Managing risk under the 2014 Farm Bill

by Ray Bowman

(first published in the October 16, 2014 issue of The Farmer’s Pride)

Some of the combines are still rolling but many farmers are putting grain in the bins. No matter what stage the harvest is at, this is a busy time. It’s not a time you want to start crunching the numbers on next year’s crop insurance.

University of Kentucky extension economist Todd Davis says that’s OK. It’s a little early yet to begin evaluating the the two new risk management programs that became available under the 2014 Farm Bill.

Rather than the direct and countercyclical payments and state-based Average Crop Revenue Enhancement (ACRE) programs that were available under the 2008 Farm Bill, growers will have two new supplemental programs to choose from.

The first is called the Price Loss Coverage (PLC) program, which makes a payment to a producer when the covered crop comes in below a fixed reference price. The Agricultural Risk Coverage (ARC) program kicks in when either the farm’s revenue from all crops or the county’s revenue for a crop falls below 86 percent of a predetermined or benchmark level of revenue. The grower makes the decision which benchmark (individual farm or county) they will be held to. The two program options provide an economic safety net, but at a projected lower cost than the ones they replaced.

Confused yet? Davis says not to worry, help is on the way.

“There are two different tools being developed through funding from the USDA,” says Davis. “Since there’s a one-time opportunity to make these decisions (over the span of the Farm Bill) it’s going to be worthwhile to dig into these decision tools to evaluate what program works best for you.”

One of the on-line tools is being developed by a group headed by Texas A and M University https://usda.afpc.tamu.edu/ and the other comes from a partnership of land-grant universities led by the University of Illinois http://fsa.usapas.com/

“Both of these tools are to help with the Farm Bill decisions,” Davis reiterates.

Training sessions will soon be scheduled to prepare county extension agents to help producers with the use of the tools, Davis says. “The people who are going to be doing the leg work on this will be the agents, helping farmers run these decision tools. We want to help these agents get very comfortable with the decision tools that are out there before the flood gates open and everybody comes knocking at their door.”

Davis says the crop insurance is still being serviced by private sector companies, with the government serving a reinsurance function which hasn’t changed from the previous Farm Bill. “There is going to be more education needed for everybody involved – farmers, crop insurance agents and lenders – just to understand what the new programs are and how they interact, but the basic delivery mechanism has not changed at all.”

Producers have from now through March 31, 2015 to make a decision between the PLC and the ARCwhich will remain in effect for the 2014-2018 crop years.


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Cattle checkoff referendum set for November 20

by Ray Bowman

(First published in Farmer’s Pride Oct. 2)

On November 20 Kentucky beef producers will make their voices heard on a proposal that, if passed, would set aside $1.00 from the sale of each of their animals to promote the future of their industry.

Anyone involved in the production and marketing of cattle will have an opportunity to go to their nearest extension office to vote on the measure. Ballots will be collected between 8:00 a.m. And 6:00 p.m.

The question to be posed to Commonwealth cattlemen is Shall the producers of bovine animals assess themselves an additional ONE DOLLAR ($1.00) per head sold, and use the funds so collected by the Kentucky Beef Promotion Council to finance a program to promote and stimulate by research, market development, and education, the use and sale, domestic and foreign, of bovine animal products?”

Seven states - Alabama, Idaho, Louisiana, Oregon, Tennessee, Utah and Washington – currently have a checkoff program to augment promotional money being generated by the national program. Ohio recently approved a similar measure and efforts are also underway to create a state checkoff in Texas and Oklahoma.

Kentucky is no stranger to the idea of a state checkoff. The first one was inaugurated in 1976, a decade prior to the national checkoff. The first checkoff was ten cents per head. That jumped up to a quarter in 1985. That year, the passage of the Farm Bill introduced the federal checkoff which began to be collected in 1988. With the institution of the federal checkoff, Kentucky suspended its collections.

A lot has changed since 1988. In recent years, the United States cattle herd size has been decreasing dramatically. Record droughts have had a significant impact, as have other weather events such as the early season blizzard called Winter Storm Atlas that slammed South Dakota and surrounding states in October of 2013, resulting in the loss of thousands of head of cattle. Building back those numbers may be challenging given the current political atmosphere that promotes climate disruption fears associated with livestock production and increasing pressure from animal rights concerns.

Kentucky realizes a fifty cent return from each federal checkoff dollar collected here, but industry observers are concerned that that may not be enough to promote beef production with the lower cattle numbers generating a smaller return from checkoff collections.

The director of the Kentucky Beef Network, Becky Thompson, says the other state checkoff programs were evaluated by the committee created to research and generate the referendum. That committee identified five funding areas the future dollars were needed for: promotion, education, market development, research and global marketing. “The take-home point from this is that Kentucky money will be spent by Kentucky producers,” Thompson said.

Should the referendum be approved, the Kentucky Beef Promotion Council will be appointed to suggest projects to be funded with the new dollars.

Thompson says a lot is already being accomplished with funds coming back to the Commonwealth from the federal program. “We’re working with dietitians to ensure they’re aware of beef’s nutritional value as part of a healthy diet,” Thompson said. “We’re taking them on farm tours so they can see how beef is raised and build relationships with farmers.” Thompson says there also have been efforts to take beef’s nutritional message into the schools and promote it on a broader level through the use of mass media. For the last three years, the Kentucky Beef Council has teamed with the Kentucky Derby Festival to search for the best burger recipe in the Derby Burger Challenge. “With access to more promotional funds, we hope to enhance many of the current programs as well as seek other avenues of outreach.”

A study conducted by Cornell University researchers and released in July of this year concludes that each dollar invested in the national Beef Checkoff Program between 2006 and 2013 returned about $11.20 to the beef industry. Thompson says a lot can be done with that kind of money. “Who wouldn’t want a return like that on their investment?”


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