsp;&nbsp;The package also included $250 million in support for rice producers, a key priority of Senator John Boozman (R-AR), Ranking Member of the Senate Committee on Agriculture, Nutrition, and Forestry.



The Agricultural &amp; Food Policy Center at Texas A&amp;M University maintains almost 100 representative farms across 30 different states which serve as a basis on which to conduct policy analysis at the request of Congress.&nbsp;&nbsp;In a&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/716/BP-22-06.pdf">May 2022 report</a>&nbsp;requested by Sen. Boozman, we highlighted that the 15 representative rice farms maintained by AFPC faced the largest drop in net cash farm income in 2022 of all 64 representative crop farms maintained by AFPC – a reduction of $880,000 per farm or $442 per acre.



In the case of rice, AFPC has consistently reported that rice growers have faced the harshest financial outlook over the last several years.&nbsp;&nbsp;Rice producers, in particular, received very little support from ad hoc aid packages like the Market Facilitation Program (MFP) and the Coronavirus Food Assistance Program (CFAP).&nbsp;&nbsp;These problems are compounded by trading partners like India whose minimum support prices and input subsidies cause significant harm to U.S. rice producers, contributing to a nearly 40-year low in U.S. rice exports this year.&nbsp;&nbsp;Relatively flat prices and high input costs further exacerbated an already tenuous situation for U.S. rice producers in 2022.



The $250 million – all of which USDA is required to spend – is for one-time payments for U.S. rice producers for the 2022 crop.&nbsp;&nbsp;The payment is based on (1) a rate of not less than 2 cents per pound multiplied by (2) the producer’s actual production history (i.e., crop insurance APH) multiplied by (3) all of the producer’s planted (or prevented planted) rice acres in 2022.&nbsp;&nbsp;A separate payment limit applies, consistent with the limit imposed for WHIP+ (i.e., $250,000 if 75 percent or more of the average adjusted gross income of the person or legal entity is average adjusted gross&nbsp;farm&nbsp;income).



Importantly, nothing is final until USDA announces the official details of the program.  In the meantime, our colleagues at the University of Arkansas have put together a helpful <a href="https://www.uaex.uada.edu/publications/pdf/FSA68.pdf">FAQ document</a> that answers several key questions. 



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Fischer, Bart, and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2023/01/support-for-rice-producers-in-the-fiscal-year-2023-omnibus/">Support for Rice Producers in the Fiscal Year 2023 Omnibus.</a>&#8221; Southern Ag Today 3(3.4). January 19, 2023. <a href="http://support-for-rice-producers-in-the-fiscal-year-2023-omnibus">Permalink</a>

Support for Rice Producers in the Fiscal Year 2023 Omnibus

One of the questions we have been getting the most as agricultural policy economists is whether we are going to get a 2023 Farm Bill on time.&nbsp;&nbsp;While there are dedicated teams of ag committee members and staff in the House of Representatives and Senate who are going to do their best to get a farm bill done on time, history is not on their side.&nbsp;&nbsp;This article isn’t going to focus on the probability or odds of getting a bill in 2023 but rather – how much would it matter if it doesn’t get done?&nbsp;



Figure 1 contains our estimate of the mandatory spending associated with programs that will expire on September 30, 2023.&nbsp;&nbsp;It may come as a surprise to many of our readers that only about 5% of the funding is actually facing the threat of expiration.&nbsp;&nbsp;Why?&nbsp;&nbsp;The Supplemental Nutrition Assistance Program (SNAP) is what’s known as an appropriated entitlement.&nbsp;&nbsp;In other words, if the farm bill expires, the appropriators will continue to fund SNAP.&nbsp;&nbsp;Beyond that, crop insurance is permanently authorized by legislation outside of the farm bill.&nbsp;&nbsp;In addition, the Inflation Reduction Act (IRA) recently reauthorized spending for the major conservation programs.&nbsp;&nbsp;Further, annual appropriations bills have provided significant funding for ad hoc disaster programs over the past four years for programs such as WHIP, WHIP+, and ERP.



So – what does this information mean?&nbsp;&nbsp;It means that the impending expiration of the 2018 Farm Bill means very little for the vast majority (i.e., 95%) of the mandatory spending in the farm bill.&nbsp;&nbsp;It also means that unless policymakers are able to significantly enhance Title I commodity programs, this is little reason to go through the process that invariably will include damaging amendments to farm policy.&nbsp;&nbsp;While this still leaves a number of programs in limbo (particularly those without mandatory baseline spending),&nbsp;&nbsp;a simple extension of the 2018 Farm Bill would maintain the status quo.



Figure 1.&nbsp;&nbsp;Estimated mandatory spending in the 2018 Farm Bill that will expire on September 30, 2023.


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<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="558" src="https://ageconafpc.wpengine.com/wp-content/uploads/2023/01/3.01.4-1024x558.png" alt="" class="wp-image-37719" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2023/01/3.01.4-1024x558.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/01/3.01.4-768x419.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/01/3.01.4-1536x837.png 1536w, https://ageconafpc.wpengine.com/wp-content/uploads/2023/01/3.01.4-2048x1116.png 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>


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Outlaw, Joe, and Bart Fischer. &#8220;<a href="https://southernagtoday.org/2023/01/what-if-we-dont-get-a-farm-bill-in-2023/">What If We Don’t Get a Farm Bill in 2023</a>?&#8221; Southern Ag Today 3(1.4). January 5, 2023. <a href="http://what-if-we-dont-get-a-farm-bill-in-2023">Permalink</a>



Photograph by Mark Stebnicki

What If We Don’t Get a Farm Bill in 2023?

A&nbsp;<a href="https://southernagtoday.org/2022/12/what-is-the-expected-impact-of-high-commodity-prices-on-effective-reference-prices-for-covered-commodities/">recent article</a>&nbsp;in Southern Ag Today highlighted that increasing marketing year average prices over the past few years likely will lead to increasing “Effective Reference Prices” for many crops.&nbsp;&nbsp;The article further noted that if those increased Effective Reference Prices were realized, “then the cost of increasing reference prices for all commodities should be significantly lower when cost estimates are developed during farm bill discussions.”



The analysis in the earlier article was based on the Congressional Budget Office’s (CBO) May 2022 baseline projections.<a href="//D70D2E49-FAFF-4BEC-B715-88C55AAF5695#_ftn1">[1]</a>&nbsp;&nbsp;The biggest question at this point: where are commodity prices headed in the next CBO baseline?&nbsp;&nbsp;To help answer this question, we look to the U.S. Department of Agriculture’s (USDA) most recent long-term outlook released on November 7, 2022.<a href="//D70D2E49-FAFF-4BEC-B715-88C55AAF5695#_ftn2">[2]</a>



As noted in Table 1, commodity prices in USDA’s latest long-term price outlook have increased significantly relative to CBO’s May 2022 projections.&nbsp;&nbsp;Significant increases in the near term will bolster Effective Reference Prices, and generally speaking, those increases persist throughout the entire baseline period.&nbsp;&nbsp;For example, USDA is projecting corn prices to average $4.30/bu in 2032, a $0.50/bu increase over CBO’s $3.80/bu estimate for 2032 in May 2022.&nbsp;&nbsp;Figure 1 explores the same data as percentage increases.&nbsp;&nbsp;For example, the marketing year average prices for corn, cotton, and wheat are all expected to be at least 10 percent higher in 2032 than projected by CBO in May 2022.



Bottom line: the upcoming baseline projections will likely reinforce the point made in the earlier Southern Ag Today article, with higher prices continuing to reduce the cost estimates for raising reference prices in the next farm bill.



Table 1.&nbsp;&nbsp;Dollar Change in Marketing Year Average Price Projections, USDA November 2022 versus CBO May 2022.



<figure class="wp-block-table"><table><tbody><tr><td></td><td class="has-text-align-center" data-align="center">Units</td><td class="has-text-align-center" data-align="center">2023</td><td class="has-text-align-center" data-align="center">2024</td><td class="has-text-align-center" data-align="center">2025</td><td class="has-text-align-center" data-align="center">2026</td><td class="has-text-align-center" data-align="center">2027</td><td class="has-text-align-center" data-align="center">2028</td><td class="has-text-align-center" data-align="center">2029</td><td class="has-text-align-center" data-align="center">2030</td><td class="has-text-align-center" data-align="center">2031</td><td class="has-text-align-center" data-align="center">2032</td></tr><tr><td>Corn</td><td class="has-text-align-center" data-align="center">$/bu</td><td class="has-text-align-center" data-align="center">1.25</td><td class="has-text-align-center" data-align="center">0.80</td><td class="has-text-align-center" data-align="center">0.55</td><td class="has-text-align-center" data-align="center">0.45</td><td class="has-text-align-center" data-align="center">0.45</td><td class="has-text-align-center" data-align="center">0.35</td><td class="has-text-align-center" data-align="center">0.30</td><td class="has-text-align-center" data-align="center">0.35</td><td class="has-text-align-center" data-align="center">0.40</td><td class="has-text-align-center" data-align="center">0.50</td></tr><tr><td>Cotton</td><td class="has-text-align-center" data-align="center">$/lb</td><td class="has-text-align-center" data-align="center">0.06</td><td class="has-text-align-center" data-align="center">0.05</td><td class="has-text-align-center" data-align="center">0.04</td><td class="has-text-align-center" data-align="center">0.05</td><td class="has-text-align-center" data-align="center">0.06</td><td class="has-text-align-center" data-align="center">0.07</td><td class="has-text-align-center" data-align="center">0.09</td><td class="has-text-align-center" data-align="center">0.10</td><td class="has-text-align-center" data-align="center">0.12</td><td class="has-text-align-center" data-align="center">0.11</td></tr><tr><td>Soybeans</td><td class="has-text-align-center" data-align="center">$/bu</td><td class="has-text-align-center" data-align="center">2.50</td><td class="has-text-align-center" data-align="center">1.20</td><td class="has-text-align-center" data-align="center">0.75</td><td class="has-text-align-center" data-align="center">0.45</td><td class="has-text-align-center" data-align="center">0.25</td><td class="has-text-align-center" data-align="center">0.30</td><td class="has-text-align-center" data-align="center">0.30</td><td class="has-text-align-center" data-align="center">0.30</td><td class="has-text-align-center" data-align="center">0.30</td><td class="has-text-align-center" data-align="center">0.30</td></tr><tr><td>Wheat</td><td class="has-text-align-center" data-align="center">$/bu</td><td class="has-text-align-center" data-align="center">1.65</td><td class="has-text-align-center" data-align="center">1.60</td><td class="has-text-align-center" data-align="center">0.75</td><td class="has-text-align-center" data-align="center">0.45</td><td class="has-text-align-center" data-align="center">0.50</td><td class="has-text-align-center" data-align="center">0.50</td><td class="has-text-align-center" data-align="center">0.50</td><td class="has-text-align-center" data-align="center">0.55</td><td class="has-text-align-center" data-align="center">0.55</td><td class="has-text-align-center" data-align="center">0.60</td></tr></tbody></table></figure>







Figure 1.&nbsp;&nbsp;Percent Change in Marketing Year Average Price Projections, USDA November 2022 versus CBO May 2022.



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<a href="//D70D2E49-FAFF-4BEC-B715-88C55AAF5695#_ftnref1">[1]</a>&nbsp;<a href="https://www.cbo.gov/data/baseline-projections-selected-programs">https://www.cbo.gov/data/baseline-projections-selected-programs</a>



<a href="//D70D2E49-FAFF-4BEC-B715-88C55AAF5695#_ftnref2">[2]</a>&nbsp;<a href="https://www.usda.gov/oce/commodity-markets/baseline">https://www.usda.gov/oce/commodity-markets/baseline</a>



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Author: Bart Fischer 



Research Assistant Professor 



Co-Director Agricultural &amp; Food Policy Center at Texas A&amp;M University



Bart.Fischer@ag.tamu.edu



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Fischer, Bart. &#8220;<a href="https://southernagtoday.org/2022/12/where-are-commodity-prices-headed-in-the-next-cbo-baseline/">Where are Commodity Prices Headed in the next CBO Baseline?</a>&#8221; Southern Ag Today 2(52.4). December 22, 2022. <a href="http://where-are-commodity-prices-headed-in-the-next-cbo-baseline">Permalink</a>

Where are Commodity Prices Headed in the Next CBO Baseline?

Commodity reference prices are used in both the price loss coverage (PLC) and agriculture risk coverage (ARC) programs to calculate program benefits.&nbsp;&nbsp;For most commodities, reference prices have not increased since their establishment in the 2014 Farm Bill.&nbsp;&nbsp;One of the major farm bill changes farm groups would like to see in the next farm bill is an increase in reference prices to catch up with input price inflation.&nbsp;&nbsp;However, a feature added to the 2018 Farm Bill allows for reference prices to increase along with commodity prices.&nbsp;&nbsp;Since most commodity prices have increased over the past few years it is interesting to see whether reference prices are likely to increase.



Section 1101 of the 2018 Farm Bill (P.L. 115-334) allows for the “effective reference price” for a commodity to replace the statutory reference price if 85% of the previous five-year Olympic average of the national marketing year average price is greater than the statutory reference price (Schnepf).&nbsp;&nbsp;The “effective reference price” may increase to as much as 115% of the statutory reference price.&nbsp;



Table 1 contains the statutory reference prices and calculated commodity “effective reference prices” for 2023 through 2028 determined using historical prices and CBO May 2022 commodity price estimates.&nbsp;&nbsp;The statutory reference prices are blue.&nbsp;&nbsp;If the projected “effective reference prices” are green or red that means the commodity prices have risen enough to generate a higher “effective reference price”.&nbsp;&nbsp;If the calculated reference price is green it means the “effective reference price” is less than 115% of the statutory reference price.&nbsp;&nbsp;If the calculated reference price is red it means the “effective reference price” is greater than 115% of the statutory reference price and would be set at 115% of the statutory reference price.



Corn, soybeans, oats, grain sorghum, mustard seed, sunflower, safflower and large and small chickpeas could see an increase in “effective reference prices” over the next six years depending upon whether CBO’s price estimates are realized.&nbsp;&nbsp;While many commodities such as wheat have experienced significant price increases, prices have not increased enough to overcome only being able to use 85% of the Olympic average of the previous 5 years commodity prices.&nbsp;&nbsp;If the “effective reference prices” in Table 1 are realized then the cost of increasing reference prices for all commodities should be significantly lower when cost estimates are developed during farm bill discussions.&nbsp;



Table 1.&nbsp;&nbsp;Statutory Reference Prices and Calculated “Effective Reference Prices” Based Off of Historical and CBO Estimated Prices for Covered Commodities.


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References



Schnepf, R.&nbsp;&nbsp;“Farm Commodity Provisions in the&nbsp;2018 Farm Bill (P.L. 115-334), Congressional Research Service Report R45730,&nbsp;May 21, 2019.&nbsp;&nbsp;The report can be found at:&nbsp;<a href="https://www.everycrsreport.com/files/20190521_R45730_24831706457d3ed90c82fa471d93b778b7d33676.pdf">https://www.everycrsreport.com/files/20190521_R45730_24831706457d3ed90c82fa471d93b778b7d33676.pdf</a>



Congressional Budget Office (CBO).&nbsp;&nbsp;USDA Mandatory Farm Program Baseline, May 2022.&nbsp;&nbsp;The report can be found at:&nbsp;<a href="https://www.cbo.gov/system/files?file=2022-05/51317-2022-05-usda.pdf">https://www.cbo.gov/system/files?file=2022-05/51317-2022-05-usda.pdf</a>



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Author: Joe Outlaw Professor and Extension EconomistCo-Director Agricultural &amp; Food Policy Center at Texas A&amp;M University joutlaw@tamu.edu&nbsp;







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Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/12/what-is-the-expected-impact-of-high-commodity-prices-on-effective-reference-prices-for-covered-commodities/">What is the Expected Impact of High Commodity Prices on Effective Reference Prices for Covered Commodities.</a>&#8221; Southern Ag Today 2(50.4). December 8, 2022. <a href="http://what-is-the-expected-impact-of-high-commodity-prices-on-effective-reference-prices-for-covered-commodities">Permalink</a>

What is the Expected Impact of High Commodity Prices on Effective Reference Prices for Covered Commodities

Over the past five years, the federal crop insurance program has become a more important part of the farm safety net – relative to ARC/PLC and the marketing loan.&nbsp;&nbsp;There are several reasons for this, but the two most important are 1) higher commodity prices have made ARC/PLC and the marketing loan less likely to provide any benefits and 2) the crop insurance program uses the futures market to establish initial and harvest-time prices used in insurance calculations that are based on a monthly average of futures closing prices for a specified contract month.&nbsp;&nbsp;When commodity prices are trending upward, like they have been over the past few years, crop insurance protection increases along with higher futures market prices.



The correspondence, or lack thereof, of rice planted acres for four Southern rice growing states with the marketing year average price reported by USDA around October 1st&nbsp;of the year prior to planting and the projected insurance prices was evaluated over the 2016 to 2022 period.&nbsp;&nbsp;The previous year’s marketing year average price was used to evaluate whether it was signaling for more or less acres for the next year.&nbsp;&nbsp;The projected (initial) insurance price is determined just prior to planting.&nbsp;&nbsp;The three states (Arkansas, Mississippi and Texas) that use the same futures contract to establish projected and harvest time prices are grouped together in the graphs followed by the graph for Louisiana.



The graphs indicate both marketing year average prices and insurance projected prices are generally trending upward since 2017.&nbsp;&nbsp;Planted acres for Arkansas and Mississippi and Louisiana do not exhibit an upward trend.&nbsp;&nbsp;Producers in these states generally have multiple crop alternatives to rice that may be drawing acres away from rice based on the relative profitability of the alternatives to rice.&nbsp;&nbsp;Texas producers generally have fewer viable alternatives to rice production, which appears to be revealed in the upward trend in planted acres.&nbsp;&nbsp;Another consideration to keep in mind is that even though rice prices have increased over the past few years, generally speaking, prices still remain below the full cost of production for producers in Southern rice growing states, particularly when accounting for the deductible associated with insurance policies.&nbsp;


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Outlaw, Joe, and Bart Fischer. &#8220;<a href="https://southernagtoday.org/2022/11/correspondence-of-rice-planted-acres-to-safety-net-prices/">Correspondence of Rice Planted Acres to Safety Net Prices</a>.&#8221; Southern Ag Today 2(46.4). November 10, 2022. <a href="http://correspondence-of-rice-planted-acres-to-safety-net-prices">Permalink</a>

Correspondence of Rice Planted Acres to Safety Net Prices

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From wild swings in commodity prices to an explosion in input costs that would make the Consumer Price Index (CPI) blush, agricultural producers have been riding a rollercoaster over the past year.&nbsp;&nbsp;The purpose of the farm safety net – the combination of Federal crop insurance and the traditional farm bill programs like Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) – is to help producers manage these risks. However, unprecedented pressure from the COVID-19 pandemic and natural disasters, along with the inflated input costs, have exposed gaps in the current farm safety net.&nbsp;&nbsp;One of the concerns on the minds of most producers at this point is how the farm safety net will perform in 2023 if commodity prices fall and input costs remain at elevated levels.&nbsp;&nbsp;In this article, we look at this question in the context of cotton.



This summer, USDA’s Economic Research Service (ERS) forecasted a U.S. average total cost of production for cotton in 2023 of $794/ac.<a href="//E1929A68-B45D-48CB-BA74-4597AB29666C#_ftn1">[1]</a>&nbsp;&nbsp;Assuming an average yield of 847 lbs/ac (based on the 5-year harvested-acre average for upland cotton from 2017-21), the total average cost of production for cotton in 2023 would be an estimated $0.9374/lb.&nbsp;&nbsp;The question:&nbsp;&nbsp;how much of the cost incurred by producers will be protected by the farm safety net?



Federal crop insurance is the cornerstone of the farm safety net.&nbsp;&nbsp;The insured price for cotton in the spring will be based on the Cotton #2 Dec ’23 futures contract (CTZ23).&nbsp;&nbsp;While the price is based on a month-long average (with the discovery period depending on your location), this example simply uses yesterday’s closing price ($0.731/lb) as a proxy for how the safety would perform if the insured price were established at yesterday’s levels (Figure 1).&nbsp;&nbsp;For a grower with Revenue Protection (RP) at a 75% coverage level, they are effectively protecting $0.5483/lb (= $0.731/lb x 75%).&nbsp;&nbsp;Even in the case where a grower purchases STAX at a 90% coverage level (in addition to RP), they still are only able to protect $0.6579/lb (= $0.731/lb x 90%).&nbsp;&nbsp;In other words, a producer would only be able to insure, on average, 70% of their total cost of production (= $0.6579/$0.9374).&nbsp;&nbsp;



But, won’t PLC help fill in the gap given it is designed to help in low-price scenarios?&nbsp;&nbsp;With cottonseed prices at $343/ton (NASS August 2022<a href="//E1929A68-B45D-48CB-BA74-4597AB29666C#_ftn2">[2]</a>), a lint value of roughly $0.637/lb equates with a seed cotton equivalent of $0.367/lb (the PLC seed cotton reference price).&nbsp;&nbsp;In other words, if cottonseed prices for the marketing year averaged $343/ton, lint prices would have to fall below $0.637/lb before PLC would trigger support.&nbsp;&nbsp;If the marketing year average price were to hover around the insurance price in our example ($0.731/lb), PLC would end up paying nothing.



Naturally, any number of different scenarios could transpire.&nbsp;&nbsp;For example, prices could rebound before planting.&nbsp;&nbsp;Input costs could fall between now and the spring.&nbsp;&nbsp;And, above-average yields could blunt the impact of lower prices.&nbsp;&nbsp;In the case of yields and given the example above, if prices averaged $0.731/lb, yields would need to be more than 28% above average to break even.&nbsp;&nbsp;While that is possible (especially in isolated areas), neither producers (nor their lenders) can bank on yields that are 28% above average.



This scenario clearly highlights just one example of the gaps that exist in the current farm safety net.&nbsp;&nbsp;It also highlights the importance of the upcoming debate on the 2023 Farm Bill.&nbsp;&nbsp;While pundits are prognosticating over whether there will be a simple extension of the current farm bill next year, agricultural producers may not be able to wait.&nbsp;&nbsp;Even if the markets end up breaking their way, they currently are exposed to a considerable amount of risk and the prospect of significant losses.



Figure 1.&nbsp;&nbsp;Cotton #2 December 2023 ICE Futures Contract (CTZ23)



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<a href="//E1929A68-B45D-48CB-BA74-4597AB29666C#_ftnref1">[1]</a>&nbsp;https://www.ers.usda.gov/webdocs/DataFiles/47913/cop_forecast.xlsx?v=4738.9



<a href="//E1929A68-B45D-48CB-BA74-4597AB29666C#_ftnref2">[2]</a>&nbsp;https://downloads.usda.library.cornell.edu/usda-esmis/files/c821gj76b/69700872f/k643c9334/agpr0922.pdf



Fischer, Bart L., and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2022/10/an-early-look-at-the-farm-safety-net-for-cotton-in-2023/">An Early Look at the Farm Safety Net for Cotton in 2023.&#8221;</a> Southern Ag Today 2(44.4). October 27, 2022. <a href="http://an-early-look-at-the-farm-safety-net-for-cotton-in-2023">Permalink</a>

An Early Look at the Farm Safety Net for Cotton in 2023

One of the most asked questions we get is whether the next farm bill will contain a reference price increase for covered commodities to offset higher input prices.&nbsp;&nbsp;&nbsp;Both the price loss coverage (PLC) and agriculture risk coverage (ARC) safety net programs use reference prices in their respective calculations.&nbsp;&nbsp;Focusing on PLC, with relatively high market prices, it would seem that now is the time to increase reference prices as market prices for many covered commodities are above their respective reference prices.&nbsp;&nbsp;This would mean reference prices could be raised modestly without triggering much, if any, payment.&nbsp;&nbsp;This analysis sets aside the question of whether the agricultural committees will have any more money to write the next farm bill.



Table 1 provides the ratio of marketing year average prices to reference prices for seven covered commodities from 2023 to 2032.&nbsp;&nbsp;The results in Table 1 that are green indicate the market price is above the reference price for the commodity for that year.&nbsp;&nbsp;And conversely, ratios that are red indicate market prices that are below reference prices.&nbsp;&nbsp;One of the first things that jumps out in the table is that the 2023 marketing year has all but peanut prices higher than their respective reference prices.&nbsp;&nbsp;CBO projects prices to decline below reference prices for all but corn and soybeans over their projection period.&nbsp;&nbsp;Generally, this wouldn’t bode well for the agricultural committees being able to increase reference prices; however, the last column in the table contains base acres for each of the covered commodities.&nbsp;&nbsp;Two of the biggest crops in terms of base acres (corn and soybeans) that account for more than 146 million base acres are projected to experience prices above their respective reference prices.&nbsp;&nbsp;The remaining commodities with relatively lower marketing year average prices account for less than 100 million acres, with wheat accounting for more than one-half of the total.



Time will tell whether reference prices can be increased, which will largely depend on an infusion of new money into the farm bill process.&nbsp;&nbsp;Proponents should feel cautiously optimistic that a reference price increase could be feasible.



Table 1.&nbsp;&nbsp;Ratio of Marketing Year Average Prices to Reference Prices and Base Acres.


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Outlaw, Joe, and Bart Fischer. &#8220;<a href="https://southernagtoday.org/2022/10/does-the-may-2022-cbo-baseline-provide-any-information-about-the-ability-to-increase-commodity-reference-prices/">Does the May 2022 CBO Baseline Provide Any Information About the Ability to Increase Commodity Reference Prices?</a>&#8221; Southern Ag Today 2(42.4). October 13, 2022. <a href="http://does-the-may-2022-cbo-baseline-provide-any-information-about-the-ability-to-increase-commodity-reference-prices">Permalink</a>

Does the May 2022 CBO Baseline Provide Any Information About the Ability to Increase Commodity Reference Prices?

In a previous Southern Ag Today article, I discussed the concept of unintended consequences which is a topic we talk a lot about in agricultural policy.<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftn1">[1]</a>&nbsp;&nbsp;Generally speaking, unintended consequences result from a lack of knowledge and/or lack of analysis of the potential consequences of a policy change.&nbsp;&nbsp;The previous article focused on the unintended consequences associated with government policies that created the U.S. ethanol industry.&nbsp;&nbsp;This article looks at the Securities and Exchange Commission (SEC) proposed rule changes that would require climate-related disclosures of publicly traded firms.<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftn2">[2]</a>



On March 21, 2022, the SEC proposed rule changes that would require certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements.&nbsp;



According to the SEC, the proposed rule “would require a registrant to disclose information about its direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a registrant would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions.”&nbsp;&nbsp;Required disclosures for each of the three scopes would be phased in over a period of time.



This proposal generally requires publicly traded companies to provide investors more information about GHG emissions coming from business activities.&nbsp;&nbsp;However, as reported by the American Farm Bureau Federation (AFBF), “While farmers and ranchers are not public companies and therefore not ‘registrants’ that are required to report directly to the SEC, their obligations through their regulated customers could be enormous….requirements for Scope 3 greenhouse gas emissions not only directly affects farmers’ and ranchers’ operations, but could create several substantial costs and liabilities, such as reporting obligations, technical challenges, significant financial and operational disruption and the risk of financially crippling legal liabilities.”<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftn3">[3]</a>



While the proposed rule’s focus is to provide investors more information about the GHG emissions of publicly traded companies, depending upon 1) if the rule is adopted and 2) how it is implemented, it could have implications for U.S. farmers and ranchers because as AFBF points out, “for agriculture, food, and forestry manufacturing alone, there are nearly 2,400 companies registered with the SEC that would be subject to reporting Scope 3 emissions from its farm suppliers.”


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="510" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.40.4-1-1024x510.png" alt="" class="wp-image-37137" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.40.4-1-1024x510.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.40.4-1-768x382.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.40.4-1-1536x765.png 1536w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.40.4-1-2048x1020.png 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: SEC data compiled by American Farm Bureau Federation (AFBF)</figcaption></figure></div>


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<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftnref1">[1]</a>&nbsp;<a href="https://southernagtoday.org/2022/04/the-u-s-ethanol-industry-and-unintended-consequences/">https://southernagtoday.org/2022/04/the-u-s-ethanol-industry-and-unintended-consequences/</a>



<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftnref2">[2]</a>&nbsp;https://www.sec.gov/rules/proposed/2022/33-11042.pdf



<a href="//9797EC79-8BAF-4320-8B34-6F21D8482B94#_ftnref3">[3]</a>&nbsp;<a href="https://www.fb.org/market-intel/overreach-of-sec-proposed-climate-rule-could-hurt-agriculture">https://www.fb.org/market-intel/overreach-of-sec-proposed-climate-rule-could-hurt-agriculture</a>



Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/09/the-securities-and-exchange-commission-proposed-climate-related-disclosures-and-unintended-consequences/">The Securities and Exchange Commission Proposed Climate Related Disclosures and Unintended Consequences?</a>&#8220;. Southern Ag Today 2(40.4). September 29, 2022. <a href="http://the-securities-and-exchange-commission-proposed-climate-related-disclosures-and-unintended-consequences">Permalink</a>

The Securities and Exchange Commission Proposed Climate-Related Disclosures and Unintended Consequences?

Livestock producers are making hard decisions this summer and fall as widespread drought conditions limit pasture, hay, and, in some places, water availability across the southern and western states. Drought losses can result in additional costs for purchased hay (for those who can find a hay source), selling calves early, retaining fewer replacement heifers, or culling cows to reduce pressure on pasture and rangeland. Drought disaster programs are available to help offset some of the additional costs. For example, the Emergency Assistance for Livestock, Honey Bees and Farm-Raised Fish (ELAP) program can help offset the added cost of transporting hay from greater distances this year. Forage management and supplementation can also stretch available grazing to reduce the need for winter hay feeding in some areas. However, in many cases, producers will be reducing herd sizes through additional cattle sales.&nbsp;



Drought related costs and losses will be reflected on 2022 tax returns for many producers across the country. Understanding how those losses must be reported come tax season and what documentation to retain will aid in properly reporting expenses and program payments. Drought related farm expenses and payments from drought disaster programs are fairly straightforward. For example, if a producer purchases hay in 2022 sourced from farms in states at a greater distance than previous years, they may be eligible for the ELAP transportation cost offset mentioned previously. The producer would report the cost of hay and hauling as farm expenses. The ELAP disaster payment for excess transportation cost would be reported as income. For more information on USDA disaster program documentation requirements, see factsheet: https://extension.okstate.edu/fact-sheets/usda-program-recordkeeping-requirements.html



Cattle sales will also be reported on tax returns, but these decisions are a little more complicated. Gains from breeding, dairy or draft cattle sales in excess of normal due to drought may be deferred for up to two years, as long as the dollar value of the cattle are replaced within those two years. Record keeping is critical. The producer can only defer cattle sales that are above what would typically be sold under normal production conditions. Two tax provisions exist to avoid the adverse tax consequences of selling more animals than normal due to weather related conditions. One applies only to breeding, dairy and draft animals that will be replaced. The second applies to market animals where the income from the additional animals sold are reported in the year that they would have normally been marketed.



Consider an example for breeding animals: Over the past 3 years, my cattle operation sold 30 calves weighing 650 pounds and 4 cull cows as an annual average. Due to drought in 2022, I sell 5 replacement heifers I would ordinarily have retained and 10 cows (6 more than the average) for $10,000. I can defer reporting the $10,000 of income from the excess animal sales (the 5 replacement heifers and the 6 cows) by electing to replace those sold by buying at least $10,000 of replacement breeding animals by December 31, 2024. If I do not spend at least $10,000 on replacement animals, I must amend the 2022 return and report the difference as income in that year. Should my county or a contiguous county be declared a federal disaster area, the replacement period is extended to 4 years and the animals will not have to be replaced until the end of 2026. The replacement animals must also be of the same type and purpose of the animals sold (dairy animals for dairy animals or breeding for breeding). This tax provision is under Internal Revenue Code Section 1033(e).



Now consider an example for the sale of any livestock (other than poultry) due to weather related conditions, and this time the county I raise cattle in is declared a federal disaster area (which is a requirement for this provision). Using the same facts as the prior example, I sold 6 more cows and 5 replacement heifers plus 15 head of calves (that would have normally been sold in 2023) for $20,000. Combined, this is more livestock than what would have normally been sold had the drought conditions not existed. This tax law provision allows me to elect to report the $20,000 of income in 2023 instead bunching this excess income in 2022. This tax provision is under Internal Revenue Code Section 453(g).&nbsp;



Documentation is critical for all drought related losses. Specifically for your taxes keep the following in your tax records:&nbsp;



<ul>
<li>Evidence of the weather-related conditions that forced the sale or exchange of animals.</li>



<li>Number and kind of livestock sold or exchanged.</li>



<li>Number of livestock of each kind that would have been sold or exchanged under normal business circumstances (generally, the average number of animals sold over the three preceding years).</li>



<li>The amount of gain realized on the sale or exchange.</li>



<li>The amount of income to be postponed</li>
</ul>



It will be important to discuss the application of these tax provisions with your income tax advisor. Sources of drought information include the Drought Monitor Maps which indicate drought intensity by state and region. In addition, USDA reports which counties are currently considered drought disaster areas and are eligible to receive federal disaster programs, and disaster declarations generally are available from State and Federal government websites and stakeholder announcements. Tax season seems like it is far off on the horizon still, but better understanding how drought related losses will be reported may aid in documentation of losses today.&nbsp;



For more information see the Rural Tax Center factsheet <a href="https://nam04.safelinks.protection.outlook.com/?url=http%3A%2F%2Fruraltax.org%2Ffiles-ou%2FRTE_2021-05_Weather_Related_Sales_of_Livestock.pdf&amp;data=05%7C01%7Camy.hagerman%40okstate.edu%7C786cfafd8b9e47d6ac8508da8ad0e0ba%7C2a69c91de8494e34a230cdf8b27e1964%7C0%7C0%7C637974926974421784%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&amp;sdata=4kAIPFPICnIMe9G9ZgTrcnJy9N99JzT7mVzsGFIMVwI%3D&amp;reserved=0">http://ruraltax.org/files-ou/RTE_2021-05_Weather_Related_Sales_of_Livestock.pdf</a>



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Hagerman, Amy, and JC Hobbs. &#8220;<a href="https://southernagtoday.org/2022/09/drought-related-livestock-sales-and-tax-reporting-options/">Drought Related Livestock Sales and Tax Reporting Options</a>.&#8221; Southern Ag Today 2(38.4). September 15, 2022. <a href="http://drought-related-livestock-sales-and-tax-reporting-options">Permalink</a>

Drought Related Livestock Sales and Tax Reporting Options

In a recent&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/719/BP-22-06-inflation-reduction-act.pdf">report</a>&nbsp;by the Agricultural &amp; Food Policy Center (AFPC), we provided an overview of the agricultural provisions included in the recently-passed Inflation Reduction Act (IRA) of 2022.&nbsp;&nbsp;The IRA was a Senate-led compromise that broke the months-long logjam over the Build Back Better (BBB) Act that had been stalled in the Senate.&nbsp;&nbsp;As noted in Figure 1, the funding for agriculture in the IRA was less than half of what had been proposed in the BBB.



As noted in Figure 1, roughly half of the funding for agriculture goes to conservation.&nbsp;&nbsp;Specifically, the IRA provides an additional $8.45 billion for the Environmental Quality Incentives Program (EQIP), $3.25 billion for the Conservation Stewardship Program (CSP), $1.4 billion for the Agricultural Conservation Easement Program (ACEP), $4.95 billion for the Regional Conservation Partnership Program (RCPP), $1 billion for Conservation Technical Assistance, and $300 million for USDA to collect “field-based data” to quantify carbon sequestration and greenhouse gas emissions.&nbsp;&nbsp;Importantly, beyond the temporary funding increases, the authorizations for all of these programs – including the Conservation Reserve Program (CRP) – were extended through fiscal year 2031.



The IRA also provided $3.1 billion for loan relief to borrowers with “at-risk agricultural operations” and almost $3 billion in assistance and support for “underserved farmers, ranchers, and foresters,” of which $2.2 billion is for financial assistance – including the cost of any financial assistance – to producers determined to have experienced discrimination prior to January 1, 2021, in any USDA farm lending programs.&nbsp;&nbsp;As noted in a recent Southern Ag Today&nbsp;<a href="https://southernagtoday.org/2022/08/debt-relief-for-certain-farmers--ranchers/">article</a>, initial versions of the IRA had left out debt relief, but the version that was signed into law ultimately addressed the issue.&nbsp;&nbsp;



Finally, the IRA provided over $13 billion for rural development programs – most of which is for rural electric cooperative loans – and almost $5 billion for forestry-related provisions.



We are frequently asked about the impact that this will have on the next farm bill.&nbsp;&nbsp;While one can argue that an additional infusion for farm bill conservation programs is helpful, it is important to note that the additional funding dries up in fiscal year 2026, which will likely coincide with the mid-point of the next farm bill.&nbsp;&nbsp;This undoubtedly will complicate what are already guaranteed to be complicated farm bill deliberations next year.



Figure 1. Comparing Estimated Outlays for Agriculture under the Build Back Better (BBB) Act and the Inflation Reduction Act (IRA), FY2022-31.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="880" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.36.4-1-1024x880.png" alt="" class="wp-image-36844" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.36.4-1-1024x880.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.36.4-1-768x660.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.36.4-1-1536x1320.png 1536w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/09/2.36.4-1.png 1674w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source:&nbsp;&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/719/BP-22-06-inflation-reduction-act.pdf">https://afpc.tamu.edu/research/publications/files/719/BP-22-06-inflation-reduction-act.pdf</a></figcaption></figure></div>


Fischer, Bart L., and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2022/09/agricultural-provisions-in-the-reduction-act-of-2022/">Agricultural Provisions in the Inflation Reduction Act of 2022</a>.&#8221; Southern Ag Today 2(36.4). September 1, 2022. <a href="http://agricultural-provisions-in-the-reduction-act-of-2022">Permalink</a>

Agricultural Provisions in the Reduction Act of 2022

The Risk Management Agency (RMA) is responsible for rating crop insurance in an actuarially sound way. Unlike private insurance companies, RMA is not driven by profit when determining rates. Premium rates do not include the cost of sales, underwriting, loss adjustments, or the operating costs of RMA. Legislative language instructs that&nbsp;“the amount of the premium shall be sufficient to cover anticipated losses and a reasonable reserve<a href="//74F2C856-D1B0-49F1-8F10-1EFE16F41E9B#_ftn1">[1]</a>.”&nbsp;RMA considers actual production history in the rating process, and rates are established independently of crop and geographic region. The loss experience of rice is not a factor when developing a premium rate for corn. Likewise, the loss experience of corn in Mississippi is not a factor when developing a premium rate for corn in Illinois.&nbsp;



The politics of crop insurance comes into play with the premium subsidy percentage amounts set by policy. Subsidy percentages are equitable across all crops, though, with each crop receiving the same subsidy percentage dependent on coverage level and unit choice. Total acres insured, coverage level, and premium rates all factor into the total amount of subsidies received by a crop. As seen in Figure 1., corn has received a total of $24.6 billion of crop insurance subsidies in the past decade, followed by soybeans at $14.9 billion. Rice and peanuts have total subsidy amounts of $617 million and $424 million, respectively, over the past decade.&nbsp;&nbsp;



Crop insurance performance is often judged by loss ratios. A loss ratio is simply calculated as indemnity payments divided by total premium. A loss ratio of 1.0 means that indemnity payments equaled total premiums. A loss ratio greater than 1.0 means indemnity payments exceed premiums, and a loss ratio less than 1.0 means total premiums exceed indemnity payments. The Risk Management Agency (RMA) is statutorily mandated to achieve a target loss ratio of 1.0. While loss ratios can fluctuate year-to-year, the national and crop-specific ratios have been trending down since 1989, as seen in Figure 2. Interestingly, many crops have trended down at similar rates. Rice, cotton, wheat, soybeans, and the national total have similar sloping trend lines. Corn has trended down but at a slower rate than the previously mentioned crops. Peanuts have seen the most dramatic decrease in the trend of any crop.&nbsp;&nbsp;&nbsp;&nbsp;



Figure 1. Total 10 Year Subsidy Amount by Crop, 2013-2022


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="590" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-1-1024x590.png" alt="" class="wp-image-36726" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-1-1024x590.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-1-768x442.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-1-1536x885.png 1536w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-1-2048x1180.png 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: USDA-RMA Summary of Business &#8211;&nbsp;<a href="https://prodwebnlb.rma.usda.gov/apps/SummaryOfBusiness/ReportGenerator">Report Generator (usda.gov)</a></figcaption></figure></div>


Figure 2. U.S. Crop Insurance Loss Ratio Trends Over Time by Selected Crops, 1989-2021


<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="549" height="450" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/08/2.34.4-2-1.png" alt="" class="wp-image-36729"/><figcaption class="wp-element-caption">Source: USDA-RMA Summary of Business &#8211;&nbsp;<a href="https://prodwebnlb.rma.usda.gov/apps/SummaryOfBusiness/ReportGenerator">Report Generator (usda.gov)</a></figcaption></figure></div>


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<a href="//74F2C856-D1B0-49F1-8F10-1EFE16F41E9B#_ftnref1">[1]</a>&nbsp;Coble, K. H., Knight, T. O., Goodwin, B. K., Miller, M. F., Rejesus, R. M., &amp; Duffield, G. (2010). A comprehensive review of the rma aph and combo rating methodology: Final report.&nbsp;Prepared by Sumaria systems for the risk Management agency.



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Maples, William E., and Keith H. Coble. &#8220;<a href="https://southernagtoday.org/2022/08/crop-insurance-loss-ratio-trends-over-time/">Crop Insurance Loss Ratio Trends Over Time</a>.&#8221; Southern Ag Today 2(34.4). August 18, 2022. <a href="http://crop-insurance-loss-ratio-trends-over-time">Permalink</a>

Crop Insurance Loss Ratio Trends Over Time

On March 11, 2021, President Biden signed the American Rescue Plan (ARP) Act of 2021 into law.&nbsp;&nbsp;Section 1005 of the act required the Secretary to make payments to socially disadvantaged farmers or ranchers “in an amount up to 120 percent of the outstanding indebtedness” of eligible producers for both direct and guaranteed loans administered by various USDA agencies.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn1">[1]</a>&nbsp;&nbsp;While USDA immediately went to work implementing the provisions, multiple lawsuits were filed – alleging that the provision was unconstitutional because it violates the Due Process Clause of the Fifth Amendment – and 3 courts have issued injunctions prohibiting USDA from issuing any payments, loan assistance, or debt relief pursuant to Section 1005.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn2">[2]</a>&nbsp;&nbsp;According to USDA, the injunctions “do not prohibit FSA from completing administrative actions leading up to payments, including providing payment notifications to potentially eligible borrowers.”<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn3">[3]</a>&nbsp;&nbsp;At the time of passage, the Congressional Budget Office (CBO) estimated the provision would cost $3.98 billion over the next 10 years.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn4">[4]</a>



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the meantime, the Build Back Better Act (BBB) of 2021 – which passed the House on November 19, 2021 – sought to remedy the concerns raised about Section 1005 in the American Rescue Plan.&nbsp;&nbsp;Specifically, Section 12101 of the BBB amends Section 1005 of ARP, in part, by changing the focus of the debt relief to “economically distressed borrowers” with eligibility tied to eight (8) broad criteria ranging from debt delinquency metrics to whether the farm or ranch was headquartered in a county with a poverty rate of 20 percent or greater.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn5">[5]</a>&nbsp;&nbsp;With the presumably expanded list of eligible borrowers, CBO estimated that the provision would cost $6.647 billion over the next 10 years.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn6">[6]</a>&nbsp;&nbsp;Due, in part, to the price tag of the overall bill, the BBB has languished in the Senate for the last several months.



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Last week, Senators Schumer and Manchin announced a joint agreement to add various provisions from the BBB – via the Inflation Reduction Act of 2022 – to the FY2022 Budget Reconciliation Bill.<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftn7">[7]</a>&nbsp;&nbsp;In our review of the draft legislation posted last week, it does not appear that debt relief for farmers and ranchers was included.&nbsp;&nbsp;While Congressional leaders may have plans for including debt relief in another legislative vehicle, unless and until they do – or unless and until the courts rule on the pending cases or lift the existing injunctions – potentially eligible farmers and ranchers will have to keep waiting.&nbsp;&nbsp;



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<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref1">[1]</a>&nbsp;<a href="https://www.congress.gov/117/plaws/publ2/PLAW-117publ2.pdf">https://www.congress.gov/117/plaws/publ2/PLAW-117publ2.pdf</a>



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref2">[2]</a>&nbsp;See&nbsp;Holman v. Vilsack, 21-1085-STA-jay, Order Granting Motion for Preliminary Injunction (July 8, 2021);&nbsp;Miller v. Vilsack, 4:21-cv-00595-O, Order (July 1, 2021);&nbsp;Wynn v. Vilsack, 3:21-cv-00514-MMH-JRK, Order (June 23, 2021).&nbsp;



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref3">[3]</a>&nbsp;<a href="https://www.farmers.gov/loans/american-rescue-plan">https://www.farmers.gov/loans/american-rescue-plan</a>



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref4">[4]</a>&nbsp;<a href="https://www.cbo.gov/system/files/2021-03/Estimated_Budgetary_Effects_of_hr1319_detailed_tables.xlsx">https://www.cbo.gov/system/files/2021-03/Estimated_Budgetary_Effects_of_hr1319_detailed_tables.xlsx</a>



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref5">[5]</a>&nbsp;<a href="https://www.congress.gov/congressional-record/volume-167/issue-201/house-section/article/H6375-4">https://www.congress.gov/congressional-record/volume-167/issue-201/house-section/article/H6375-4</a>



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref6">[6]</a>&nbsp;<a href="https://www.cbo.gov/system/files/2021-11/hr5376_title_I_Agriculture.xlsx">https://www.cbo.gov/system/files/2021-11/hr5376_title_I_Agriculture.xlsx</a>



<a href="//A3B6393C-A4CF-44F5-A63E-74957D4EDADC#_ftnref7">[7]</a>&nbsp;<a href="https://www.democrats.senate.gov/inflation-reduction-act-of-2022">https://www.democrats.senate.gov/inflation-reduction-act-of-2022</a>



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Fischer, Bart, and Tiffany Dowell-Lashmet. &#8220;<a href="https://southernagtoday.org/2022/08/debt-relief-for-certain-farmers--ranchers/">Debt Relief for Certain Farmers &amp; Ranchers</a>.&#8221; Southern Ag Today 2(32.4). August 4, 2022. <a href="http://debt-relief-for-certain-farmers-ranchers">Permalink</a>

Debt Relief for Certain Farmers & Ranchers

One of the questions policy economists get the most from farmers is how likely is it that they will get to update their base acres in the hopes of finally converting their non-base acres into base.&nbsp;&nbsp;For example, there is a significant amount of cotton produced in the Texas Panhandle that does not have seed cotton base and therefore is not eligible for ARC or PLC protection.&nbsp;&nbsp;In previous base update opportunities provided in the 2002, 2014 and 2018 (for cotton only) Farm Bills, producers always had the choice to stay with the crop bases that were established in the 1985 Farm Bill or update to align their crop bases more closely to current plantings.&nbsp;&nbsp;Given the choice, producers rarely would choose to have less total base acres even if it meant more closely aligning their bases to current plantings.&nbsp;&nbsp;This type of update has generally been scored by the Congressional Budget Office (CBO) as having a positive cost so Congress has had to find the money to update crop bases.



One of the suggestions currently making the rounds in Washington D.C. is a forced base update where producers who were planting less than their farm’s base acres during some specified time period would lose base and similarly, those that were planting more than their current base acres would gain base.&nbsp;&nbsp;Proponents see this as costing less to implement, as some farmers will most certainly gain base acres while others would lose base.&nbsp;&nbsp;While the devil is very much in the implementation details that would be determined by USDA, a quick evaluation of USDA-NASS planted acre data relative to USDA-FSA base acre data for the 13 Southern States indicates the South would lose a considerable amount of base in a forced base update situation where keeping old crop bases would not be an option.



Table 1 compares the planted acres of nine primary covered commodities (corn, grain sorghum, soybeans, rice, wheat, cotton, peanuts, barley and oats) in the South and indicates that an average of 53.6 million acres were planted in 2021 and 2022.&nbsp;&nbsp;This compares to 2021 total base acres of 62.1 million acres.&nbsp;&nbsp;Producers planted roughly 8.5 million acres less than their crop bases during that time period.&nbsp;&nbsp;Of the 13 Southern States, only Kentucky, North Carolina, Tennessee, and Virginia planted more acres than they have crop base.



While this quick analysis only looked at planted acres over two years, it still provides a good indication of what the direction of the overall impact would be on the Southern States.&nbsp;&nbsp;&nbsp;A forced base update is still just one of many proposals that are floating around Washington as farm bill discussions are just getting started.&nbsp;&nbsp;Individual farmers may benefit drastically; however, it is important to understand that a forced base update will have significant negative repercussions on the South as a whole.



Table 1.&nbsp;&nbsp;Planted Acres of Nine Primary Covered Commodities for 2021 and 2022 and 2021 Base Acres.


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<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="756" height="373" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/07/2.30.4-1.png" alt="" class="wp-image-36529" /></figure></div>


Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/07/an-initial-look-at-forced-base-update-on-the-south/">An Initial Look at Forced Base Update on the South</a>&#8220;. Southern Ag Today 2(30.4). July 21, 2022. <a href="http://an-initial-look-at-forced-base-update-on-the-south">Permalink</a>

An Initial Look at Forced Base Update on the South

In May 2022, the Congressional Budget Office (CBO) released its latest 10-year budget projections for a number of Federal programs, including farm-related programs and the Supplemental Nutrition Assistance Program (SNAP).&nbsp;&nbsp;While CBO typically updates its budget projections up to three times per year, the spring update following the release of the President’s budget is most closely watched as it typically is the baseline against which the cost of legislative proposals is “scored” throughout the year.



During farm bill reauthorization years, CBO typically also releases their baseline projections by farm bill title.&nbsp;&nbsp;That summary gives policymakers a clear picture of the budget for mandatory spending they have to work with in each title of the farm bill.&nbsp;&nbsp;That estimate also gives a clear picture of what CBO expects the entire farm bill to spend if existing policies were simply maintained going forward.



While we are still a year out from CBO releasing baseline projections by title, there is still plenty to be gleaned from the May 2022 baseline update.&nbsp;&nbsp;For example, if we look back to the April 2018 baseline (the scoring baseline for the 2018 Farm Bill), the spending projections for CCC Price Support and Related Activities, Conservation, SNAP, and Crop Insurance accounted for $865.9 billion (Table 1), or 99.85% of the $867.2 billion in projected total baseline outlays for the farm bill.&nbsp;&nbsp;



&nbsp;Applying the same methodology to the most recent May 2022 baseline update, those four categories are projected to spend approximately $1.3 trillion over the next 10 years (Table 1).&nbsp;&nbsp;The significant increase is due to a 66.4% increase in projected spending on SNAP, with SNAP now projected to account for $1.1 trillion, or 84% of the total farm bill baseline.&nbsp;&nbsp;By contrast, the income support provisions for agricultural producers that make up the largest component of Title 1 – the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs – are projected to spend $43.3 billion over the next 10 years, or just 3.3% of the total farm bill baseline.



Table 1.&nbsp;&nbsp;Congressional Budget Office (CBO) 10-Year Outlays in Million$



<figure class="wp-block-table is-style-stripes"><table><tbody><tr><td>&nbsp;</td><td class="has-text-align-center" data-align="center">April 2018</td><td class="has-text-align-center" data-align="center">May 2022</td><td class="has-text-align-center" data-align="center">Change($)</td><td class="has-text-align-center" data-align="center">Change (%)</td></tr><tr><td>CCC Price Support &amp; Related&nbsp;1/</td><td class="has-text-align-center" data-align="center">64,305</td><td class="has-text-align-center" data-align="center">71,092</td><td class="has-text-align-center" data-align="center">+6,787</td><td class="has-text-align-center" data-align="center">+10.6%</td></tr><tr><td>Conservation</td><td class="has-text-align-center" data-align="center">59,689</td><td class="has-text-align-center" data-align="center">59,216</td><td class="has-text-align-center" data-align="center">-473</td><td class="has-text-align-center" data-align="center">-0.8%</td></tr><tr><td>SNAP&nbsp;2/</td><td class="has-text-align-center" data-align="center">663,828</td><td class="has-text-align-center" data-align="center">1,104,384</td><td class="has-text-align-center" data-align="center">+440,556</td><td class="has-text-align-center" data-align="center">+66.4%</td></tr><tr><td>Crop Insurance</td><td class="has-text-align-center" data-align="center">78,037</td><td class="has-text-align-center" data-align="center">79,761</td><td class="has-text-align-center" data-align="center">+1,724</td><td class="has-text-align-center" data-align="center">+2.2%</td></tr><tr><td>Total</td><td class="has-text-align-center" data-align="center">865,859</td><td class="has-text-align-center" data-align="center">1,314,453</td><td class="has-text-align-center" data-align="center">+448,594</td><td class="has-text-align-center" data-align="center">+51.8%</td></tr></tbody></table><figcaption> 1/ CBO included $10 billion in “Other Administrative CCC Spending” in the May 2022 baseline update. 2/ Revised economic assumptions and administrative changes to the Thrifty Food Plan (TFP) resulted in the Office of Management and Budget (OMB) projecting an additional $254 billion in SNAP outlays from FY2022-31 (<a href="https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf</a>).</figcaption></figure>



Fischer, Bart. &#8220;<a href="https://southernagtoday.org/2022/07/the-trillion-dollar-farm-bill/">The Trillion Dollar &#8220;Farm&#8221; Bill</a>&#8220;. Southern Ag Today 2(28.4). July 7, 2022. <a href="http://the-trillion-dollar-farm-bill">Permalink</a>

The Trillion Dollar “Farm” Bill

Looking at unemployment rates experienced from February to December of 2020 paints a picture of the resiliency of southeastern states counties to the COVID-19 pandemic. As shutdowns took place and unemployment rates rose, telework became an important factor in recovery. Across the 1,206 counties of the 12 southeastern states, rates of telework ability – defined as the percentage of jobs that could be done remotely – ranged from 22% to 43%.&nbsp;&nbsp;As the pandemic unfolded, the resiliency of each county was determined by industry composition, unemployment rates at the beginning of the pandemic, county demographic characteristics, and –&nbsp;&nbsp;broadband adoption rates.&nbsp;



Household broadband subscription rates ranged from 34% to 94% across the counties in the sample, and the results demonstrate that these differences are vital. The ability to telework had no impact on unemployment rates from February to April in counties with broadband adoption rates under 50%. Although some individuals may have been employed in occupations that were telework-friendly, their home broadband situation may have prevented them from continuing work. Alternatively, telework increased resilience in counties with higher broadband adoption rates, with marginal effects of -0.21 percentage points. That is, counties with high rates of broadband adoption had more resiliency (lower increases in unemployment) during the first two months of the pandemic.&nbsp;&nbsp;During the April to December period, areas where a high percentage of workers&nbsp;could&nbsp;telework – but had low broadband adoption – saw lower rates of recovery.&nbsp;



During the initial months of the pandemic, a high ability to telework and a high broadband adoption rate helped dampen increases in unemployment rates. However, the longer-term effects of broadband on unemployment recovery were diminished. Counties with a high ability to telework but low broadband adoption rates were held back in recovering from April to December.&nbsp;&nbsp;This is a striking finding that local broadband adoption rates are crucial for the potential impact of telework. In particular, federal programs put in place to subsidize household broadband access (the Emergency Broadband Benefit and Affordable Connectivity Programs) likely came too late to influence resiliency during the initial phase of the pandemic.&nbsp;



To read more about these findings and other correlations corresponding to counties resiliency, check out the full journal article: Carvalho, Mckenzie, Amy D. Hagerman, and Brian Whitacre. 2022. “Telework and COVID-19 Resiliency in the Southeastern United States.” Journal of Regional Analysis &amp; Policy, https://jrap.scholasticahq.com/article/36123-telework-and-covid-19-resiliency-in-the-southeastern-united-states


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<figure class="aligncenter size-large"><img decoding="async" src="https://southernagtoday.org/wp-content/uploads/2022/06/2.26.4-451x1024.jpg" alt="" class="wp-image-36166"/></figure></div>


Carvalho, Mckenzie, Amy Hagerman, Brian Whitacare, and Teresa Haddock. &#8220;<a href="https://southernagtoday.org/2022/06/broadband-adoption-and-impacts-on-covid-19-unemployment-recovery-in-the-south/">Broadband Adoption and Impacts on Covid-19 Unemployment Recovery in the South</a>.&#8221; Southern Ag Today 2(26.4). June 23, 2022. <a href="http://broadband-adoption-and-impacts-on-covid-19-unemployment-recovery-in-the-south">Permalink</a>

Broadband Adoption and Impacts on COVID-19 Unemployment Recovery in the South

This morning I testified before the U.S. House Agriculture Committee Subcommittee on General Farm Commodities and Risk Management at a hearing titled “A 2022 Review of the Farm Bill:&nbsp;&nbsp;Economic Perspectives in Title I Commodities and Title XI Crop Insurance”.



At the Agricultural and Food Policy Center (AFPC) at Texas A&amp;M University, our work with 675 commercial producers located across the United States has provided our group with a unique perspective on agricultural policy.&nbsp;&nbsp;Currently, we maintain the information to describe and simulate 94 representative crop and livestock operations in 30 states.&nbsp;



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to provide perspective on Titles I and XI, I wanted to briefly summarize a recent AFPC&nbsp;<a href="https://www.afpc.tamu.edu/research/publications/files/716/BP-22-06.pdf">report</a>&nbsp;that looks at farm profitability in 2022 relative to 2021 for our 64 representative crop farms in the face of higher input and output prices<a href="//8D8F8BF9-7915-4FB8-9A32-E8DDDD241BBC#_ftn1">[1]</a>.&nbsp;&nbsp;For this report, we asked our panel members to provide their costs per acre for 2022 versus 2021 for the major input categories.&nbsp;&nbsp;The average for each category across all respondents is presented in Table 1.&nbsp;&nbsp;Updated commodity prices for the 2021/22 and 2022/23 marketing years and policy variables were obtained from the FAPRI-MU Bulletin #01-22 entitled U.S. Agricultural Market Snapshot, April 2022 (Table 2).&nbsp;&nbsp;While some producers were able to benefit by locking in input prices early in 2021 for this year’s crop, most indicated very little ability to lock in these prices even when using their normal tax management strategy of prepaying inputs.&nbsp;&nbsp;Simply, the input suppliers would not lock in a price until the producers agreed to take delivery.&nbsp;&nbsp;Almost every respondent stated they were going to do their best to reduce input usage in the face of the highest costs of production they had ever experienced.&nbsp;



Table 1.&nbsp;&nbsp;Average Percentage Change in Representative Farm Input Costs/Acre from 2021 to 2022.



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<figure class="wp-block-table is-style-stripes"><table><tbody><tr><td>&nbsp;</td><td class="has-text-align-center" data-align="center">Seed</td><td class="has-text-align-center" data-align="center">Nitrogen Fertilizer</td><td class="has-text-align-center" data-align="center">Phosphorus &amp; Potassium Fertilizer</td><td class="has-text-align-center" data-align="center">Herbicide</td><td class="has-text-align-center" data-align="center">Insecticide</td><td class="has-text-align-center" data-align="center">Fungicide</td><td class="has-text-align-center" data-align="center">Fuel &amp; Lube</td></tr><tr><td>Percentage Change 2021 to 2022</td><td class="has-text-align-center" data-align="center">16.58%</td><td class="has-text-align-center" data-align="center">133.62%</td><td class="has-text-align-center" data-align="center">92.75%</td><td class="has-text-align-center" data-align="center">64.23%</td><td class="has-text-align-center" data-align="center">40.25%</td><td class="has-text-align-center" data-align="center">36.02%</td><td class="has-text-align-center" data-align="center">86.63%</td></tr></tbody></table></figure>
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Table 2.&nbsp;&nbsp;Projected Commodity Prices Reported in FAPRI April 2022 Update, Marketing Years 2021/22 and 2022/23.



<figure class="wp-block-table is-style-stripes"><table><tbody><tr><td>&nbsp;</td><td>2021/22</td><td>2022/23</td><td>Percentage Change</td></tr><tr><td>Corn ($/bu)</td><td>$5.78</td><td>$6.06</td><td>4.84%</td></tr><tr><td>Wheat ($/bu)</td><td>$7.60</td><td>$8.08</td><td>6.32%</td></tr><tr><td>Soybean ($/bu)</td><td>$13.27</td><td>$14.22</td><td>7.16%</td></tr><tr><td>Grain Sorghum ($/bu)</td><td>$5.87</td><td>$6.14</td><td>4.60%</td></tr><tr><td>Barley ($/bu)</td><td>$5.27</td><td>$5.60</td><td>6.26%</td></tr><tr><td>Oats ($/bu)</td><td>$4.30</td><td>$4.00</td><td>-6.98%</td></tr><tr><td>Upland Cotton ($/lb)</td><td>$0.910</td><td>$0.871</td><td>-4.29%</td></tr><tr><td>Seed Cotton ($/lb)</td><td>$0.464</td><td>$0.443</td><td>-4.53%</td></tr><tr><td>Peanuts ($/lb)</td><td>$0.238</td><td>$0.240</td><td>0.84%</td></tr><tr><td>Sunflower Seed ($/lb)</td><td>$0.318</td><td>$0.324</td><td>1.89%</td></tr><tr><td>Canola ($/lb)</td><td>$0.318</td><td>$0.295</td><td>-7.23%</td></tr><tr><td>All Rice ($/cwt)</td><td>$15.80</td><td>$15.84</td><td>0.25%</td></tr><tr><td>Long Grain Rice ($/cwt)</td><td>$13.75</td><td>$14.03</td><td>2.04%</td></tr></tbody></table></figure>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The news is full of stories about inflation that is averaging 8.5 percent so far this year for the average American.&nbsp;&nbsp;The lowest year-over-year inflation farmers are seeing is twice that on seed with most categories many times higher.&nbsp;Commodity prices, while generally higher in 2022, are up less than 8 percent.&nbsp;&nbsp;If not for the incredible productivity of the U.S. farmer, there would be a major financial crisis in agriculture.&nbsp;&nbsp;Following are the key highlights of our report:



<ul><li>Net cash farm income in 2021 included a significant amount of ad hoc assistance. Absent another infusion of assistance in 2022, we estimate that significant increases in input prices will result in a huge decline in net cash farm income in 2022 (compared to 2021).</li></ul>



<ul><li>Despite the significant reduction from 2021, higher commodity prices for most crops will likely still result in positive net cash farm income for most of AFPC’s representative crop farms.&nbsp;The noticeable outlier is rice – two-thirds of the rice farms are facing losses in 2022.</li></ul>



<ul><li>The analysis hinges on producers receiving the higher commodity prices forecasted by FAPRI with average yields. With drought being experienced across a significant portion of the country and many other areas facing excess moisture, this assumption may be overly optimistic.&nbsp;</li></ul>



<ul><li>Having worked with farmers located across the U.S over the last 30 years, I want to make sure you understand we are talking about historic amounts of capital that farmers are putting at risk</li></ul>



Throughout my career, I have referred to the programs in Title I and Title XI as the three-legged stool that serves as the safety net for U.S. producers.&nbsp;&nbsp;The current programs, agriculture risk coverage (ARC) and price loss coverage (PLC) and the nonrecourse commodity loan program, serve as two of the legs while the federal crop insurance program serves as the third leg. The following are what I believe to be the most significant shortcomings of all three legs of the stool.&nbsp;&nbsp;Most of my suggestions require additional resources that may be difficult to secure but are necessary.



<ul><li>Price loss coverage (PLC) reference prices worked fine while inflation was fairly low; however, the reference prices set in the 2014 Farm Bill and continued in the 2018 Farm Bill are in dire need of increases to remain relevant.&nbsp;&nbsp;Producers’ costs have increased substantially, and the current reference prices are not providing a relevant amount of protection.&nbsp;&nbsp;</li></ul>



Agriculture risk coverage (ARC) was also established in the 2014 Farm Bill as a second attempt at providing producers a revenue-based safety net program to replace the overly complicated and not widely used average crop revenue election (ACRE) program first used in the 2008 Farm Bill.&nbsp;&nbsp;While good when coming off of relatively high prices, ARC proved worthless when prices declined and remained relatively flat, providing little protection to producers.&nbsp;&nbsp;This is why that while widely chosen over PLC early in the 2014 Farm Bill, ARC was largely abandoned as a choice of safety net program in recent years.&nbsp;&nbsp;Since ARC has the reference price embedded in the calculations, raising reference prices will make ARC more attractive as a revenue protection safety net alternative.



Assuming these two alternatives are used going forward, instead of forcing producers to pick the tool (ARC or PLC) they want, I would suggest allowing them to receive the benefits of whichever is higher in a given year.&nbsp;&nbsp;This would cost nothing more than if the producers have chosen wisely and selected the appropriate tool and would take a major decision away that only serves as a major distraction to their work in trying to grow a crop.&nbsp;&nbsp;



<ul><li>The nonrecourse marketing loan program works as it was designed more than four decades ago; however, despite modest increases for some commodities in the 2018 Farm Bill, the rates have largely remained unchanged over the past 30 years, losing ground to inflation.&nbsp;&nbsp;Providing producers the ability to take out a storage loan or receive a loan deficiency payment on a crop is a very useful marketing tool.&nbsp;&nbsp;The rates need to be raised to increase the amount of the crop that is being protected which will cost money but is significantly less expensive to do at current price levels.</li></ul>



<ul><li>Federal crop insurance is an enormously successful public-private partnership that today stands as the primary safety net tool for U.S. producers.&nbsp;&nbsp;This is due to the program largely using futures prices to annually adjust the amount of protection producers can select.&nbsp;&nbsp;While crop insurance is popular with producers, the little-known secret in the farming community is that bankers “encourage” producers to purchase buy-up levels of crop insurance as a means of protecting the producer and the operating loan banks make to producers.&nbsp;&nbsp;As I have said many times in front of Congress… do no harm to crop insurance and stop outside interest groups from tying provisions of their pet projects to crop insurance – for example, linking climate change practice adoption to insurance program subsidy levels.&nbsp;&nbsp;This runs the risk of creating an unlevel playing field for producers by distorting protection levels and leaving some producers with less protection due to their lack of feasible climate change mitigation alternatives.&nbsp;&nbsp;</li></ul>



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While this morning’s hearing focused on Title 1 and crop insurance, I believe the upcoming farm bill provides a clear opportunity to help address some of the shortcomings ad hoc assistance was designed to address as well. In the case of WHIP, WHIP+, and ERP, they all essentially are designed to help cover the large deductibles producers face in their crop insurance policies.&nbsp;&nbsp;While the ad hoc assistance over the last 5 years has been vital, it comes LONG after the disaster has come and gone and has been limited to specific causes of loss.&nbsp;&nbsp;Perhaps most important, ad hoc assistance is, by definition, not guaranteed.&nbsp;&nbsp;Farmers already face enough risks and uncertainty – ideally, they wouldn’t have to guess at what the safety net might look like as they struggle to put a crop in the ground.



<a href="https://agriculture.house.gov/calendar/eventsingle.aspx?EventID=2519">Link to Full Testimony</a>



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<a href="//8D8F8BF9-7915-4FB8-9A32-E8DDDD241BBC#_ftnref1">[1]</a>&nbsp;Economic Impact of Higher Crop and Input Prices on AFPC’s Representative Crop Farms, AFPC Briefing Report 22-05.&nbsp;&nbsp;<a href="https://www.afpc.tamu.edu/research/publications/files/716/BP-22-06.pdf">https://www.afpc.tamu.edu/research/publications/files/716/BP-22-06.pdf</a>







Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/06/while-still-largely-profitable-crop-producers-putting-historic-amount-of-capital-at-risk-in-2022/">While Still Largely Profitable…Crop Producers Putting Historic Amount of Capital at Risk in 2022</a>&#8220;. Southern Ag Today 2(24.4). June 9, 2022. <a href="http://while-still-largely-profitable-crop-producers-putting-historic-amount-of-capital-at-risk-in-2022">Permalink</a>

While Still Largely Profitable…Crop Producers Putting Historic Amount of Capital at Risk in 2022

So far, 2022 has been a stressful weather year with large portions of the country suffering from first severe cold and then severe drought. Spring storms and tornados have destroyed farm equipment, buildings, and fence lines. Weather risk is something all producers think about and should manage in some way. This could mean diversification of crops, adoption of production practices to mitigate the impacts of extreme weather, and participation in crop insurance.&nbsp;



Weather risk management is more critical than ever. The number of extreme weather events has increased since the turn of the century. Between 1980 and 2019, states in the southern climate region (AR, KS, LA, MS, OK and TX) were affected by 182 weather-related disasters with multi-state impacts totaling $660B (NOAA). The average number of events per year increased to 6.6 disasters per year from 2000 to 2019 compared to 2.6 disasters per year from 1980 to 1999. These types of extreme weather events affect households and agricultural producers years into the future.&nbsp;



Ad hoc disaster assistance has been reported by USDA-Economic Research Service since 1998. From 2000 to 2019, ad hoc disaster programs resulted in $46B in payments to agricultural producers and averaged $2B per year. Ad hoc payments were about 15% of the total direct payments to producers on average but varied widely by year. Nationally, these programs have addressed damages due to hurricanes, drought, extreme heat and cold, flooding, blizzards, and severe weather. Programs include



<ul><li>Crop Insurance</li><li>Noninsured Crop Disaster Assistance Program</li><li>Tree Assistance Program</li><li>Livestock Indemnity Program</li><li>Emergency Assistance for Livestock, Honeybees and Farm-Raised Fish</li><li>Livestock Forage Program</li><li>Emergency Conservation Program</li></ul>



In September 2021, as part of the continuing resolution to fund the Federal government, Congress provided an additional $10 billion in disaster assistance for crop and livestock producers.&nbsp;&nbsp;In response, USDA launched a new Emergency Livestock Relief Program and Emergency Relief Program for producers affected by qualifying weather disasters in 2020 (ERP) and 2021 (ELRP and ERP). Like the recent Wildfire and Hurricane Indemnity Program-Plus (WHIP+), ERP is tied to risk management decisions. Row crop producers eligible for a Phase I ERP must have participated in crop insurance and received an indemnity in a qualifying event on their crop. Payment factors are tied to the level of coverage producers participated in, like WHIP+, as shown in the table. It is also tied to future risk management. To receive the Phase I ERP payment producers will also agree to purchase crop insurance for the next two crop years. Producers who participated in NAP will be addressed in additional phases of the ERP but no details are available at this time. As we draw closer to the 2023 Farm Bill discussions, these ad hoc disaster programs and the increased tie between risk management and program payments may be a point of further discussion.&nbsp;&nbsp;







<figure class="wp-block-table is-style-stripes"><table><tbody><tr><td class="has-text-align-right" data-align="right">Coverage Level &nbsp;</td><td> WHIP+ Factor</td><td>ERP Factor</td></tr><tr><td class="has-text-align-right" data-align="right">Uninsured &nbsp;</td><td> 70%</td><td> Not included at this time</td></tr><tr><td class="has-text-align-right" data-align="right">Catastrophic</td><td> 75%</td><td> 75%</td></tr><tr><td class="has-text-align-right" data-align="right">NAP Basic</td><td> 75%</td><td> 75%</td></tr><tr><td class="has-text-align-right" data-align="right">NAP 50</td><td> 75%</td><td> 80%</td></tr><tr><td class="has-text-align-right" data-align="right">NAP 55&nbsp;</td><td> 75%</td><td> 85%</td></tr><tr><td class="has-text-align-right" data-align="right">NAP 60</td><td> NA</td><td> 90%</td></tr><tr><td class="has-text-align-right" data-align="right">NAP 65</td><td> NA</td><td> 95%</td></tr><tr><td class="has-text-align-right" data-align="right">50% &#8211; &lt;55%&nbsp;</td><td> 77.5%</td><td> 80%</td></tr><tr><td class="has-text-align-right" data-align="right">55% &#8211; &lt;60%&nbsp;</td><td> 80%</td><td> 82.5%</td></tr><tr><td class="has-text-align-right" data-align="right">60% &#8211; &lt;65%&nbsp;</td><td> 82.5%</td><td> 85%</td></tr><tr><td class="has-text-align-right" data-align="right">65% &#8211; &lt;70%&nbsp;</td><td> 85% </td><td> 87.5%</td></tr><tr><td class="has-text-align-right" data-align="right">70% &#8211; &lt;75%&nbsp;</td><td> 87.5%</td><td> 90%</td></tr><tr><td class="has-text-align-right" data-align="right">75% &#8211; &lt;80%&nbsp;</td><td> 92.5%</td><td> 92.5%</td></tr><tr><td class="has-text-align-right" data-align="right">&gt; = 80%&nbsp;</td><td> 95%</td><td> 95%</td></tr><tr><td class="has-text-align-right" data-align="right">Supplemental Coverage Option</td><td> 95%</td><td> Not included at this time</td></tr></tbody></table></figure>



Source: USDA FSA www.farmers.gov



Hagerman, Amy. &#8220;<a href="https://southernagtoday.org/2022/05/usda-launches-new-disaster-program-for-2019-and-2020-crop-years/">USDA Launches New Disaster Program for 2020 and 2021 Crop Years</a>&#8220;. Southern Ag Today 2(22.4). May 26, 2022. <a href="http://usda-launches-new-disaster-program-for-2019-and-2020-crop-years">Permalink</a>

USDA Launches New Disaster Program for 2020 and 2021 Crop Years

In 2017 Extension Economists from across the South worked on a major producer education effort that resulted in a book titled&nbsp;Surviving the Farm Economy Downturn<a href="//F5AA8588-97DC-4F97-B4A8-67D7F11FC07C#_ftn1">[1]</a>.&nbsp;&nbsp;The 1980s is second only to the Great Depression in terms of really bad financial outcomes for agricultural producers in the United States.&nbsp;&nbsp;In the 1980s, the sustained decline in farm incomes and corresponding drop in land values triggered a large number of loan defaults leading to a significant number of farm bankruptcies.&nbsp;&nbsp;The chapter I worked on was titled “Are We Headed Toward Another Farm Financial Crisis as Severe as the 1980s?”&nbsp;&nbsp;The chapter evaluated six of the variables often cited as contributing in some way to the 1980s downturn such as high interest and exchange rates, collapsing land values, and rising debt to asset ratios.&nbsp;&nbsp;At that time the conclusion was that while the late 2016-2017 period had a few caution signs, only the strong exchange rate was similar to the 1980s and that U.S. agriculture was not going into another major downturn.



The Federal Reserve recently increased interest rates by one-half point with strong signals that more increases are on the way.&nbsp;&nbsp;This triggered my thinking about what happens when our current near record crop prices decline to their new normal along with inputs prices that are sticky on the way down.&nbsp;&nbsp;According to USDA survey data, U.S. agricultural producers, on average, have relatively low debt and many are in quite strong cash flow positions.&nbsp;&nbsp;Low debt makes farmers much less vulnerable to a collapse in land values.&nbsp;&nbsp;But, I think the biggest reason the U.S. won’t see a crisis like the 1980s again is the federal crop insurance program.&nbsp;&nbsp;Crop insurance had very low participation during the 1980s with less than 50 million acres covered generally at low levels of buy-up on yield policies (Figure 1).&nbsp;&nbsp;Over time, a lot of innovation has occurred in crop insurance policies.&nbsp;&nbsp;Now, around 225 million acres are covered generally by revenue insurance policies bought up to at least the 70 percent coverage level.&nbsp;&nbsp;With virtually all cropland covered by some type of policy, significant within year price declines will be covered by revenue insurance.&nbsp;&nbsp;Due to this, there wouldn’t be the tremendous pressure on farm incomes contributing to lower land values and increased loan defaults.&nbsp;&nbsp;What about a sustained price decline scenario?&nbsp;&nbsp;That is where crop insurance coupled with price loss coverage provides significant protection.



Figure 1.&nbsp;&nbsp;Planted Acres for Major Crops in Crop Insurance, 1981-2021.



<div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="670" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/05/2.20.4-1-1024x670.png" alt="" class="wp-image-35260" srcset="https://ageconafpc.wpengine.com/wp-content/uploads/2022/05/2.20.4-1-1024x670.png 1024w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/05/2.20.4-1-768x502.png 768w, https://ageconafpc.wpengine.com/wp-content/uploads/2022/05/2.20.4-1.png 1430w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source:&nbsp;&nbsp;National Crop Insurance Services, 2022.</figcaption></figure></div>



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<a href="//F5AA8588-97DC-4F97-B4A8-67D7F11FC07C#_ftnref1">[1]</a>&nbsp;<a href="https://www.afpc.tamu.edu/extension/resources/downturn-book/Surviving-the-Farm-Economy-Downturn.pdf">https://www.afpc.tamu.edu/extension/resources/downturn-book/Surviving-the-Farm-Economy-Downturn.pdf</a>



Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/05/crop-insurance-the-key-to-avoiding-another-farm-economy-downturn/">Crop Insurance the Key to Avoiding Another Farm Economy Downturn</a>&#8220;. Southern Ag Today 2(20.4). May 12, 2022. <a href="http://crop-insurance-the-key-to-avoiding-another-farm-economy-downturn">Permalink</a>

Crop Insurance the Key to Avoiding Another Farm Economy Downturn

While questions about market power in the meatpacking sector have been around for well over 100 years, the spike in retail beef prices following the fire at the Tyson facility in Holcomb, Kansas, in August 2019, and the COVID-19 outbreak in early 2020, brought about a renewed focus on the issue.&nbsp;&nbsp;In response to concerns in the countryside, several legislators offered policy solutions, with the bulk focused primarily on enhancing transparency and increasing negotiated trade volumes in fed cattle markets.&nbsp;



With a number of legislative proposals floating around and with the&nbsp;Livestock Mandatory Reporting Act&nbsp;set to expire in September 2020, the bi-partisan leadership of the House Agriculture Committee asked the Agricultural &amp; Food Policy Center (AFPC) at Texas A&amp;M University to evaluate a number of issues in the cattle markets.&nbsp;&nbsp;Given the sensitivity and regional nature of the topic, we chose to partner with several respected livestock economists from across the country.&nbsp;&nbsp;That work ultimately culminated in the release of a&nbsp;<a href="https://www.afpc.tamu.edu/research/publications/710/cattle.pdf">book</a>&nbsp;in October 2021 that cautioned against many of the proposed changes, warning that proposals to mandate a minimum amount of negotiated purchases could ultimately reduce prices to cattle producers.



Following the release of that book, Senators Grassley (R-IA), Fischer (R-NE), Tester (D-MT), and Wyden (D-OR) released a compromise bill – the&nbsp;Cattle Price Discovery and Transparency Act of 2021&nbsp;(S. 3229) – that would, among other things, require the U.S. Secretary of Agriculture to establish a regional mandatory minimum threshold for the percentage of cattle purchased under negotiated grid or negotiated pricing terms.&nbsp;&nbsp;Senator John Boozman, Ranking Member, Senate Committee on Agriculture, Nutrition, and Forestry asked AFPC to evaluate the bill.&nbsp;&nbsp;Our January 2022&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/712/BP-22-Cattle-Market-Transparency.pdf">report</a>&nbsp;found that an additional 6 million head would have to be purchased via negotiation from 2022 to 2026, with the burden (and cost) falling largely on the Southern Plains.



In April 2022, Senators Fischer (R-NE), Grassley (R-IA), Tester (D-MT), and Wyden (D-OR) released an updated version of their bill – the&nbsp;Cattle Price Discovery and Transparency Act of 2022&nbsp;(S. 4030).&nbsp;&nbsp;Senator Boozman again asked AFPC to weigh in on the updated bill.&nbsp;&nbsp;Our latest&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/715/BP-22-4-Cattle-Market-Transparency.pdf">report</a>, released last Friday, found that the number of head impacted by the updated bill would likely be lower than in S. 3229, but we cautioned that the updated bill gives so much discretion to the Secretary that it was virtually impossible to assess the expected costs to the cattle industry.&nbsp;&nbsp;When taking all of the uncertainty into account, we noted that it was conceivable that the estimated cost of the latest bill could far exceed earlier estimates.&nbsp;



Last week, a group of livestock economists – all of whom were involved in drafting the book noted above – independently released a&nbsp;<a href="https://www.lmic.info/sites/default/files/Comments%20on%20the%20Cattle%20Price%20Discovery%20and%20Transparency.pdf">report</a>&nbsp;noting there is “no research evidence of any significant or persistent fed cattle price discovery problem at this time” and that proposed legislation would impose “many millions of dollars of additional cost, added risk, and lost value”&nbsp;&nbsp;that would result in “lower feeder cattle prices and higher consumer beef prices.”&nbsp;&nbsp;Over the course of the past two years, that is a consistent message we’ve heard from every economist we’ve consulted.



Fischer, Bart. &#8220;<a href="https://southernagtoday.org/2022/04/fed-cattle-pricing-will-well-intentioned-proposals-actually-reduce-cattle-prices/">Fed Cattle Pricing: Will Well-Intentioned Proposals Actually Reduce Cattle Prices?</a>&#8220;. Southern Ag Today 2(18.4). April 28, 2022. <a href="http://fed-cattle-pricing-will-well-intentioned-proposals-actually-reduce-cattle-prices">Permalink</a>

Fed Cattle Pricing: Will Well-Intentioned Proposals Actually Reduce Cattle Prices?

Often in agricultural policy we find that well intentioned policies designed to solve a problem often have unintended consequences.&nbsp;&nbsp;A good example of this is the U.S. ethanol industry.



Since the 1970s the U.S. government has implemented a variety of policies aimed at increasing the use of gasohol that later became known as ethanol.&nbsp;&nbsp;There were a variety of tax credits offered to blenders in an attempt to increase the use of ethanol in motor fuels.&nbsp;&nbsp;One of the major boosts to biofuels came in 1996 when California announced it was banning Methyl tertiary-butyl ether (MTBE) as an oxygenate in motor fuels by 2003.&nbsp;&nbsp;This change brought to light the need for a replacement oxygenate that ethanol was touted as being able to fill.&nbsp;&nbsp;However the most significant boost for the ethanol industry came from the Energy Policy Act of 2005 (EPA of 2005) and the Energy Independence and Security Act of 2007 (EISA of 2007) both aiming to increase U.S. energy independence.&nbsp;&nbsp;The EPA of 2005 mandated increasing levels of biofuels (ethanol and biodiesel) that had to be blended into the nation’s fuel supply each year from 4 billion gallons in 2006 up to 7.5 billion gallons by 2012. Overnight this effectively created a demand for biofuels and therefore corn leading to a significant price increase (Figure 1).&nbsp;&nbsp;The EISA of 2007 increased the mandate each year to 36 billion gallons by 2022 (15 billion gallons of corn ethanol and 21 billion gallons of other renewable fuels).&nbsp;&nbsp;Corn prices continued an upward trend spiking during the midwest drought of 2012.&nbsp;&nbsp;



At the same time all of this was happening in the U.S., the rising corn prices were seen not just by producers in the U.S. but by producers around the world.&nbsp;&nbsp;Spurred on by prices that were now profitable, producers increased their corn production.&nbsp;&nbsp;This created an unintended consequence of incentivizing corn production and exports by several countries who had previously not been significant competitors – namely Brazil and Ukraine (Figure 2).&nbsp;&nbsp;Prior to the 1990s, the U.S. was the unrivaled corn exporter in the world with only Argentina with significant corn exports.&nbsp;&nbsp;Now, Argentina, Brazil and Ukraine (prior to being attacked by Russia) are all major exporters of corn who compete with U.S. producers.



Figure 1.&nbsp;&nbsp;U.S. Marketing Year Average Corn Price, 1980 to 2021


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Source: USDA-NASS.



Figure 2. Corn Exports by Major Exporting Countries, 1980 to 2021


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Source: USDA.&nbsp;&nbsp;Found at https://apps.fas.usda.gov/psdonline/app/index.html#/app/home



Outlaw, Joe, and David Anderson. &#8220;<a href="https://southernagtoday.org/2022/04/the-u-s-ethanol-industry-and-unintended-consequences/">The U.S. Ethanol Industry and Unintended Consequences</a>.&#8221; Southern Ag Today 2(16.4). April 14, 2022. <a href="http://httpthe-u-s-ethanol-industry-and-unintended-consequences">Permalink</a>

The U.S. Ethanol Industry and Unintended Consequences

It’s around this time of year – with the release of the President’s budget – that we start to get a lot of questions about what’s going to happen with Federal spending for the year.&nbsp;&nbsp;The questions are quite natural given the amount of attention the release of the President’s budget generates and the enormous volume of pages it fills (i.e. this year the Appendix alone spans 1,400 pages).&nbsp;&nbsp;It’s somewhat ironic, then, that the Constitution gives no formal role to the President in the federal budget process.&nbsp;&nbsp;In fact, the Constitution vests the authority to “lay and collect taxes” and to authorize the withdrawal of funds from the Treasury exclusively in the U.S. Congress.



While Congress controls the power of the purse, for the past 100 years – since passage of the Budget and Accounting Act of 1921 – there has been a&nbsp;statutory&nbsp;role for the President in establishing a budget and presenting it to Congress.&nbsp;&nbsp;For the past 30 years, Federal law has stipulated that the President is to submit the budget to Congress “on or after the first Monday in January but not later than the first Monday in February of each year” (we’ll save the discussion about whether they are submitted on time for another day).



If Congress controls the purse strings, then what’s the point of the President’s budget?&nbsp;



First, it kicks off the Congressional budget process.&nbsp;&nbsp;In exercising the power of the purse, Congress establishes a budget resolution, which is a broad revenue/spending framework (which is also the basis for budget enforcement) that also provides spending allocations to the Appropriations Committees.&nbsp;&nbsp;The budget resolution can also include reconciliation instructions, which featured prominently in last year’s debates on the Build Back Better Act.



Second, the President’s budget is an overview of the President’s policy vision.&nbsp;&nbsp;Often, that vision includes proposing significant changes to existing Federal programs.&nbsp;&nbsp;With respect to agriculture, notably, the last two budget cycles broke with recent tradition which had proposed a litany of ways in which farm policy could be slashed to save money.&nbsp;&nbsp;Last year’s budget was silent on the matter and this year is no different.&nbsp;&nbsp;With that said, the budget does hint at other significant changes that could have a major impact on agriculture.&nbsp;&nbsp;For example, the so-called Green Book –the Treasury Department’s explanation of this year’s revenue proposals – contemplates imposing capital gains at death.&nbsp;&nbsp;The Agricultural &amp; Food Policy Center (AFPC)&nbsp;<a href="https://afpc.tamu.edu/research/publications/files/708/RR-21-01.pdf">reported</a>&nbsp;last summer on the enormous impact that the elimination of stepped-up basis (or the imposition of transfer taxes) could have on agricultural producers.&nbsp;&nbsp;While the President can propose changes, only Congress has the power to actually change the law.



Bottom line:&nbsp;&nbsp;the President’s budget kicks off the budget process and signals the policy priorities of the Administration, but it’s Congress that ultimately controls the purse strings.



Fischer, Bart. &#8220;<a href="https://southernagtoday.org/2022/03/presidents-budget-does-it-matter/">President’s Budget: Does it Matter?</a>&#8220;. Southern Ag Today 2(14.4). March 31, 2022. <a href="http://presidents-budget-does-it-matter">Permalink</a>

President’s Budget:  Does it Matter?

On March 16, I testified before the House Agriculture Committee at a hearing titled



“A 2022 Review of the Farm Bill:&nbsp; The Role of USDA Programs in Addressing Climate Change”.&nbsp;&nbsp;Working closely with commercial producers has provided the Agricultural and Food Policy Center with a unique perspective on agricultural policy.&nbsp;&nbsp;While we normally provide the results of policy analyses at committee hearings, on this occasion I was carrying the message from the nearly 675 producers we work with across the United States.



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparation for the testimony we emailed our representative farm members the following points that I planned on making and asked them to let us know if they agreed or disagreed with each of the 5 points.&nbsp;&nbsp;In two days, we received 105 responses and several more after I had submitted my testimony.



<ol><li>Having a strong safety net from Title I programs (ARC/PLC and the marketing loan) and Title XI (crop insurance) remains critical even with new carbon market opportunities.&nbsp;They unanimously agreed with this statement in spite of the fact they expect very little benefit from Title I programs this year.&nbsp;</li><li>USDA conservation programs (CRP, CSP and EQIP) that have incentivized a broad array of conservation practices have worked well in the past.&nbsp;They have just been under funded.&nbsp;&nbsp;Producers much prefer this type of program to the current carbon program situation where the significant record keeping requirements, additionality requirements, uncertain soil tests, and very low financial benefits have the majority of our representative farm panel members not interested in participating.&nbsp;</li><li>Congress should strongly consider providing financial incentives to early adopters who are not eligible to participate in current carbon programs due to the additionality requirement.&nbsp;If it is good to sequester carbon it should also be good to keep carbon sequestered.&nbsp;&nbsp;Many of the producers who responded to my request indicated that they are disgusted with a system that only rewards late adopters</li><li>All producers regardless of size, region, or crops planted should have opportunities in any new USDA climate programs.&nbsp;This statement appears fairly benign but let me assure you it is not.&nbsp;&nbsp;If all producers in the U.S. do not have some USDA NRCS identified practice they can undertake in the name of sequestering carbon then there will be regional winners and losers, and by crop, and by size as carbon programs are created.</li><li>Congress should consider providing USDA the authority to safeguard producers from being taken advantage of in current carbon markets dealing with private entities.&nbsp;For example, signing a carbon contract with at least one current company would require a producer to forgo commodity and conservation program benefits on that land.&nbsp;&nbsp;This is really the only point where many producers disagreed with me.&nbsp;&nbsp;Several producers would rather not have the government get involved in the carbon market at all and asked me to point out that while they see a problem – it could be made worse.</li></ol>



<a href="https://agriculture.house.gov/calendar/eventsingle.aspx?EventID=2441">Link to Full Testimony</a>



Outaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/03/a-2022-review-of-the-farm-bill-the-role-of-usda-programs-in-addressing-climate-change/">A 2022 Review of the Farm Bill: The Role of USDA Programs in Addressing Climate Change</a>&#8220;. Southern Ag Today 2(12.4). March 17, 2022. <a href="http://a-2022-review-of-the-farm-bill-the-role-of-usda-programs-in-addressing-climate-change">Permalink</a>

A 2022 Review of the Farm Bill:  The Role of USDA Programs in Addressing Climate Change

Producers are calling asking about the FSA signup decision they have to make by March 15th.&nbsp;&nbsp;&nbsp;Even though commodity programs have used marketing year average prices to trigger payments for decades, there still seems to be some uncertainty among producers.&nbsp;



A quick look at nearby futures would indicate that neither agriculture risk coverage (ARC) nor price loss coverage (PLC) will likely trigger a payment for the 2022 crop.&nbsp;&nbsp;While it makes some sense to look at nearby (old crop) and harvest time (new crop) futures to help decide what to plant, futures prices may or may not be a very good guide for program signup decisions.&nbsp;



Why?&nbsp;&nbsp;Because marketing year average prices start being calculated at harvest of this year’s crop ending prior to the next year’s harvest (Figure 1).&nbsp;&nbsp;At the end of the marketing year, USDA will multiply each monthly price for the commodity by the percent of the crop marketed that month to arrive at a marketing year average price that weights the monthly prices with higher marketings greater than those months (like right now) with very little marketings occurring.&nbsp;



While most would agree that the current futures outlook would indicate no ARC or PLC payments, trying to guess at weather, geopolitical and trade conditions around the world 18 months in advance can be daunting.



Figure 1.&nbsp;&nbsp;Marketing Years and Expected Date Final Price will be Reported by Commodity.



<figure class="wp-block-table aligncenter is-style-stripes"><table><tbody><tr><td>Commodity</td><td>Marketing Year</td><td>Publishing Dates for the Final 2022/2023</td></tr><tr><td>Wheat</td><td>Jun. 1- May 31</td><td>August 28, 2023</td></tr><tr><td>Barley</td><td>Jun. 1- May 31</td><td>August 28, 2023</td></tr><tr><td>Oats</td><td>Jun. 1- May 31</td><td>August 28, 2023</td></tr><tr><td>Peanuts</td><td>Aug. 1- Jul. 31</td><td>August 28, 2023</td></tr><tr><td>Corn</td><td>Sep. 1- Aug. 31</td><td>September 30, 2023</td></tr><tr><td>Grain Sorghum</td><td>Sep. 1- Aug. 31</td><td>September 30, 2023</td></tr><tr><td>Soybeans</td><td>Sep. 1- Aug. 31</td><td>September 30, 2023</td></tr><tr><td>Dry Peas</td><td>Jul. 1- Jun. 30</td><td>September 30, 2023</td></tr><tr><td>Lentils</td><td>Jul. 1- Jun. 30</td><td>September 30, 2023</td></tr><tr><td>Canola</td><td>Jul. 1- Jun. 30</td><td>September 30, 2023</td></tr><tr><td>Large Chickpeas</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Small Chickpeas</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Sunflower Seed</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Flaxseed</td><td>Jul. 1- Jun. 30</td><td>November 30, 2023</td></tr><tr><td>Mustard Seed</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Rapeseed</td><td>Jul. 1- Jun. 30</td><td>November 30, 2023</td></tr><tr><td>Safflower</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Crambe</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Sesame Seed</td><td>Sep. 1- Aug. 31</td><td>November 30, 2023</td></tr><tr><td>Seed Cotton</td><td>Aug. 1- Jul. 31</td><td>October 30, 2023</td></tr><tr><td>Rice (Long Grain)</td><td>Aug. 1- Jul. 31</td><td>October 30, 2023</td></tr><tr><td>Rice (Med/Short Grain)</td><td>Aug. 1- Jul. 31</td><td>October 30, 2023</td></tr><tr><td>Rice (Temperate Japonica)</td><td>Oct. 1- Sep. 30</td><td>January 2024</td></tr></tbody></table></figure>



<a href="https://southernagtoday.uada.edu/should-i-buy-stax/">Should I Buy STAX?</a>



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Outlaw, Joe. &#8220;<a href="https://southernagtoday.org/2022/03/what-is-a-marketing-year-average-price/">What is a Marketing Year Average Price?</a>&#8221; Southern Ag Today 2(10.4). March 3, 2022. <a href="http://what-is-a-marketing-year-average-price">Permalink</a>

What is a Marketing Year Average Price?

As we’ve traveled throughout the Southern United States over the past two months, one of the questions we’ve most often been asked is whether a producer should purchase a Stacked Income Protection Plan (STAX) insurance policy for the 2022 crop year.&nbsp;&nbsp;While we would never presume to know what’s best for a producer – because we are neither on the hook for paying the premiums nor do we know a particular producer’s financial situation or appetite for risk – we have been encouraging producers to take a very close look at STAX and to exhaust that option before considering any other alternatives.&nbsp;&nbsp;Generally speaking, area-wide policies like STAX can serve as an effective complement to an individual crop insurance policy. With prices at their current levels, that option arguably becomes even more important.



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;STAX was first authorized under the 2014 Farm Bill.&nbsp;&nbsp;It was retained in the Bipartisan Budget Act of 2018 and the 2018 Farm Bill, but both bills required producers to choose between (1) Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) and (2) STAX.&nbsp;&nbsp;Any farm (FSA Farm Number) with seed cotton base enrolled in ARC or PLC is ineligible for STAX.&nbsp;&nbsp;As a result, most producers we talk to are currently trying to choose between ARC (particularly ARC County, or ARC-CO) and STAX.



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While there are a number of factors that must be taken into consideration – for example, how much seed cotton base do you have on your farm and do you plan to plant that farm to cotton – in the example that follows we attempt to draw some comparisons between ARC-CO and STAX.&nbsp;&nbsp;For those parts of the cotton belt with February 28th&nbsp;sales closing dates (including the Arkansas, Georgia, and Mississippi counties in the example below), the projected price for crop insurance has been set at $1.02/lb with a 0.22 volatility factor (which is used to establish crop insurance premiums).&nbsp;&nbsp;While the Texas and Oklahoma counties have a March 15th sales closing date and are still undergoing price discovery, the analysis that follows uses the same price assumptions.&nbsp;&nbsp;The analysis also assumes that the maximum amount of STAX is being purchased, including a 20% coverage level with a 120% protection factor.&nbsp;&nbsp;If a producer has an underlying crop insurance coverage level above 70%, then the STAX coverage would be reduced.



&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Table 1 below illustrates the maximum possible ARC-CO payment rate in the event of sufficient price and/or yield losses.&nbsp;&nbsp;It illustrates the same for STAX, but it also includes the estimated premiums paid for STAX coverage.&nbsp;&nbsp;The last column compares maximum possible net indemnities from STAX to the maximum possible ARC-CO payments.&nbsp;&nbsp;As noted below, in every case, STAX provides more than TWICE the coverage of ARC-CO (even after accounting for premiums).&nbsp;&nbsp;Naturally, if both prices and yields end up hitting their average levels, then neither ARC-CO nor STAX will pay, and the producer will be left paying the STAX premium.&nbsp;&nbsp;As a result, there is no clear-cut answer to the question above, but it is abundantly clear that the amount of protection a producer can secure under STAX vastly exceeds that offered by ARC-CO.&nbsp;&nbsp;Finally, while we provide estimates in this article for purposes of illustrating options for you to consider, nothing can substitute for discussing these options with your crop insurance agent.



Table 1: Comparing ARC-CO and STAX in the Counties with the Largest Number of Planted Acres in the 5 Largest Southern Cotton States


<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="678" height="284" src="https://ageconafpc.wpengine.com/wp-content/uploads/2022/06/2.8.4-1.png" alt="" class="wp-image-36103"/><figcaption class="wp-element-caption">*The maximum possible [net] indemnity can go up if harvest price exceeds the price at planting.&nbsp;&nbsp;There is no additional premium paid by the producer in that case.</figcaption></figure></div>


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Fischer, Bart L., and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2022/02/should-i-buy-stax/">Should I Buy Stax?</a>&#8221; Southern Ag Today 2(8.4). February 17, 2022. <a href="http://should-i-buy-stax">Permalink</a>

Should I Buy STAX?

Producers have until March 15th&nbsp;to select their Title I safety net coverage at their local county FSA office.&nbsp;&nbsp;Current futures prices for many U.S. covered commodities are well above the reference prices which has most producers thinking there will be no payments for the Price Loss Coverage (PLC) so they should choose the revenue coverage provided by Agriculture Risk Coverage-County Option (ARC-CO).&nbsp;&nbsp;The combination of price and yield protection provided by ARC-CO should be somewhat more likely to trigger a payment than just the price protection provided by PLC.&nbsp;&nbsp;On the surface this seems quite reasonable, however, as is the case with most decisions in life, this one is much more complicated than that.



First, with a 2022 yield equal to the 2022 county benchmark yield, ARC-CO would not trigger a payment until market prices fall below $3.18/bu for corn, $7.84/bu for soybeans, $3.40/bu for grain sorghum, and $4.73/bu for wheat (Figure 1).&nbsp;&nbsp;These trigger prices are considerably lower than the effective reference prices for each crop.&nbsp;&nbsp;So, what if the yield isn’t average?&nbsp;&nbsp;Across these 4 commodities, it would take a 14 percent yield decline relative to the 2022 county benchmark yield just to increase each commodity’s ARC-CO trigger price to the effective reference price (i.e., $3.70 for corn, etc).



Second, the supplemental coverage option (SCO) is only available on the crops for which a producer chooses PLC as their Title I safety net program.&nbsp;&nbsp;Given the extremely high futures prices that currently are in place during price discovery, if a producer is looking for a shallow loss revenue protection option, SCO often provides significantly more revenue protection than ARC-CO which uses marketing year average prices to determine revenue benchmarks.&nbsp;&nbsp;While SCO has a premium that must be paid, many producers may find the coverage difference well worth the cost.



Finally, the current high futures prices for most commodities are good indicators that market prices will be quite strong this harvest.&nbsp;&nbsp;However, both ARC-CO and PLC use marketing year average prices to determine whether a payment is triggered.&nbsp;&nbsp;The 2022-23 marketing year for corn begins September 1, 2022 and continues through August 31, 2023.&nbsp;&nbsp;While not likely to crash, a lot can happen between now and August 2023.&nbsp;&nbsp;Purchasing SCO allows a producer to elect PLC for the covered commodity, effectively establishing a free put option at the reference price (at least on those base acres and program yields). 



Figure 1.&nbsp;&nbsp;Example ARC-CO and PLC Parameters for the 2022 Decision.



<figure class="wp-block-table is-style-stripes"><table><tbody><tr><td class="has-text-align-center" data-align="center">Crop Name</td><td class="has-text-align-center" data-align="center">2016 County Yield</td><td class="has-text-align-center" data-align="center">2017 County Yield</td><td class="has-text-align-center" data-align="center">2018 County Yield</td><td class="has-text-align-center" data-align="center">2019 County Yield</td><td class="has-text-align-center" data-align="center">2020 County Yield</td><td class="has-text-align-center" data-align="center">2022 Benchmark County Yield</td><td class="has-text-align-center" data-align="center">2022 Benchmark Price</td><td class="has-text-align-center" data-align="center">2022 Benchmark Revenue</td><td class="has-text-align-center" data-align="center">2022 Guarantee Revenue</td><td class="has-text-align-center" data-align="center">Price below which ARC-CO is Triggered with an Avg Yield</td><td class="has-text-align-center" data-align="center">2022 Effective Reference Price (ERP)</td></tr><tr><td class="has-text-align-center" data-align="center">Corn</td><td class="has-text-align-center" data-align="center">129.62</td><td class="has-text-align-center" data-align="center">144.90</td><td class="has-text-align-center" data-align="center">168.80</td><td class="has-text-align-center" data-align="center">137.45</td><td class="has-text-align-center" data-align="center">157.42</td><td class="has-text-align-center" data-align="center">146.59</td><td class="has-text-align-center" data-align="center">$3.70</td><td class="has-text-align-center" data-align="center">$542.38</td><td class="has-text-align-center" data-align="center">$466.45</td><td class="has-text-align-center" data-align="center">$3.18</td><td class="has-text-align-center" data-align="center">$3.70</td></tr><tr><td class="has-text-align-center" data-align="center">Grain Sorghum</td><td class="has-text-align-center" data-align="center">97.93</td><td class="has-text-align-center" data-align="center">109.10</td><td class="has-text-align-center" data-align="center">120.02</td><td class="has-text-align-center" data-align="center">93.14</td><td class="has-text-align-center" data-align="center">93.48</td><td class="has-text-align-center" data-align="center">100.17</td><td class="has-text-align-center" data-align="center">$3.95</td><td class="has-text-align-center" data-align="center">$395.67</td><td class="has-text-align-center" data-align="center">$340.28</td><td class="has-text-align-center" data-align="center">$3.40</td><td class="has-text-align-center" data-align="center">$3.95</td></tr><tr><td class="has-text-align-center" data-align="center">Soybeans</td><td class="has-text-align-center" data-align="center">49.46</td><td class="has-text-align-center" data-align="center">44.56</td><td class="has-text-align-center" data-align="center">51.96</td><td class="has-text-align-center" data-align="center">39.06</td><td class="has-text-align-center" data-align="center">45.11</td><td class="has-text-align-center" data-align="center">46.38</td><td class="has-text-align-center" data-align="center">$9.12</td><td class="has-text-align-center" data-align="center">$422.99</td><td class="has-text-align-center" data-align="center">$363.77</td><td class="has-text-align-center" data-align="center">$7.84</td><td class="has-text-align-center" data-align="center">$8.40</td></tr><tr><td class="has-text-align-center" data-align="center">Wheat</td><td class="has-text-align-center" data-align="center">74.45</td><td class="has-text-align-center" data-align="center">86.24</td><td class="has-text-align-center" data-align="center">61.69</td><td class="has-text-align-center" data-align="center">61.77</td><td class="has-text-align-center" data-align="center">64.21</td><td class="has-text-align-center" data-align="center">66.81</td><td class="has-text-align-center" data-align="center">$5.50</td><td class="has-text-align-center" data-align="center">$367.46</td><td class="has-text-align-center" data-align="center">$316.46</td><td class="has-text-align-center" data-align="center">$4.73</td><td class="has-text-align-center" data-align="center">$5.50</td></tr></tbody></table></figure>



Outlaw, Joe, and Bart Fischer. &#8220;<a href="https://southernagtoday.org/2022/02/the-arc-co-plc-decision-isnt-as-easy-as-you-think/">The ARC-CO/PLC Decision isn’t as Easy as You Think</a>.&#8221; Southern Ag Today 2(6.4). February 3, 2022. <a href="http://the-arc-co-plc-decision-isnt-as-easy-as-you-think">Permalink</a>

The ARC-CO/PLC Decision Isn’t as Easy as You Think

The farm program election deadline for 2022 is March 15th, and producers have the option to enroll commodities in Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC).&nbsp;&nbsp;PLC protects against declines in prices, and ARC protects against revenue losses at the county level (ARC-CO) or individual farm level (ARC-IC).&nbsp;&nbsp;Among Southern producers, ARC-IC has not been popular in previous program elections, accounting for less than 1 percent of farm signups.&nbsp;&nbsp;However, for the 2022 crop year, producers are making their farm program decisions at a time with relatively high commodity prices.&nbsp;&nbsp;In this situation, it is unlikely that PLC will provide much support, and only alternatives that include yield losses will likely trigger support (ARC-CO and ARC-IC).&nbsp;&nbsp;This begs the question of whether producers should consider ARC-IC for 2022.&nbsp;&nbsp;ARC-IC differs from ARC-CO in the following ways:&nbsp;



<ol type="1">
<li>The ARC-IC benchmark revenue is determined by a producer’s individual farm yields rather than county average yields.&nbsp;</li>



<li>ARC-IC election is made by Farm Service Number (FSN) rather than by commodity, i.e., if ARC-IC is selected for a FSN, then all commodities on that FSN are enrolled in ARC-IC.&nbsp;&nbsp;If multiple FSNs are enrolled in ARC-IC, they will be treated as one “ARC-IC Farm.”&nbsp;</li>



<li>An ARC-IC payment is made on 65% of base acres rather than 85% for ARC-CO.</li>



<li>Coverage applies to commodities with planted acres rather than base acres, i.e., if a producer has seed cotton base but plants corn in 2022, the ARC-IC benchmark revenue will be determined by corn prices and yields.&nbsp;</li>
</ol>



In addition to the ARC-CO/PLC decision tool, Texas A&amp;M University offers a spreadsheet calculator for producers considering ARC-IC available at&nbsp;<a href="http://www.afpc.tamu.edu/">www.afpc.tamu.edu</a>.&nbsp;&nbsp;For the ARC-IC calculator, producers will need the information in Table 1.&nbsp;&nbsp;Producers can utilize the calculator to compare potential ARC-IC payments with different combinations of FSNs and different price and yield expectations.&nbsp;



Table 1. ARC-IC Calculator Inputs


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Graff, Natalie, and Joe Outlaw. &#8220;<a href="https://southernagtoday.org/2022/01/arc-ic-considerations-for-2022-farm-program-elections/">ARC-IC Considerations for 2022 Farm Program Elections</a>&#8220;. Southern Ag Today 2(4.4). January 20, 2022. <a href="http://arc-ic-considerations-for-2022-farm-program-elections">Permalink</a>

ARC-IC Considerations for 2022 Farm Program Elections

For the 2022 crop year, producers will have several decisions to make over the next few months.&nbsp;&nbsp;For example, the U.S. Department of Agriculture’s Farm Service Agency (FSA) has announced that producers will have until March 15, 2022, to make their Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) elections and enrollments for the 2022 crop year.&nbsp;&nbsp;In addition, many of the sales closing dates for crop insurance for spring-planted crops are rapidly approaching.



For the ARC-County (ARC-CO) and PLC decision, the Agricultural &amp; Food Policy Center (AFPC) at Texas A&amp;M University provides a&nbsp;<a href="https://www.afpc.tamu.edu/tools/farm/farmbill/2018/">decision tool</a>&nbsp;to evaluate the trade-offs between the two programs on a crop-by-crop and farm-by-farm basis.&nbsp;&nbsp;AFPC also offers a spreadsheet calculator for producers who are considering ARC-Individual (ARC-IC).&nbsp;&nbsp;Given the current price outlook – where producers may expect to receive little (or no) assistance from ARC and PLC – it arguably makes the crop insurance coverage decisions even more important.&nbsp;&nbsp;



To that end, we offer the following “rules of thumb” for you to consider as you make farm safety net decisions for the 2022 crop year:



<ul>
<li>Similar to the 2021 crop year, ARC and PLC are less likely to pay.&nbsp;&nbsp;That’s okay!&nbsp;&nbsp;Most producers tell us they would rather get their income from the market than the government anyway.&nbsp;</li>



<li>Rather than focusing on expected ARC/PLC payments (when neither may trigger), consider instead where you are most vulnerable.&nbsp;&nbsp;Is it lower prices due to trade disruptions or slow economic recovery?&nbsp;&nbsp;Is it lower yields due to persistent drought?</li>



<li>Talk to your crop insurance agent to make sure you’ve evaluated all yield enhancement options (e.g., Yield Exclusion) and unit structures.</li>



<li>With current price elections on crop insurance, perhaps now is the time to focus more on adding area-wide tools like the Stacked Income Protection Plan (STAX) for upland cotton, the Supplemental Coverage Option (SCO), and the Enhanced Coverage Option (ECO).
<ul>
<li>You can have STAX on a farm if the seed cotton base on the farm is not enrolled in ARC/PLC.</li>



<li>You can purchase SCO for a crop on a farm as long as it’s not enrolled in ARC.</li>



<li>You can purchase ECO on the farm regardless of ARC/PLC enrollment.</li>
</ul>
</li>



<li>At a minimum, on farms with little (or no) seed cotton base, be sure to take a close look at area-wide policies like STAX.&nbsp;&nbsp;</li>



<li>If your APH is relatively higher than the county average yields, then be sure to compare STAX against both SCO and ECO.&nbsp;&nbsp;Because of the 10% limitation in ARC, you may find SCO to be a more attractive alternative (and PLC can be utilized as well, providing some downside price protection, even if you do not expect to need it).</li>
</ul>



Fischer, Bart, and J. Marc Raulston. &#8220;<a href="https://southernagtoday.org/2022/01/2022-farm-safety-net-decisions/">2022 Farm Safety Net Decisions</a>&#8220;. Southern Ag Today 2(2.4). January 6, 2022. <a href="http://2022-farm-safety-net-decisions">Permalink</a>

2022 Farm Safety Net Decisions

Congress is rushing to finish up its year-end work.&nbsp;&nbsp;President Biden has already signed the continuing resolution to fund most of the Federal government through February 18, 2022, and Congress has now reached agreement on other priorities like the National Defense Authorization Act and raising the debt ceiling.&nbsp;&nbsp;Reaching agreement on the Build Back Better Act (BBBA) – which passed the U.S. House of Representatives on November 19, 2021 – has proven to be more elusive.



While the BBBA touches on a number of different topics – falling mostly under the banner of “human infrastructure” – most of the agriculture-related provisions are tied to addressing climate change.&nbsp;&nbsp;As noted in Figure 1, the bill dedicates an estimated $76.9 billion in spending on agriculture-related priorities over the next 10 years.&nbsp;&nbsp;For example, $26 billion is provided for forestry activities, most of which is for forest restoration and fuels reduction projects.&nbsp;&nbsp;Another $25.3 billion is provided for a number of rural development priorities, including $6.6 billion for a “fix” to the debt relief for socially disadvantaged producers provision from the American Rescue Plan (which has run into a number of constitutional challenges in the courts).&nbsp;&nbsp;Perhaps most notably, the bill also includes $23.5 billion for conservation, with $5 billion going to cover crops and most of the remainder going to temporary plus-ups for existing conservation programs.



The path forward for the BBBA is not clear.&nbsp;&nbsp;Even if the Senate reaches agreement before the end of the calendar year, they may very well amend the bill which will require the House to weigh in again.&nbsp;&nbsp;Finally, even if the bill does become law, the temporary nature of the funding increases on the agriculture-related provisions may very well add to the complications that Congressional negotiators will face as they write the next farm bill.


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Fischer, Bart. &#8220;<a href="https://southernagtoday.org/2021/12/build-back-better/">Build Back Better?</a>&#8221; Southern Ag Today 1(50.4). December 9, 2021. <a href="http://build-back-better">Permalink</a>

Build Back Better?

A total of 246,601,268 base acres were enrolled in the U.S. in 2021 across 23 covered commodities (Outlaw, Raulston, 2021). The enrolled base acres for the Farm Bill support programs, Agricultural Risk Coverage (ARC-CO) and Price Loss Coverage (PLC), total 244,109,500 for the 2021 program year. The remaining 2,496,768 base acres are enrolled in Agricultural Risk Coverage Individual Coverage (ARC-IC). Price Loss Coverage has the highest share of enrolled base acres at 56.7% followed by ARC-CO at 42.3% and ARC-IC at 1%. The Southern Region (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia) account for 50,459,856 acres, or 20.6%, of the U.S. total acreage enrolled in PLC, ARC-CO and ARC-IC programs. The share of base acres enrolled by program for the 2021 crop year is 56.7% PLC, 42.3% ARC-CO, and 1.0% ARC-IC.&nbsp;&nbsp;&nbsp;



The share of base acres enrolled in 2021 between ARC-CO and PLC is shown in Table 1. The crop with highest percentage of base acres enrolled in ARC-CO for the U.S. is soybeans at 87.2%. The next closest crop in terms of share is corn at 48.4%. The crops with the highest percentage enrolled in PLC is long grain rice at 99.8% followed by peanuts at 99.7%, seed cotton at 91.2%, and grain sorghum at 73.75%.&nbsp;



Table 1. Share of Enrolled Base Acres&nbsp;by Crop for the 2021 Program Year.



2021 ARC-CO vs. PLC



<figure class="wp-block-table aligncenter is-style-stripes" style="font-size:12px"><table><tbody><tr><td>&nbsp;</td><td class="has-text-align-center" data-align="center">13 Southern States ARC-CO %</td><td class="has-text-align-center" data-align="center">U.S.&nbsp;ARC-CO %</td><td class="has-text-align-center" data-align="center">13 Southern States&nbsp;PLC %</td><td>U.S.&nbsp;PLC %</td></tr><tr><td>Corn</td><td class="has-text-align-center" data-align="center">50.4%</td><td class="has-text-align-center" data-align="center">48.4%</td><td class="has-text-align-center" data-align="center">49.6%</td><td>51.6%</td></tr><tr><td>Grain Sorghum</td><td class="has-text-align-center" data-align="center">24.1%</td><td class="has-text-align-center" data-align="center">26.4%</td><td class="has-text-align-center" data-align="center">75.9%</td><td>73.8%</td></tr><tr><td>Peanuts</td><td class="has-text-align-center" data-align="center">0.17%</td><td class="has-text-align-center" data-align="center">0.26%</td><td class="has-text-align-center" data-align="center">99.8%</td><td>99.7%</td></tr><tr><td>Rice (Long Grain)</td><td class="has-text-align-center" data-align="center">0.05%</td><td class="has-text-align-center" data-align="center">0.16%</td><td class="has-text-align-center" data-align="center">99.9%</td><td>99.8%</td></tr><tr><td>Seed Cotton</td><td class="has-text-align-center" data-align="center">09.2%</td><td class="has-text-align-center" data-align="center">08.8%</td><td class="has-text-align-center" data-align="center">90.8%</td><td>91.2%</td></tr><tr><td>Soybeans</td><td class="has-text-align-center" data-align="center">86.8%</td><td class="has-text-align-center" data-align="center">87.2%</td><td class="has-text-align-center" data-align="center">13.2%</td><td>12.8%</td></tr><tr><td>Wheat</td><td class="has-text-align-center" data-align="center">14.3%</td><td class="has-text-align-center" data-align="center">16.85%</td><td class="has-text-align-center" data-align="center">85.7%</td><td>83.3%</td></tr></tbody></table><figcaption class="wp-element-caption">Source: USDA/FSA. Available at:&nbsp;<a href="https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index">https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index</a></figcaption></figure>



The seven major program crops shown in Table 1 account for 98.7% of total base acres enrolled in the South according to Outlaw and Raulston. The three southern crops of long grain rice, peanuts, and seed cotton range from 90% to 99% enrolled in PLC and drive the U.S. total. Comparing the South to the U.S. for the other four crops shows the South trends with the U.S. in the share of ARC-CO and PLC enrolled base acres. The biggest differences are two percentage points higher in the South for corn ARC-CO, grain sorghum PLC, and wheat PLC. The 2018 Farm Bill allows farm operators to make program election changes in crop years 2021, 2022, and 2023 for ARC-CO and PLC.&nbsp;



Citations:



Outlaw, Joe, and J. Marc Raulston. &#8220;<a href="https://southernagtoday.org/2022/01/southern-states-share-of-major-crop-bases/">Southern States Share of Major Crop Bases</a>.&#8221; Southern Ag Today 1(45.4). November 4, 2021. <a href="https://southernagtoday.org/2022/01/southern-states-share-of-major-crop-bases">Permalink</a>



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Smith, Nathan, and Trey Bucklew. &#8220;<a href="https://southernagtoday.org/2021/11/enrolled-base-acres-share-of-the-arc-co-and-plc-program-by-crop/">Enrolled Base Acres Share of ARC-CO and PLC Program by Crop</a>.&#8221; Southern Ag Today 1(47.4). November 18, 2021. <a href="http://enrolled-base-acres-share-of-the-arc-co-and-plc-program-by-crop">Permalink</a>

Enrolled Base Acres Share of the ARC-CO and PLC Program by Crop

For the 2021 program year, the U.S. had a total of 246,601,268 enrolled base acres across 23 covered commodities, ranging from feed and food grains to various major and minor oilseeds and seed cotton.&nbsp;&nbsp;The 13 Southern States (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia) accounted for 50,459,543 acres or 20 percent of the U.S. total.&nbsp;&nbsp;



Looking at enrolled crop bases for the 2021 program year, the South accounted for a relatively low percentage of corn and soybean bases (9% and 14%, respectively).&nbsp;&nbsp;The Southern States accounted for over 90 percent of seed cotton, long grain rice, and peanut base acres, which makes sense as these three commodities are generally grown in warmer climates and are often referred to as “Southern crops”.&nbsp;&nbsp;While the share of wheat base in the Southern States was only 24 percent of the U.S. total, the 14,734,976 acres of wheat base represented the largest raw number of base acres of any single crop in the 13-state region.



Table 1. Enrolled Base Acres for the 2021 Program Year.



<figure class="wp-block-table is-style-stripes" style="font-size:12px"><table class="has-fixed-layout"><tbody><tr><td class="has-text-align-center" data-align="center">Base Acres</td><td class="has-text-align-center" data-align="center">Corn</td><td class="has-text-align-center" data-align="center">Soybeans</td><td class="has-text-align-center" data-align="center">Seed Cotton</td><td class="has-text-align-center" data-align="center">Long Grain Rice</td><td class="has-text-align-center" data-align="center">Wheat</td><td class="has-text-align-center" data-align="center">Grain Sorghum</td><td class="has-text-align-center" data-align="center">Peanuts</td></tr><tr><td class="has-text-align-center" data-align="center">13 Southern States</td><td class="has-text-align-center" data-align="center">7,996,187</td><td class="has-text-align-center" data-align="center">7,186,913</td><td class="has-text-align-center" data-align="center">10,483,866</td><td class="has-text-align-center" data-align="center">3,487,440</td><td class="has-text-align-center" data-align="center">14,734,976</td><td class="has-text-align-center" data-align="center">3,563,167</td><td class="has-text-align-center" data-align="center">2,355,027</td></tr><tr><td class="has-text-align-center" data-align="center">U.S. Total</td><td class="has-text-align-center" data-align="center">92,307,697</td><td class="has-text-align-center" data-align="center">52,245,516</td><td class="has-text-align-center" data-align="center">11,546,346</td><td class="has-text-align-center" data-align="center">3,790,095</td><td class="has-text-align-center" data-align="center">61,910,841</td><td class="has-text-align-center" data-align="center">8,501,757</td><td class="has-text-align-center" data-align="center">2,404,116</td></tr><tr><td class="has-text-align-center" data-align="center">13 States as % of Total</td><td class="has-text-align-center" data-align="center">9%</td><td class="has-text-align-center" data-align="center">14%</td><td class="has-text-align-center" data-align="center">91%</td><td class="has-text-align-center" data-align="center">92%</td><td class="has-text-align-center" data-align="center">24%</td><td class="has-text-align-center" data-align="center">42%</td><td class="has-text-align-center" data-align="center">98%</td></tr></tbody></table><figcaption class="wp-element-caption">Source: USDA/FSA.&nbsp;&nbsp;Available at:&nbsp;&nbsp;<a href="https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index">https://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index</a></figcaption></figure>



These seven crops accounted for 49,807,514 of the 13 Southern State total of 50,459,543 base acres (or 98.7 percent), indicating there are very few enrolled base acres of other covered commodities on farms located in the South.



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Outlaw, Joe, and J. Marc Raulston. &#8220;<a href="https://southernagtoday.org/2022/01/southern-states-share-of-major-crop-bases/">Southern States Share of Major Crop Bases</a>.&#8221; Southern Ag Today 1(45.4). November 4, 2021. <a href="http://southern-states-share-of-major-crop-bases">Permalink</a>

Southern States Share of Major Crop Bases

Producers across the United States benefited from the Coronavirus Food Assistance Program (CFAP) 1.0 and CFAP 2.0 programs aimed at providing assistance for losses due to the COVID-19 pandemic.&nbsp; CFAP 1.0 provided more than $10 billion in payments on over 600,000 applications.&nbsp; CFAP 2.0 provided almost $14 billion in payments along with top-up payments for acreage based commodities totaling another $4.8 billion from over 900,000 approved applications.
CFAP 2.0 provided broader coverage than the CFAP 1.0 program that limited eligibility to only those crops experiencing a 5 percent decline while focusing on unsold inventories from 2019, left out HRW wheat, and only protected livestock inventories on the farm as of January 15th, 2020.&nbsp;&nbsp;
&nbsp;CFAP 2.0 was widely accessed by producers across the South with the 13 southern states accounting for $3.7 billion or nearly 27 percent of the payments.&nbsp; Soybeans, cattle, and sales commodities were the highest commodity categories in four states each, while corn was the highest in Kentucky.&nbsp; Sales commodities include specialty crops, aquaculture, nursery crops and floriculture, and other commodities not included in the price trigger and flat-rate payment categories.
<img decoding="async" loading="lazy" class=" wp-image-30966" src="https://wordpressua.uark.edu/southernagtoday/files/2021/12/CFAP-2.0-payments-across-the-13-southern-states.png" alt="CFAP 2.0 payments across the 13 southern states" width="778" height="442">



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Outlaw, Joe, and J. Marc Raulston. &#8220;<a href="https://southernagtoday.org/2022/01/cfap-2-0-payments-across-the-south/">CFAP 2.0 Payments Across the South</a>.&#8221; Southern Ag Today 1(43.4). October 21, 2021. <a href="http://cfap-2-0-payments-across-the-south">Permalink</a>