Field Reports

The Farm Bill and Your Fertilizer Program

eKonomics News Team

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This February, the White House signed into effect the long-awaited Farm Bill after years of negotiations. The new bill, which authorizes nearly $1 trillion over the next ten years, will promote US agricultural production, fund nutrition programs and support environmental and energy research.

While the passage of the 2014 Farm Bill is not expected to directly affect decisions on farm fertilizer applications, it will be important to know how the new program will work from a cash flow standpoint.

A good piece of advice is to know what crop support will exist for your operation this year and next. This will help in budgeting and planning for 2015 as you look forward to 2014-2015 revenues, costs and overall cash flows. Your local farm consultant will be the best person to have a discussion with on how the county-level particulars of the bill will affect you.

With that in mind, below are a few key updates regarding the upcoming changes on the farm policy side:

The new bill ends a nearly 20-year-old direct payment program that costs approximately $5 billion per year and paid farmers and landowners regardless of farm income levels or cropping practices. Instead of this, farms will make a one-time choice between the two programs called Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). These programs are separate from crop insurance and contain revised caps and eligibility restrictions. This irreversible decision will be in effect until the next farm bill is passed.

  • Agriculture Risk Coverage: A revised version of the former ACRE program, which is a revenue-based safety net now calculated at the county level. Payments kick in whenever the actual county revenue for the crop year is below the County ARC revenue guarantee established by the USDA. The actual county revenue is calculated by multiplying the average county yield for the commodity in the current crop year by the higher of the Marketing Year Average (MYA) price for the commodity or the commodity’s loan rate ($1.95 for corn, $5.00 for soybeans).
  • Price Loss Coverage: Provides payments when crop prices fall below target levels set in the farm bill. Reference prices are set at $3.70/bushel for corn, $8.40/bushel for soybeans and $5.50/bushel for wheat.

Regarding crop insurance for 2014, there are no major changes from 2013. The Supplemental Coverage Option (SCO) is a “shallow loss” insurance option included in the 2014 Farm Bill, but it won’t be available as an option until 2015. Farmers can keep crop insurance decisions from 2013 the same for 2014 if they want. The full details of the SCO haven’t been finalized, but will serve as optional supplemental coverage to the individual crop insurance that the farmer will already have. It works by mimicking the farm’s individual insurance. Get in contact with your insurance provider to find out about how this may apply to your farm for 2015.

For farmers everywhere, the goal of the bill is to provide a safety net in the event of adverse weather or challenging market conditions. In spite of all this, farmers will be looking at all options to maximize profits. Fertilizer is one investment that can improve returns and provide greater financial security. Maintaining adequate soil test levels is the ideal situation to be in regardless of what the markets, Mother Nature, or policy throws at us.

Tell us what you think of the recently passed Farm Bill on Twitter @eKonomics_PCS with the hashtag #eKonomics.