Highlights of Some Key Topics in Senate Farm Bill Proposal

April 21, 2012 04:59 AM
 

via a special arrangement with Informa Economics, Inc.

Senate Ag panel markup begins April 25


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


The following are just some of the highlights from the Senate Ag Committee farm bill draft:


Title: No title yet.

Number of pages: 900

 

Titles: 12. The proposed legislation includes 12 titles covering commodities, conservation, trade, nutrition, credit, rural development, research, forestry, energy, horticulture, and crop insurance. Livestock, which had a title of its own in the last farm bill, was included in a "miscellaneous" title, an approach pushed by the National Cattlemen's Beef Association.

 

Deadline for amendments: Monday, April 23, 5 pm ET; amendments cannot have a budget cost, or must be offset

 

Senate Ag Committee markup: Begins Wednesday, April 25

 

Link to Senate Ag Committee  

 


Summary of major topics:


  • Budget baseline impacts: Cuts of $15 billion in commodity programs, $6 billion conservation funding, $4 billion nutrition | $2 billion reinvested for livestock disaster program and specialty crop funding – net budget cuts of $23 billion over ten years | Livestock disaster portion of SURE made retroactive for 2012

  • Direct payments: Eliminates $4.8 billion in annual direct payments

  • Eliminates target prices/counter-cyclical payments

  • Maintains marketing loans with loan rates kept the same except for cotton, which has a floating rate between 47 and 52 cents per pound in order to address concerns related to the Brazil-WTO compliance panel findings. No payment limits on marketing loans.

  • Eliminates ACRE and the crop portion of the SURE program and replaces them with a shallow loss revenue program for all program crops except cotton, the new plan is called Ag Risk Coverage (ARC), in which farmers would have a one-time election between enrolling for individual coverage or countywide revenue coverage protection on shallow losses | Band for coverage is 79% to 89% of the last five year's Olympic average revenue | ARC payment rate based on amount actual crop revenue falls below ARC guarantee, but cannot exceed 10% of the ARC bench mark revenue | ARC payment cap of $50,000 a year (spousal rule) | ARC budget cost: $29.5 billion | Payments would cover revenue losses of between 11 percent and 21 percent | Farm- (individual-) level coverage would be limited to 60 percent of eligible acreage, while countywide coverage would extend to 75 percent of a grower's acres | Payments also would be triggered when farmers are unable to plant a crop but limited to 45 percent of the eligible acreage | For farm-level coverage, losses determined based on losses of all acres produced by producer in the county on the particular crop (enterprise units), and losses determined separately for irrigated and non-irrigated crops | For countywide-level coverage, losses determined based on Olympic five-year county revenue, and losses determined separately for irrigated and non-irrigated crops | Payments limited to maximum number of total eligible acres: average acres planted to a covered crop between 2009 and 2012 – producers allowed to plant any program commodity up to that eligible acreage for program coverage | Limit exceptions allowed for land exiting the CRP, for fallowed land coming back into production, and new oilseeds announced by the Ag Secretary | Prevented acres counted as planted if deemed prevented planting (PP) by USDA's Risk Management Agency (RMA).

  • Crop insurance: No cuts were made to the crop insurance title.

  • Peanuts: Now a covered commodity similar to program crops | Separate payment cap of $50,000 | Mandates USDA's RMA establish a revenue insurance program for peanuts by the 2013 crop year, using the Rotterdam price, something several observers labeled "a big deal."

  • Cotton: STAX and loan rate: Creates a crop/revenue assurance program for cotton producers – STAX (Stacked Income Protection Plan) – modified from initially proposed plan | Cotton loan floats, from 47 to 52 cents | STAX allows growers to purchase a county-based revenue insurance plan as stand-alone policy or to supplement existing crop insurance policy above current policies | STAX coverage between 70% and 90% of county target revenue, with a maximum payment not to exceed 20% of the county target revenue | County average determined for irrigated and non-irrigated crops |

  • Peanut and cotton storage payments maintained

  • Other crop insurance provisions: Allows for a Total Coverage Option type program called Supplemental Coverage Option (SCO) in which program crop and specialty crop producers could purchase a county level revenue policy on top of individual crop insurance coverage | Mandates that SCO cannot overlap with ARC if a producer chooses to participate in ARC | If producer participates in ARC, could purchase SCO up to the 78% level; if they do not participate in ARC, they can purchase SCO up to 90% | Countywide revenue policy premium to carry a government subsidy rate of 70% | Makes permanent the current higher subsidies (in effect the last year) for enterprise units | Mandates enterprise unit coverage be purchased separately for irrigated and non-irrigated acres | Allows RMA to collect data from other sources besides the National Ag Statistics Service (NASS) | Changes yield plug used when producers don't have adequate data to use for their Actual Production History (APH) from 60% to 70% of the T yield | Allows Federal Crop Insurance Corporation (FCIC) to run pilot programs through 508H process and to do research and development on new programs | Allows FCIC to pay up to 75% of R & D costs after the first stage of development to entities attempting to develop new crop insurance programs if certain conditions are met | Provides RMA guidelines on combining the Adjusted Gross Revenue (AGR) program and AGR-Lite.

  • Payment limits:  Prohibits participation in farm subsidy programs if average adjusted gross income (AGI) exceeds $900,000 from farm and non-farm income combined – current AGI limit is $750,000 in on-farm income and $500,000 off-farm | Maintains rolling three-year average to determine AGI | $50,000 pay limit for ARC program; doubled for a spouse | Separate $50,000 payment limit for peanuts ARC program | No payment limits for marketing loans | No changes in definitions of actively engaged

  • Dairy policy: Creates a new Dairy Producer Margin Protection Program (DPMPP) insurance program and a Dairy Market Stabilization Program (DMSP) supply management program (more detail below and in separate section), which would apply to dairies that choose to enroll in the DMPP | Repeal of dairy product price support program (effective June 30, 2013) and eventual repeal of Milk Income Loss Contract (MILC) program; MILC will be at Sept. 2012 levels – maximum milk volume covered is 2.4 million pounds, and only 34% of the price differential is covered | Baseline feed cost is increased to $9.50, up from $7.35 | When program is operating, there will be a 15-month signup period | Repeals the Dairy Export Incentive Program (DEIP) | Extends for five years the dairy forward pricing program and the dairy indemnity program | Forward contracting of Class II, III and IV prices extended for five years | Federal Order Review Commission authorized |

  • More info on new DPMPP and DMSP (further details below in separate section). New program provides enrolled producers a payment when avg. milk price across the country drops to less than $4.00/wt more than the feed cost calculation (detailed in the bill). Payment covers 80% of the highest annual production for each dairy farm over the last three years. Annual administrative fee to participate in the voluntary program is $100 for production of under one million pounds, $250 for production from 1to 5 million pounds, $350 for production from 5 to 10 million pounds, $1,000 for production from 10 to 40 million pounds, and $2,500 for production over 40 million pounds. Producers can purchase supplemental insurance coverage at specific premiums. No caps for program, thus coverage available for farms of all sizes. Producer who chooses gross margin program required to participate in a supply management program when dairy stocks are too high and prices too low. Producers will be asked to temporarily slow production, with the expectations this will be used rarely and when used, end quickly. When the margin is below $6.00/cwt. For two consecutive months, USDA notifies producers that in the following month they will only be paid on 98% of their base production (either the dairy's production for the previous three months or the production form the same month in the prior year). If the margin falls below $5.00/cwt, payment made on 97% of base production and for $4.00/cwt, payment made on 96% of base production.

    The supply management program is suspended when:

    * US cheddar cheese price or Nonfat Dry Milk (NFDM) price is equal to or higher than the world price for two consecutive months, even when the margin is less than $6.00;

    * US cheddar cheese price or NFDM is 5% or more above the world price for two consecutive months, even when the margin is less than $5.00; or

    * US cheddar cheese price of NFDM is 7% or more above the world price for two consecutive months even when the margin is less than $4.00

    Milk produced above the detailed amounts would still be paid for by the milk handler, but payments would be reduced by 2%, 3%, or 5% depending on the margin. Proceeds would be used to buy excess dairy products to be donated to food banks and feeding programs, as well as for dairy marketing at home and abroad.

  • Conservation: Consolidates 23 existing conservation programs into 13 programs

  • Conservation compliance tied to both ARC/shallow loss program and to marketing loans | Crop insurance not tied to conservation compliance

  • CRP: Phases down maximum Conservation Reserve Program (CRP) acres to 25 million from current 32 million acres by 2017 – FY 2012, no more than 32 mil. ac. - FY 2013, 30 mil. ac. - FY 2014, 27.5 mil. ac. - FY 2015, 26.5 mil. ac. - FY 2016, 25.5 mil. ac. - FY 2017, 25 mil. ac.

  • Conservation Stewardship Program would enroll up to 10.3 million acres a year, with average payment rate of $18 an acre – Payment cap of $200,000 for all contracts under CSP

  • Sugar policy: Continuation of current program and loan rates

  • Nutrition: Alters ties between low-income heating assistance and benefits under Food Stamps/Supplemental Nutrition Assistance Program (SNAP) | Stops lottery winners from continuing to receive assistance | Ends misuse by college students | Cracks down on retailers and recipients engaged in benefit trafficking | Increases requirements to prevent liquor and tobacco stores from becoming retailers | Eliminates gaps in standards that result in overpayment of benefits.

  • Energy: Biomass Crop Assistance Program included at $20 million a year | $100 million for the Rural Energy for America Program included with a $20 million yearly cap on funding | Biorefinery Assistance Program reauthorized and funded at $750 million over five years | $150 million for Biomass Research and Development program | $100 million for Bioenergy Program for Advanced Biofuels

  • Prevention of deceased individuals receiving payments under farm commodity programsAt least twice a year, the Ag Secretary shall reconcile Social Security numbers of all individuals who receive payments, whether directly or indirectly, with the Commissioner of Social Security to determine if the individuals are alive.

  • International food aid: The bill would take steps toward improving US food aid by expanding a pilot program on buying food in developing nations to meet food aid needs rather than shipping US goods abroad. Supporters note this would bolster markets for farmers in developing nations and save money. The bill also would restrict the practice by non-governmental organizations in recipient nations of selling US food commodities in local markets to raise money to provide technical assistance to local farmers or to support other programs. Critics say such practices can disrupt local markets.

  • A new "whole farm risk management plan" for producers who grow several types of crops would provide payments when a farm's gross revenue falls below 85 percent of an historical baseline, with a liability limitation of $1.5 million.

  • Speciality crops: The proposal contains language to boost insurance for specialty crop growers. The bill extends certain research and development of insurance programs to specialty crops, but maintains a 50 percent cost share.

  • Rural development: The proposal would boost high-speed internet service to rural communities with populations less than 20,000. The proposal doubles funding, to $50 million, for such projects and adds grants to an existing loan program.

  • Research: Provides $450 million over 10 years for the Specialty Crop Research Initiative (double 2008 level, which was discretionary – proposed funding is mandatory.

  • Trade: Funding for Market Access Program (MAP) at $200 million annually | Funding for Foreign Market Development Program (FMD) at $34.5 million annually.

  • Beginning farmers: Provides $50 million for the Beginning Farmer and Rancher Development Program.


Baseline Spending Changes


Getting consistent information about the impact of the Senate farm bill draft on baseline spending has been difficult, so it will be interesting to see if the official Congressional Budget Office projections confirm what most sources signal: big baseline reductions for rice, peanuts, cotton and wheat, a decrease for corn, and an increase for soybeans.


Comments:
Conflicting information abounds on this topic, as some say the biggest change in moving from base to planted acres. Others acknowledge the budget baseline numbers are in part a function of moving from base to planted acres for ARC payments, but they note that is only part of the budget shift, but not all. For example, if a guarantee is based on yield and price and the yield for corn in one county or farm is lower than it is for another, the guarantee is also lower, even if that lower yield is due to a string of disasters like levees being blown up. That extrapolates to other crops as well. Lower-yielding crops mean lower guarantees. Also, crops with higher prices over the past years lock in that advantage as well. Some observers say this could or will influence plantings and cause potential distortion and present a big budget exposure for potential huge payouts, driving producers to a couple of crops. If so, there could be significant WTO member challenges ahead.

 

The following information, from the Univ. of Illinois, compares the level of base acreage to average planted acres from 2007 to 2011 for certain program crops in the US, using data from the Farm Service Agency. Corn, soybeans, and wheat are the dominant program crops, accounting for approximately 80% of total base acreage. The chart shows that planted acres for corn and soybeans exceed base acreage by 4 million and 23 million acres for these crops, respectively. In contrast, recent planted acreage for crops such as barley, sorghum, cotton, and wheat have been well below their base acreage amounts. These differences are due primarily to reduced small grain acreage in the Plains and Midwest, and reduced cotton and rice acreage in the South as corn and soybean acreage has expanded since the last base update in 2002.

fig1.jpg

Crop

Base Acres
(in million acres)

2011-Crop Planted Acres
(in million acres)

Corn

84.7

91.9

Soybeans

50.3

75.0

Wheat

73.8

54.4

Rice

4.4

2.69

Upland cotton

18.0

14.4

Peanuts

1.5

1.1

 

Comments: As can be seen from the graphic and table, cotton, rice, wheat and sorghum have garnered direct payments despite lower plantings in recent years because those payments were pegged to base, and not planted acres. This graphic also shows why soybeans, especially, and corn come out ahead payment wise in the Senate farm bill moving from base acres to planted acres for ARC payment eligibility.

 

Regarding Congressional Budget Office (CBO) projections, a key Senate contact said, "We have every intention of having a CBO score on Wednesday (markup). The Chair (Sen. Stabenow) and Ranking Member (Sen. Roberts) have both told members and staff that."

 

A veteran farm bill observer gives the Senate Ag Committee high marks by noting, "Some have talked about a lack of leadership in Congers -- that no one is willing to step forward and make tough decisions -- that no one is willing to take cuts. That there is no bipartisanship. Well, this is a bipartisan bill that provides reforms and voluntary cuts -- without any direction from the Budget Committee -- some $23 billion. It eliminates four commodity programs. It cuts the commodity baseline by $15 billion, or 30 percent. It streamlines conservation from 23 programs to 13, while cutting $6 billion, including maximum CRP acres down to 25 million acres. It eliminates ten rural development programs and eliminates $850 million in discretionary spending. It eliminates 60 research authorizations for $770 million in discretionary cuts. Around $1.2 billion in mandatory spending in the energy title of the 2008 Farm Bill is now authorizations in this proposal. Nutrition spending is reduced by $4 billion in mandatory money."

 

As for various impacts on different crops, a farm bill observer said, "It would be easy to write a program based on the cropping patterns of 25 years ago. Yes, cotton, wheat and rice acreages are down. Know what a lot of those acres are being planted to? Corn and soybeans. Some of that funding in the new program that goes to corn and soybeans will go to the same farms and acreage that were getting wheat, cotton and rice payments the last 25 years. And, everyone knows the elimination of direct payments impacts wheat, cotton and rice the most. The only way you make that up, or keep that shift from occurring, is by setting revenue or target/reference price triggers that are so high they aren't defensible."

 

The contact continued, "Remember that some of those areas that are the 'biggest losers' in some analyses are the ones getting some of the best benefits out of the crop insurance changes. SCO, enterprise units, irrigated vs. non-irrigated, yield plugs, and peanuts revenue insurance are going to have a lot bigger impact in the wheat, cotton, sorghum, peanuts and rice regions than they are in the Corn Belt. That's a fact. To say those changes have no impact on producers, and what members repeatedly heard was their number-one priority -- crop insurance -- simply is not accurate."

 

"Finally," the contact concluded, "remember that this is a 'draft mark' for a reason. Changes are expected to be made. People should be complimenting the Senate Agriculture Committee for its openness in making this 'draft' available to the public. It hasn't been done in the past on this committee. And I don't think it was done 5 days in advance -- if at all --  when the House did its reconciliation markup this week, and it certainly hasn't been done by the majority of other congressional committees when they markup and report legislation." 

 


Questions Already Surfacing


  • Note: Questions are already coming regarding the ARC. One question: What if a producer has one farm number via the Farm Service Agency (FSA), but farms in multiple counties? Does the producer have to file paperwork and make an election on each farm in a different county? The ARC selection of individual or county coverage is by producer, not by farm. A producer chooses county or individual for all acres, all crops, all farms. As with so many matters pertaining to new farm bill proposals, any analysis is subject to change.


Details of Ag Risk Coverage (ARC)


  • One-time, irrevocable election between enrolling for individual coverage or countywide coverage (must have sufficient data as determined by Ag Secretary) | Election applies to all acres under operational control of producers – acres no longer under operational control of producers after the election are no longer subject to the election of the producers, but become subject to the election of the subsequent producers.

  • Payment cap of $50,000 annually

  • Conservation compliance applies

  • County coverage: Total quantity of all acreage in a county of the covered commodity planted or intended to be planted for harvest by a producer with the applicable yield.

  • Covered commodity: Wheat, corn, grain sorghum, barley, oats, long grain rice, medium grain rice (includes short grain rice), pulse crops, soybeans, other oilseeds, and peanuts.

  • Other oilseed means a crop of sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, or any oilseed designated by the Ag Secretary.

  • Pulse crop means dry peas, lentils, small chickpeas, and large chickpeas.

  • Producer means an owner, operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to share, directly or indirectly, in the crop available for marketing from the farm, or would have shared had the crop been produced.

  • Hybrid seed: In determining whether a grower of hybrid seed is a producer, the Ag Secretary shall not take into consideration the existence of a hybrid seed contract; and ensure that program requirements do not adversely affect the ability of the growers to receive a payment under this title.

  • Eligible acres: All acres planted or prevented from being planted to covered commodities on a farm in any crop year.

  • Maximum eligible acres: Shall not exceed the average total acres planted or prevented from being planted to covered commodities on the farm for the 2009 through 2012 crop years.

  • Adjustments to eligible acres: The Ag Secretary shall provide for an adjustment in the eligible acres for covered commodities for a farm if any of the following circumstances occurs:

    * If a conservation reserve contract for a farm in a county expires or is voluntarily terminated, or cropland is released from coverage under a conservation reserve contract, the Ag Secretary shall provide for an adjustment in the eligible acres for the farm to a total quantity that is the higher of the total base acres for the farm, less any upland cotton base acreage, that was suspended during the conservation reserve contract, or the resulted obtained by multiplying the average proportion that the total number of acres planted to covered commodities in the county for crop years 2009 through 2012; bears to the total number of all acres of covered commodities, grassland, and upland cotton acres in the county for the same crop years; by the total acres on the farm.

    * The producer has eligible oilseed acreage as the result of the Ag Secretary designating additional oilseeds.

    * The producer has any acreage not cropped during the 2009 through2012 crop years, but placed into an established annual rotation practice for the purposes of enriching land or conserving moisture for subsequent crop years, including summer fallow, as determined by the Ag Secretary.

  • Individual coverage means coverage determined using the total quantity of all acreage in a county of the covered commodity that is planted or intended to be planted for harvest by a producer with the yield determined by the average yield of the producer described below.

  • Midseason price means the applicable national average market price received by producers for the first 5 months of the applicable marketing year, as determined by the Ag Secretary.

  • ARC payments: If the Ag Secretary determined that payments are required, payments shall be made for each covered commodity available to producers.

    * Coverage election: For the period of crop years 2013 through 2017, producers shall make a one-time, irrevocable election to receive –

    - Individual coverage

    - In the case of a county with sufficient data, as determined by the Ag Secretary

    - Election made shall be binding on the producers making the election, regardless of covered commodities planted, and applicable to all acres under the operational control of the producers

    * Payments: ARC payments will be made if the Ag Secretary determined that

    - The actual crop revenue for the crop year for the covered commodity is less than ARC guarantee for the crop year for the covered commodity.

    * Time for payments: As soon as practicable.

    * Actual crop revenue: The amount of the actual crop revenue shall be equal to that obtained by multiplying

    - In the case of individual coverage, the actual average individual yield for the covered commodity; or

    - In the case of county average, the actual average yield for the county for the covered commodity

    and the higher of

    - the midseason price; or

    - if applicable, the national marketing assistance loan rate for the covered commodity

  • ARC guarantee shall equal 89% of the benchmark revenue

  • Benchmark revenue is the product obtained by multiplying

    * In the case of individual coverage, the average individual yield for the most recent 5 crop years, excluding each of the crop years with the highest and lowest yields (Olympic average)

    * In the case of county coverage, the average historical county yield for the most recent 5 crop years, excluding each of the crop years with the highest and lowest yields

    and

    * the average national marketing year average price for the most recent 5 crop years, excluding each of the crop years with the highest and lowest prices

    * Use of transitional yield: If the yield determined for the 2012 crop year or any prior crop year is less than 60% of the applicable transitional yield, the Ag Secretary shall use 60% of the applicable transitional yield for that crop year; and for the 2013 crop year and any subsequent crop year, is less than 70% of the applicable transitional yield, the Ag Secretary shall use 70% of the applicable transitional yield for that crop year.

  • Payment rate is equal to the lesser of the amount that the ARC guarantee for the covered commodity exceeds the actual crop revenue for the crop year of the covered commodity; or 10% of the benchmark revenue.

  • Payment amount: If ARC payments are required, the amount of the payment shall be equal to the product obtained by multiplying the payment rate and in the case of individual coverage, 60% of the eligible acres; and in the case of eligible acres prevented from being planted to the covered commodity, 45%; or in the case of county coverage, 75% of the eligible acres; and in the case of eligible acres prevented from being planted to the covered commodity, 45%.

 


Details of Dairy Policy Provisions (Source: National Milk Producers Federation)


 

  • Dairy Producer Margin Protection Program (DPMPP)commonly referred to as the "insurance" part of the provision. Under DPMPP, a producer could choose to enroll in a direct-payment program run by USDA. The basic program would provide cash payments directly to dairy farmers when the national "margin" between milk prices and feed costs dropped below $4.00 per hundredweight. When the average milk price across the country drops to less than $4.00 per hundredweight over the "feed cost calculation" (a formula that incorporates national values of corn, soybean meal and alfalfa), a payment would be made to all dairymen enrolled in the program. Unlike the MILC program, this insurance program would not be capped at a specific volume of milk – instead it would cover 80% of the "historical production" of each dairy facility (which would be determined by the highest annual production for each dairy over the past three years). (Note: There is a transition program whereby the milk income less program and the production margin protection program are both in existence. A dairy producer may elect to participate in either the MILC or the production margin protection program for the duration of the transition period. ) In addition, a supplemental program would be available for dairies that wish to generate payments from the program at higher margin levels. An individual dairyman could choose to customize the program so that a payment is generated whenever the price of milk is less than $5.00 per hundredweight above the feed cost calculation. Or $6.00. Or $7.00. This additional coverage would include an annual premium paid by the dairy farmer. The supplemental program could be customized to cover up to 90% of a dairy’s annual production.

  • Dairy Market Stabilization Program (DMSP)commonly referred to as the "market management" part of the bill. The DMSP would only apply to dairies that choose to enroll in the insurance program outlined above (the DPMPP). If a dairy is enrolled in the DPMPP, they would be automatically part of the DMSP. Under the DMSP, when the margin falls below $6.00 per hundredweight for two consecutive months (the national average price of milk falls to less than $6.00 per hundredweight above the feed cost calculation), USDA would notify the dairies enrolled in the DMSP that in the following month, they would only be paid for 98% of their "base production" (which can be determined by either the dairy’s production three months leading up to that point, or the production in the same month the prior year). Milk produced above that level by a dairy enrolled in the DMSP would still be paid for by the milk handler, but these dollars would be diverted to a fund used to buy excess dairy products to be donated to food banks and feeding programs. If the margin continues to fall below $5.00 or $4.00 per hundredweight, the DMSP would adjust to only pay enrolled dairy farmers for 97% and 96% of their "base production." At no point would the DMSP authorize payments below 96% of a dairy’s base production. Once the margin recovers to above $6.00 per hundredweight for two consecutive months, the DMSP is de-activated and all calculations of "base production" are eliminated. If the DMSP reactivates at a later time, the calculations will restart from scratch.

  • Not included: Proposed reforms to the Federal Milk Marketing Order regulations are not included in the Senate draft.

  • Dairies choosing to enroll in the "supplemental" portion of the Dairy Producer Margin Protection Program would be subject to a lower premium on the first 4 million lbs of milk produced per year. This lower premium would be available to all dairies, regardless of size.

 


Details of Stacked Income Protection Plan (STAX) for Upland Cotton


Timeline: Beginning not later than the 2013 crop of upland cotton, if practicable, program made available to producers of maximum eligible acres of upland cotton

 

Requirements:

 

Provide coverage for revenue loss of not less than 10% nor more than 30% of expected county revenue, specified in increments of 5%. The deductible is the minimum percent of revenue loss at which indemnities are triggered under the plan, not to be less than10% of the expected county revenue.

 

Offered to producers of upland cotton in all counties with upland cotton production –

 

  • At a county-wide level to the fullest extent practicable; or

  • in counties that lack sufficient data, on the basis of such larger geographical area as the Corporation determines to provide sufficient data for purposes of providing the coverage.

  • Be purchased in addition to any other individual or area coverage in effect on the producer's acreage or as a stand-alone policy, except that if a producer has an individual or area coverage for the same acreage, the maximum coverage available under the STAX plan shall not exceed the deductible for the individual or area coverage.

 

Establish coverage based on – an expected price that is the higher of

 

  • the expected price established under existing Group Risk Income Protection or area wide policy offered by the Corporation for the applicable county (or area) and crop year; or

  • 65 cents per pound; and

  • an expected county yield that is the higher of the expected county yield established for the existing area-wide plans offered for the applicable county (or area) and crop year (or, in geographic areas where area-wide plans are not offered, an expected yield determined in a manner consistent with those of area-wide plans); or the average of the applicable yield data for the county (or area) for the most recent five years, excluding the highest and lowest observations, from the Risk Management Agency or the National Agricultural Statistics, or both; or if sufficient county data is not available, such other data considered appropriate by the Ag Secretary.

  • Use a multiplier factor to establish maximum protection per acre (referred to as a "protection factor") of not less than the higher of the level established on a program wide basis or 120%.

  • Pay an indemnity based on the amount that the expected county revenue exceeds the actual county revenue, as applied to the individual coverage of the producer. Indemnities under STAX shall not include or overlap the amount of the deductible selected.

  • In all counties for which data are available, establish separate coverage levels for irrigated and nonirrigated practices.

  • Include a premium that is sufficient to cover anticipated losses and a reasonable reserve; and includes and amount for operating and administrative expenses.

  • Reinsurance: When the $0.65 reference price is equal to or greater than the expected price established under the existing Group Risk Income Protection or area wide policy for the applicable county (or area) and crop year or the yield established is used to establish the expected county yield, the Corporation shall reinsure at 100% that portion of the indemnity that is attributable to the difference between the $0.65 reference price and the expected price established under the existing Group Risk Income Protection or area wide policy offered for the applicable county (or area) and crop year; and the yield established shall be 100% reinsured by the Corporation.

  • Limitation: A producer of upland cotton that participates in the Supplemental Coverage Option shall not be eligible for STAX.

  • Eligible acres means all acres planted or prevented from being planted to upland cotton on a farm in any crop year.

  • Maximum eligible acres to address World Trade Organization (WTO) concerns: The total quantity of eligible acres on a farm determined shall not exceed the average total acres planted or prevented from being planted to upland cotton on the farm for the 2009 through 2012 crop years, plus any adjustment.

  • Conservation Reserve Program acres adjustment: If a conservation reserve contract for a farm in a county entered into expires or is voluntary terminated or cropland is released from coverage under a conservation reserve contract, the Ag Secretary shall provide for an adjustment, as appropriate, in the maximum eligible acres for upland cotton for the farm to a total quantity that is the higher of the total upland cotton base acreage for the farm that was suspended during the conservation reserve contract; or the product obtained by multiplying the average proportion that the total number of acres planted to upland cotton in the county for crop years 2009 through 2012; bears to the total number of all acres of planted covered commodities, grassland, and upland cotton acres in the county for the same crop years' by the total acres on the farm that were under the conservation reserve contract.

  • Payment of portion of premium by Corporation: The amount of premium paid by the Corporation for all qualifying coverage levels of STAX shall be 80% of the amount of the premium established for the coverage level selected; and the amount determined to cover administrative and operating expenses.


 

 

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

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