3 Reasons to Consider Reallocating Base Acres

 
3 Reasons to Consider Reallocating Base Acres

Only two days remain for landowners to decide how to handle yields and base acres in the new farm commodity programs.

For the base acre decision, landowners have two alternatives for the total base acres on each FSA farm:  

  • Current allocation of base acres on the farm. These acres were sent to landowners and producers in a letter received in August 2014.
  • Reallocated base acres. Total base acres are reallocated based on plantings from 2009 through 2012. Actual plantings were described in a letter received in August 2014. Total base acres under reallocation will equal base acres if current base acres are retained.

“This is a one-time choice – between retaining old set of base acres (could be 20 years or older) or a new mix of crop bases with no increase or decrease in total base acres,” says Farm CPA Paul Neiffer, an accountant with CliftonLarsonAllen. “It is not mandatory, but it is a voluntary option. If you fail to make this decision, it automatically defaults to the current base allocations.”

So, why should farmers choose to reallocate? Neiffer provides these three reasons:

  1. If you expect total payments will increase based on reallocation
  2. To simplify base acres for future farm bills
  3. To diversify to multiple crop bases

“You could diversify your risk by reallocating away from having your acres in only one crop,” Neiffer says.

For example, if your base acres were originally 100% wheat, you could reallocate them to include wheat, corn and soybeans. Then you could qualify for payments for all three crops, instead of just wheat.

Depending on the crop, it’s been a decade or more since farmers were able to update yields and reallocate base acres, and many farmers’ crop mix has changed dramatically. “Guys are way out of whack with what they grow,” says Jamie Wasemiller of the Chicago-based Gulke Group.

Wasemillar says one frustrating piece is farmers can’t increase base acres, only reallocate.

“So, essentially what you do is you can get more of those base acres to pay on a corn price or a soybean price, as opposed to edible beans or wheat whatever it might be,” he says. “So it’s a truer safety net for your farm.”

Luckily, no calculations are needed for this decision, says Gary Schnitkey, University of Illinois ag economist. “The only difference is what crops they are in,” he says. “Our advice is to choose the one with the most corn acres.” This is because corn is expected to pay out more in 2015 to 2018, just as it has in the past.

Even if you’re not going to update your yields, Schnitkey says, you can still reallocate your base acres.

With the deadline so close, Schnitkey says you should make an appointment with FSA immediately.

 

Neiffer and Wasemiller presented during a Farm Bill Decisions webinar presented by Farm Journal Media on Feb. 24. The next webinar is March 10 at 11 a.m. Central. More details and the registration link will be available on AgWeb’s Farm Bill Decisions page, closer to the event.

 

How has the process been for you? What questions remain unanswered as these deadlines approach? Let us know on the AgWeb discussion boards.

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Comments

 
Spell Check

Cotton_farmer
Lubbock, TX
2/28/2015 04:58 PM
 

  I've never planted corn , wheat , or soybeans and I don't plan to , I'm not set up to grow those crops and I'm not about to invest in the needed equipment required to grow and harvest those crops , besides I don't have enough irrigation water to grow corn anyway. I am a cotton farmer and I plan to stay with that crop . I've seen the market fluctuate before and this year is no different , cotton remains the most profitable crop for me to grow . Do I need to reallocate base acres if I have no intention of growing anything but cotton , and do I need to update my cotton yields ( makes no sense to do so if the government is not making payments on cotton under the new farm bill ) ? I have a very small grain sorgum base and an even smaller wheat base . Four out of the last five years of my dryland acres have had a 0 cotton yield due to crop loses , and one out of the last five years of my irrigated crop has had a 0 cotton yield due to crop loss . In these years of loss on dryland acres , one year the acres were left summer fallow due to drought , two years had a grain sorgum crop replanted on those failed cotton acres , and one year was replanted to Sudan and harvested as hay after the failed cotton crop . The one year that i had a 0 cotton yield on irrigated acres , it was replanted back to grain sorgum behind the failed cotton . My harvested grain yields were dismal at best due to drought and high winds before harvest , so the county yield is actually better than my actual yield on those two years . Now can anyone explain to me what I need to do as far as updating yields and / or reallocating base acres ? Like I said before , I plan to plant cotton on all my acres this year . What do I need to change , if anything ?

 
 
Tim
Hershey, PA
2/26/2015 07:30 AM
 

  The program doesn't care what crop you plant, only the "farm base crop" you choose. You only have 2 options: keep the base crops as-is (CCC-858 box 6A) or use the reallocated base-crops (box 6B). We are choosing the option having the most corn acres--even though we may not plant corn. You also get to choose base yield for each crop type: either existing CC yield (box 7A) or updated PLC yield (box 7B). Use the higher yield for each crop type.

 
 
Jeanne
Noblesville, IN
2/25/2015 04:08 PM
 

  What advantage to upping our corn base and lowering our soybean base when we always plant 50/50 corn/soybeans. We have contracts that must be met each year that are not flexible except to reduce acres if we loose a rented farm. Jeanne

 
 

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