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Agricultural News for Farmers and Agribusiness in SW Georgia

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Posts Tagged ‘ag economics’

Cotton Marketing Update – Shurley

Posted by romeethredge on September 4, 2015

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Peanut Market Loan Gain Meeting – Colquitt, Ga

Posted by romeethredge on September 4, 2015

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Cotton Market Update 8-12-15

Posted by romeethredge on August 12, 2015

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Cotton Market Update

Posted by romeethredge on July 31, 2015

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Cotton Market Update

Posted by romeethredge on July 17, 2015

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Farm Bill Update and Prevented Planting Question

Posted by romeethredge on June 8, 2015

Farm Bill Update and Prevented Planting Question by Dr. Nathan Smith, UGA Extension Ag Economist.

FSA recently held training for State Staff on ARCPLC enrollment.   Producers are required to enroll annually in the ARCPLC program to be eligible to receive payments.   The enrollment period is expected to begin mid-June.  Enrollment for 2014 and 2015 ARCPLC will take place during this signup period.  Producers will need to complete and sign form CCC-861 (ARC-CO and PLC) or CCC-862 (ARC-IC).   Also, acreage certification (FSA-578), called cropland certification, is due to the FSA office on July 15.

New Reconstitution Rules

A new twist on ARC-County elections will affect payments depending on the county and farm’s irrigation history.  For ARC-CO only, counties that meet the HIP (historical irrigation percentage) criteria have irrigated and non-irrigated ARC-CO benchmarks, guarantees, and payments.  The HIP criteria for a specific covered commodity in a county are at least 25% of the acres of the crop were irrigated and 25% of the acres were non-irrigated for the time period 2009-2012.  HIP eligible counties can trigger an ARC-CO payment for one practice or both depending on the county yield each year.  The farm level HIP factor is calculated same as the county, the irrigated and non-irrigated history of the covered commodity on the farm from 2009 to 2012.  The farm level HIP factor will be used to determine the ARC-CO payment for a farm when a payment triggers for the irrigated or non-irrigated practice or both.

The real concern with the establishment of a HIP for a farm is related to reconstitutions.  The rule recently written requires the HIP for each common crop to be the same on all parent farms looking to be combined.  In other words, farms with HIP-eligible common crops must have the same HIP factor in order to be combined in a reconstitution.  This will effectively prevent combining farms through reconstitution unless they are all irrigated or all non-irrigated.   Remember, to be able to combine farms, the same ARCPLC elections had to be made on the covered crops.  The HIP rule will likely prevent most farm combinations that were planned.

Prevented and Failed Planting and Generic Acres

A question that has come up a couple times on prevented planting is “will prevented planting acreage be attributed to generic base?”  In short, the answer is no according to Farm Service Agency.  A covered commodity, such as peanuts, has to be planted in order to be attributed to generic base.  The final planting date for peanuts was June 5 for most counties in Georgia.  The late planting period runs either 10 or 15 days after the final planting date where coverage is reduced 1% per day until June 15.

Failed planting acres of a covered commodity, however, does count and will be attributed to generic base on a farm with generic base.   Below is an update of prevented and failed planting info from 2014 Peanut Pointers article.

Final Planting Date (FPD)

The Final Planting Date is the last date a producer may plant and the acreage be eligible for full crop insurance coverage (receive the 100% of Production Guarantee or Revenue Guarantee). The producer is not required to plant after the FPD but may do so at reduced coverage of 1% per day through the late planting period.

Georgia Final Planting Date

Crop Date Counties
Cotton May 20 Bartow, Chattooga, Elbert, Floyd, Franklin, Gordon, Hart, Henry, McDuffie, Monroe, Morgan, Oconee, Polk, Spalding, Walton, and Warren
Cotton May 31 All other counties
Peanut May 31 Jefferson, Johnson, Laurens, Montgomery, Richmond, Treutlen, Washington, Wilkinson
Peanut June 5 All other counties
Grain Sorghum June 20 All counties
Soybeans June 15 All counties

Late Planting Period (LPP). If the producer so elects, planting may continue during the late planting period at reduced coverage of 1% per day. Planting may continue even after the late planting period and coverage will be at the Prevented Planting guarantee (50% of the full season guarantee for cotton and peanuts and 60% of the full season guarantee for grain sorghum and soybeans).

Georgia Late Planting Period

Crop Period Counties
Cotton May 21 – June 4(15 days) Bartow, Chattooga, Elbert, Floyd, Franklin, Gordon, Hart, Henry, McDuffie, Monroe, Morgan, Oconee, Polk, Spalding, Walton, and Warren
Cotton June 1 – June 15(15 days) All other counties
Peanut June 1 – June 15(15 days) Jefferson, Johnson, Laurens, Montgomery, Richmond, Treutlen, Washington, Wilkinson
Peanut June 6 – June 15(10 days) All other counties
Grain Sorghum June 20 – July 04(15 days) All counties
Soybeans June 16 – July 10(25 days) All counties

Farmers can still plant peanuts and cotton after June 15, but the guarantee drops to 50 percent for peanuts and cotton. If the producer is unable to plant by the final planting date, the producer may file for prevented planting” and must do so within 72 hours after the Final Planting Date. If the producer is unable to plant during the Late Planting Period, again the producer must file for “prevented planting” within 72 hours of the late planting deadline. Filing for prevented planting requires documentation on the part of the producer.

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Crop Enterprise Cost Estimate April 2015

Posted by romeethredge on April 30, 2015

The revised Crop enterprise cost estimates from UGA Ag Econ are now posted at this link.

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Cotton Market Update 4-28-15

Posted by romeethredge on April 28, 2015

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Estimated 2014 Peanut PLC Payment

Posted by romeethredge on April 28, 2015

Dr. Nathan Smith, UGA Ag Economist says that “The weighted season average price for peanuts is calculated to estimate the 2014 PLC payment.  The current MYA on peanuts is $438.15 giving a projected PLC payment rate of $96.85 per ton before sequestration and the 85% factor.”

Here’s a good write up by County Agent Bill Tyson concerning Peanuts. Click to go to his Bullock County Ag News.

The Marketing Year Average (MYA) price for peanuts is calculated from August 1 – July 31 using National Agricultural Statistics Service (NASS) prices.  That being said, we are about 75% of the way through the 2014 marketing year.

The Farm Service Agency (FSA) has a Projected 2014 PLC Coverage Payment Rate on their  ARC/PLC website. The MYA price for peanuts from this source has the price at $430/ton for peanuts, which has not changed since November.

Another source to get the MYA price for peanuts is NASS’s Quick Stats database and it has the current MYA price at $426/ton. However, this average only includes August through December prices for peanuts.

NASS publishes weekly peanut prices in their Peanut Prices report (not to be confused with FSA Weekly Posted Price for peanuts).  Looking at published weekly prices of peanuts since August 1, 2014 through last week brings the MYA of peanuts to $438/ton. The only peanut prices from this source that is not included for each week are those values not published due to individual buyer disclosure concerns.

 Dr. Nathan Smith has put together a spreadsheet that includes the published peanut values for each week since August 2014. This spreadsheet will be fairly close to the value FSA will use to determine PLC peanut payments for 2014. The only values not included in spreadsheet are those that are not published. Link to it here.

$535 – $438.15 = $96.85

 $96.85/ton is the current estimated PLC payment for peanuts. The final payment rate for 2014 will not be determined until after July 31, 2015. Payments for the 2014 production year will not be paid by FSA until October 2015.

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Peanut Market Loan Gains and Payment Limitations

Posted by romeethredge on April 28, 2015

UGA Ag Economist, Nathan Smith , has some good information about Peanut Economics.

Base Acres to Reach the Peanut Payment Limit

Most Georgia producers have made their ARC/PLC program elections and the farms with peanut base and/or generic base likely chose PLC for peanuts. The US marketing year average (MYA) price for the 2014 is given as $0.213 per pound or $426 per ton on NASS Quick Stats database but it reflects prices reported only through December 2014. When you take the weekly sales by type and weight by marketings, you come up with $438.15 per ton through the week of April 18, 2015. Using this estimate, the PLC payment rate for 2014 is projected to be $96.85 per ton. The payment per acre received will be adjusted by a payment factor of 85% as well as an expected sequestration rate. Some large farms will likely hit the new payment limit of $125,000 per person or legal entity. For the 2015 crop year, contracts offered were lower than last year so it is assumed that the PLC payment rate for the 2015 crop will be at least as high as the 2014 rate and probably higher.

The payment limit can play a role in peanut planting decisions during periods of very low prices because without the PLC payment, the peanut price received by a farmer could end up somewhere between the $355 loan rate and $400 per ton. The 2014 Farm Bill establishes a maximum dollar amount of Title I program payments that can be received annually (crop year), directly or indirectly, by each person or legal entity. A person or legal entity can accumulate up to $125,000 for all covered commodities except peanuts. Peanuts have a separate but equal payment limit of $125,000 per person. A spouse is also eligible for a $125,000 limit provided both are actively engaged in the farming operation. Limitations on payments are controlled by direct attribution to a person or legal entity. Visit your local FSA office for actively engaged requirements. The type of payments applied to the limit are those received for the Agriculture Risk Coverage County Option (ARC-CO), Agriculture Risk Coverage – Individual Farm Option (ARC-IC), Price Loss Coverage (PLC), marketing loan gains (MLG) and loan deficiency payments (LDP). Market assistance loan forfeitures to the Commodity Credit Corporation (CCC) are not included in this limit.

The risk of reaching the payment limit depends on the PLC payment rate, the farm’s average PLC payment yield, and number of peanut base (traditional and/or generic) acres. The tables below show the “payment acres”, adjusted by the 85% payment factor and potential sequestration, to reach the $125,000 payment limit for a person. The acres are any combination of peanut base and generic base that is assigned as peanut base. For example, a farm with 500 acres of peanut base and 500 acres of generic base that is assigned as peanut base (planted 500 acres of peanuts and all of it allocated as peanut base) would have a total of 1000 base payment acres. Given a $100 per ton payment rate ($535

Reference Price – $435 National Marketing Year Average Price), the PLC payment would translate into a $79 per acre payment. The farm with 1000 acres of peanut base would hit the payment limit if its average PLC payment yield is greater than 3,172 lb/ac. At 500 bases acres, the limit would be reached at 6,345 lb/ac.

The $100 PLC payment rate is a reasonable estimate for 2014 crop year. There could be several farms that will bump up against the payment limit depending on their payment yield. For 2015, the PLC payment rate could be higher (lower MYA peanut price) so the number of base acres to reach the payment limit will be less than 2014. Assuming a $400 average marketing year price in 2015 would result in a $135 per ton PLC payment rate. The scenario of 500 acres of peanut base and 500 acres of peanuts planted and allocated to generic base lowers the PLC payment yield to 2,350 lb/ac average to max out the payment limit. Assume the farm has a 4,000 lb PLC yield, the payment limit would be reached at 793 acres of base. If for some reason peanut prices dropped to loan rate of $355 per ton, then the payment limit for one person would be hit on 1000 acres at 1,763 lb/ac. Using the 4,000 lb PLC yield the payment limit would be reached at 441 base acres.

Since the farm’s PLC payment yield is fixed for the life of the farm bill, the tables below show the total base payment acres (peanut base + pro-rated peanuts planted on generic base) to reach the $125,000 payment limit. The acres are adjusted for the 85% payment factor and a sequestration estimate given PLC payment rates for $435, $400, $385 and $355 per ton MYA price and PLC payment yields of 2,500, 3,000, 3,500, 4,000, 4,500 and 5,000 lb/ac.

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The main message is if a farmer has a significant peanut base on a farm and the farmer plans to plant a lot of peanuts on a farm in 2015, the farmer may be at risk of leaving significant payments on the table because of maxing out the payment limit.  The end result would be having grown several tons of peanuts that ended up with a lower price than expected. 

A spreadsheet developed by the Stanley Fletcher, National Center for Peanut Competitiveness, is posted on the Georgia Peanut Commission webpage and UGA Peanuts webpage that will help a farmer estimate the program payments and effective price of peanuts.  The spreadsheet will calculate the number of entities required given the average peanut price received on production, PLC payment yield, generic acres with peanuts planted, and expected yield.   For example, assume the average price offered for peanuts in 2015 is $385 per ton.   Next assume the national marketing year (season) average price for peanuts ends up at $415 per ton.  Farm 1234 has one entity, 500 acres of peanut base, a 2 ton PLC payment yield, 500 acres of generic base allotted to peanuts, a 2.5 ton expected peanut yield, and 750 acres of peanut planted on the farm.   In this case the farm would be leaving $64,108 of payments on the table and average $399 per ton effective price for the peanuts produced.   The farm needs to add an entity, such as adding a spouse and the result would raise the payment limit to $250,000 for the farm and increase the effective price to $427 per ton.

The other important consideration for payment limits is the potential of marketing loan gains (MLG) being applied to the payment limit.   If prices are low due to a large supply, it’s possible the National Posted Price (NPP) for Peanuts could drop below $355 per ton.   The NPP is the repayment rate for the marketing loan for peanuts.  If the NPP falls below $355, say to $325, then a marketing loan gain of $30 per ton is realized if the loan peanuts are redeemed at $325.  Besides getting a 1099 form come tax season, the $30 MLG will be applied to the payment limit.   In the case above, the $30 MLG is based on the expected yield and total planted peanut acres, resulting in a $67,500 total MLG.  This would put the farm above the total payment limit by $6,608.   To keep from leaving money on the table in this case, another entity is needed or additional quarter or third at least.

Ownership interest for direct attribution of payments is based on ownership interest that a person or legal entity holds in a legal entity on June 1 of the current year.  So, to add an entity with ownership interest, it needs to be done by June.  Check with the local FSA office to determine how to add a spouse, partner, or member of a legal entity.

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