Agriculture Act of 2014: Who Makes What Decisions?

By Shannon Sand

One question on producer’s minds with regards to the Agriculture Act of 2014 is who makes the decisions. The decision to update yields and base acres1 lies with the owner2 of the property. Once the owner updates yields and base acres it is time for the current producer3 to make a one-time election decision. The current producer4 is defined as all “current producers” on the farm for example owner, operator, tenant, or sharecropper. The current producer shares the risk of production and determines who is entitled to a share in the crop produced or who would have shared had the crop been produced. Producers have the option to choose between three programs: Price Loss Coverage (PLC)5, Ag Risk Coverage-County (ARC-CO)6, or Ag Risk Coverage-Individual (ARC-IC)7.

For example, if Producer A leased8 from Mr. Smith in 2014, and Producer B currently leases the same ground from Mr. Smith in 2015, Producer B is the one to make the current election9. This election will potentially impact Producer A. It is also important to note the decision Producer B makes will follow through for the life of the farm bill on Mr. Smith’s land. So if Producer C leases the land from Mr. Smith in 2016 whatever decision Producer B made in 2015 is good for the life of the farm bill and transfers to Producer C.

Failure to make an election defaults the land to PLC starting in 2015 and no payments will be made for 2014. Even producers who do not grow a covered commodity on their base acres still need to sign up for either ARC-CO or PLC. Producers who do not grow a covered commodity could still potentially trigger a payment even though they may grow alfalfa on their base acres. When the ARC-CO actual revenue is less than the ARC-CO guaranteed price for a covered commodity10 ARC-CO triggers automatically.   When the effective price11 is less than the reference price for a covered commodity PLC issues a payment.

These one-time elections are not a substitute for crop insurance. They are meant to cover up to an additional 10% of risk for producers. If a producer for example has an insurance policy with a 75% coverage level, choosing one of these programs helps ensure there is coverage as high as 85% against total loss of the crop. While these programs are not meant to replace crop insurance, they do add a degree of risk protection to covered commodities that was previously unavailable.

Source:igrow.org