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Some Farm bill insurance links

DANIEL LOOKER 02/14/2014 @ 3:19pm Business Editor

The new farm bill has rules that will punish procrastinators who can't pick a program this year, and the law's new links to crop insurance will make that an even harder choice.

Remember the ACRE program from the 2008 Farm Bill? You could opt in to that state-level revenue program in any year the law was in effect. That's not the case for the new farm bill, which gives you a choice between a target price program, Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC), a new revenue program at the county or farm level.

Buried in the "statement of managers" by the conference committee that wrote the new law's final draft is this language: "...if all the producers on a farm fail to make a unanimous election for the 2014 crop year, the Secretary may not make any ARC or PLC payments with respect to the farm for the 2014 crop year and the producers on the farm will be deemed to have elected PLC for all covered commodities" for 2015-2018.

Bottom line: You've got a few months to choose a safety net for your farm for five years. Kansas State University ag economist Art Barnaby thinks it could be June before USDA has final regulations out and signup begins. Meanwhile, most of those expanded crop insurance programs you've been reading about in newspapers don't start until 2015.

Why not this year? "It's the fact that it's insurance and they've passed the contract change date," Barnaby says.

That doesn't mean you have until 2015 to study up, however.

One benefit to enrolling in PLC is that it allows you to buy the new Supplemental Coverage Option sold by crop insurers starting in 2015. If you're in the ARC program, you can't.

Barnaby agrees with Corn Belt farmers who think ARC looks more attractive right now. (See Managing Your Farm on page 14.)

"Here's my take: If you expect the market to sort of muddle along, ARC is the most likely to pay," he says. Over the life of the farm bill, the ARC guarantee fall, though.

If you're really bearish, PLC potentially could make bigger payments. And, starting in 2015, you could buy SCO coverage. SCO is similar to ARC, with a key difference. SCO is based on one-year county revenue, not the five-year Olympic average used for ARC. And you'll pay a premium for SCO that's similar to the old GRIP insurance coverage. ARC is free (as is PLC).

In spite of some apparent advantages to ARC, Barnaby sees some advantages to the SCO that comes with choosing PLC:

ARC is capped at the base acres allotted to the crops you plant. If you plant more corn than your base, it's not covered by ARC. With SCO, you're buying coverage for the acres you plant. The farm bill's $125,000 per person payment limit applies to ARC and PLC payments. Limits don't apply to payments from SCO. It's treated as an insurance product. That's a potential plus for large farms. And you don't have to buy SCO every year. That's one decision you can put off.

Another complicating factor in program signup: 2014 county yields used for ARC and SCO revenue formulas may not be known yet. Barnaby would like USDA to release them early. "I don't think this decision is quite as easy to make as people thought at first," Barnaby says.

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