Program News

  
Producers Encouraged To Use Web For Payment Sign Up
Farmers may enroll in the 2009 Direct and Counter-Cyclical Payment (DCP) Program for farms with base acres at local USDA service centers until June 1, 2009. Farmers are urged to use the eDCP Web site to sign up. However, they can visit any USDA Service Center to complete their 2009 DCP contract.

Officials say the electronic sign-up saves producers time, reduces paperwork and speeds up contract processing at USDA Farm Service Agency (FSA) offices. The Web address is located at www.fsa.usda.gov/dcp. However, to access the service, producers must have an active USDA eAuthentication Level 2 account, which requires filling out an online registration form at www.eauth.egov.usda.gov followed by a visit to the local USDA Service Center for identity verification.

USDA computes DCP program payments using base acres and payment yields established for each farm. Eligible producers receive direct payments at rates established by statute, regardless of market prices. For peanuts, the 2009 level is $36 per ton. Eligible producers may request to receive advance direct payments based on 22 percent of the direct payment for each commodity associated with the farm. USDA started the advance direct payments in December 2008.


Counter-Cyclical Payment
Counter-cyclical payment rates vary depending on market prices. Counter-cyclical payments are issued only when the effective price for a commodity is below its target price. The effective price for each covered commodity equals the direct payment rate plus the higher of the national average market price received by farmers during the 12-month marketing year or the national average loan rate.

Farms with a peanut base qualify for the direct payment of $36 per ton, providing a full guarantee for peanuts produced of $391 per average ton. As prices remain low, the base owner also qualifies for the counter-cyclical payment of a maximum of $104 per ton up to the target price of $495 per ton. The average price paid to farmers through December was about $417 per ton. Last year’s counter-cyclical payment was $7.60 and $41.40 per ton in February and September, respectively, or $49 per ton, and the average was $410 per ton.


Payment Limits And Income Qualifications Released
USDA announced changes to the Adjusted Gross Income (AGI) qualifications, program payment limitations and direct attribution for the FSA and the Natural Resources Conservation Services. Secretary of Agriculture Ed Shafer said this is a step in the right direction to ensure that program benefits are targeted to active, qualifying farmers and ranchers.

For commodity and disaster programs, the AGI was reduced from $2.5 million from all sources to a three-year average non-farm AGI of $500,000. Also, under the new regulations, an individual or entity must have a three-year average AGI less than or equal to $750,000 per year from farm income in order to qualify for direct payments issued under the payment program.

For conservation programs, the average non-farm AGI limitation is $1 million or less for eligibility. An individual or entity who has non-farm AGI in excess of $1 million remains eligible for conservation programs only if 66.66 percent or more of the total AGI is derived from farming, ranching and forestry operations. For environmentally sensitive land of special significance, these rules may be waived.

After the interim final rule is published in the Federal Register, the public has 30 days for comment. Check with your FSA office for details.


ACRE Program Not Ready Until Spring
Producers who are eligible for the DCP Program will also be eligible to enroll in the Average Crop Revenue Election (ACRE) Program. The program enrollment period will begin in the spring. Producers may first enroll in the DCP Program, elect to receive advance direct payments and then later modify their enrollment to include the ACRE program; or they may wait and elect to enroll in DCP and ACRE at the same time.

The optional ACRE Program provides a safety net based on state revenue losses and acts in place of the price-based safety net of counter-cyclical payments under DCP. A farm’s payment is based on a revenue guarantee calculated using a five-year average state yield and the most recent two-year national price for each eligible commodity.

For the 2009 crop, the two-year price average will be based on the 2007 and 2008 crop years. An ACRE payment is issued when both the state and the farm have incurred a revenue loss. The payment is based on 83.3 percent (85 percent in 2012) of the farm’s planted acres times the difference between the state ACRE guarantee and the state revenue times the ratio of the farm’s yield divided by the state expected yield.

The total number of planted acres for which a producer may receive ACRE payments may not exceed the total base on the farm. In exchange for participating in ACRE, in addition to not receiving counter-cyclical payments, a farm’s direct payment is reduced by 20 percent and marketing assistance loan rates are reduced by 30 percent. The decision to enroll in the ACRE Program is irrevocable. The owner of the farm and all producers on the farm must agree to enroll in ACRE. Once enrolled, the farm shall be enrolled for that initial crop year and will remain in ACRE through the 2012 crop year.
 


An Impact Analysis of the U.S. House Ag Subcommittee’s Draft
of the 2007 Peanut Title on Representative Farms

By the National Center for Peanut Competitiveness
The University of Georgia

Table 1. Difference in Average Net Cash Farm Income (NCFI) of the U.S. Representative Peanut Farms for 2008-2012 between the January 2007 Benchmark Analysis and the U.S. House Ag Subcommittee's draft
Peanut Title for the 2007 Farm Bill.

(Source: University of Georgia)

U.S. Representative Farms Difference in AverageNet Cash Farm Income
  ($1,000)
Farm A -8.688
Farm B -8.51
Farm C -2.43
Farm D -5.15
Farm E -0.774
Farm F -1.742
Farm G -4.42
Farm H -2.664
Farm I -6.122
Farm J -7.014
Farm K 0.412
Farm L -4.296
Farm M -3.58
Farm N -0.45
Farm O 2.44
Farm P -11.576
Farm Q 0.204
Farm R -5.878
Farm S -4.88
   
All 19 Rep Farms -$4,537
16 Farms with declining NCFI -$5,376
3 Farms with increasing NCFI $947

The National Center for Peanut Competitiveness (NCPC) conducted a preliminary analysis of the U.S. House Agriculture Subcommittee’s draft of the peanut title for the proposed 2007 Farm Bill as to the potential effect it would have on the 19 U.S. Representative Peanut Farms, which span from Virginia to New Mexico.

The U.S. House Ag Subcommittee proposal would raise the loan rate for peanuts from $355 per ton to $375 per ton, while lowering the payment fraction for direct and counter-cyclical payments from 85 percent to 74 percent.

A decline in Net Cash Farm Income (NCFI) under the House proposal was observed in 16 of the 19 representative farms (Table 1). Weighted by the total planted peanut acreage, the average decline in NCFI is $5,376 per year. The largest decline in average NCFI from 2008 through 2012 for an individual representative farm under the House proposal was $11,576 per year. Only three of the 19 U.S. Representative Farms had a higher average NCFI under the House sub-committee proposal compared to the benchmark.

The maximum increase in average NCFI is $2,440 per year, while the weighted average increase of the three farms is $947 per year. Compared to the benchmark, the weighted average change in NCFI under the U.S. House Ag Subcommittee proposal for all 19 farms is a decline of $4,537 per year for years 2008 through 2012.

Stoplight charts are used to display the probability of overall economic viability of the representative farms. The January 2007 Baseline Benchmark resulted in two of the 19 farms classified as green, or as having good overall economic viability through 2012. Little change was observed when comparing the U.S. House Ag Subcommittee proposal to the Benchmark January 2007 Baseline. Minor changes, if any, were observed on some farms in the probabilities of negative ending cash, as well as the probabilities of net worth declining over the simulated planning horizon.

The farms that fare slightly better under the U.S. House Ag Subcommittee proposal are farms with either no peanut base or very little as compared to the actual peanut production on the farm. This is to be expected since the loan rate can be applied to all peanuts produced each season and base acreages are fixed, based on historical planted acreage and yields, and payment are constrained or decreased by the payment fraction.

Note: This analysis is simulated using the Texas A&M Ag and Food Policy Center stochastic FLIPSIM model. All analysis is based on the January 2007 FAPRI baseline.
 


Farm Bill News

Storage And Handling Fails
A key ingredient of the market loan assistance program, the payment by the government for storage and handling, failed to be included in the Emergency Supplemental Appropriations Bill and was not included in the House Ag Subcommittee’s initial draft of the peanut title.

Congressman Sanford Bishop, D-Ga., defended the request during negotiations of the supplemental bill after President Bush took several verbal jabs at the peanut storage and handling provision. President Bush, speaking on a weekly radio show, said, “I like peanuts just as much as the next guy, but I believe the security of our troops should come before the security of our peanut crop.”

Bishop, representing the largest U.S. peanut district, said, “It’s not pork. It’s no different from any other supplemental appropriations bill passed the last 6 years under the Republican administration.”

Inclusion of the storage and handling provisions for the 2008 Farm Bill is not likely and would have to be included in the Senate Agriculture Committee’s proposal or reinserted during the conference committee process.

Commission Disappointed In Title
The Georgia Peanut Commission expressed disappointment in the Peanut Title for the 2007 Farm Bill released recently by the House Subcommittee for Specialty Crops. The legislation is now open for discussion among committee members and, during markup sessions, subcommittee members will have the opportunity to offer amendments.

The Congressional Budget Office scored the peanut program earlier, and the costs were used to determine the first markup of the peanut title by the House Ag Subcommittee.

“We are working with the Congressional Budget Office to achieve peanut program scoring that more accurately reflects what our proposal costs,” said Armond Morris, GPC chairman. “Our peanut congressional delegation is committed to improving this bill, and we will continue to work with them to ensure the best possible 2007 Farm Bill.”

The GPC, which is part of the Southern Peanut Farmers Federation along with grower organizations from Florida, Alabama and Mississippi, had recommended an increase in the marketing loan rate to $450 per ton, an increase in the target price to $550 per ton and an increase in the direct payment to $40 per ton, along with other program changes.

Growers are invited to visit the Web site www.AmericanPeanuts.com to stay abreast of all legislative issues affecting them during the writing of the 2007 Farm Bill.


Alliance Files Comments With Senate
The United Peanut Alliance filed comments with the Senate Agriculture Committee, asking that they amend the present law in order to compel USDA to administer the program so that it would operate a true marketing loan program for peanuts. The development of a workable peanut program in the 2007 Farm Bill is one of the major challenges facing the U.S. peanut industry, says the UPA.

“While we are very concerned with the drastic reduction in the CBO Baseline for peanuts, we also recognize and seek a solution for the higher energy costs and low peanut prices which are harming the farm sector. We do look for a fiscally responsible peanut program that will insure that current problems do not continue to plague this industry during the life of the next Farm Bill.”

For the next peanut program, the UPA supports:
1) New language in the 2007 Farm Bill to ensure that USDA administers a repayment rate that provides peanut farmers with a true marketing loan;
2) Continuation of the separate payment limitation for peanuts and no new payment limitations;
3) Extension of the peanut storage and handling provisions of the 2002 Farm Bill; and
4) Maintaining the current loan rate for peanuts.

In response to the House’s draft of the Peanut Title, the UPA says the loan increase to $375 per ton is of no value to farmers, since the current market price is higher than this. Furthermore, to pay for the loan increase, payments on base acres was reduced from 85 percent to 74 percent, which the UPA says would actually cause a 25 percent reduction in payments to the base holder.

The UPA represents various grower organizations in New Mexico, North Carolina, Oklahoma, South Carolina, Texas and Virginia.


Shellers Propose Farm Bill Changes
The American Peanut Shellers Association has proposed changes in the new Farm Bill, while noting their continued disappointment in the way the USDA has set the repayment rate, which has seriously eroded the United States’ position in international markets.

Besides proper administration of the repayment rate by USDA, the shellers’ association opposes having any one entity with a legislated monopoly on peanut inspections, which they say creates inefficiencies and excessive costs. There should instead be a system that promotes competitive rates and services.

The shellers also support the utilization of services of loan service agents similar to other commodities.


Farm Bill Time Line
The Farm Bill, including the Peanut Title, will be discussed by the House of Representatives Agriculture Committee. Their approved Farm Bill would then be presented to the full House of Representatives on the House Floor.

The same process will occur in the Senate, with a draft coming from the subcommittee to the full committee and then final approval of the full Senate.

Differences between the two versions of the Farm Bill would be worked out in Conference Committee.

PG