2002 Farm Bill. Provisions and Impacts. Don Shurley Economist- Cotton University of Georgia. http://www.agecon.uga.edu Click on “Extension” Click on “Farm Bill 2002” Click on “Presentations”. Producers Have Two Important Decisions To Make. What Bases To Have To Maximize Payments?
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2002 Farm Bill
Provisions and Impacts
University of Georgia
Click on “Extension”
Click on “Farm Bill 2002”
Click on “Presentations”
Producers Have Two Important Decisions To Make
What Bases To Have To Maximize Payments?
Direct Payments (DP) and Counter Cyclical Payments (CCP) are tied
to Base acres and what you produce or not produce has no bearing on
What Crops To Produce?
POP’s/LDP’s or Marketing Loan Gains (MLG) are the only payments
tied to actual production. If you are likely to reach the payment limit-
can you produce without an LDP? If so, which crop(s)? If payment
limit will not be a problem, then remember you are producing for
cash+LDP or the loan rate.
Hypothetical Example of Payments on Base Acres
Let Your Agronomic and Economic Comparative Advantage
Be Your Guide
“The future is unknown. We will have a 6-year farm bill. What about
after that? Economics and farm bill issues are unpredictable and
uncertain. Think about what farm enterprises we in Georgia have a
comparative advantage in producing and think about desirable crop
rotations. It may be to your long-term advantage to keep as much base
in these crops as possible.”
Summary of Significant Commodity Provisions
Timing of Payments: For 2002 “as soon as practical”; “for any or all
2002 AMTA payments already received, 2002 DP will be reduced”;
for 2003-2007 “not before October 1 of the year harvested”, “up to 50%
in advance beginning Dec 1” of the year before harvested”.
“Counter Cyclical Payment”
Target Price - Direct Payment - max(loan, 12-mo. avg mkt price)
Example @ 40-cent cotton:
72.4 - 6.67 - 52.0 = 13.73 cents/lb
Timing of Payments: “as soon as practical after the end of the
12-month marketing year for the commodity”. PARTIAL
PAYMENTS: 1st payment- “not earlier than Oct 1, not later than
Oct 31 of the harvest year”, “may not exceed 35%”; 2nd payment
“not earlier than Feb 1”, “may not exceed 70% minus amount
of 1st payment”.
Comparison Of Base Payments @ 40-Cent Cotton
Payment Base and Payment Yield
Producers may (1) keep bases as they currently are under the 1996
farm bill and add oilseed base OR (2) may update ALL bases to the
average of acres planted from 1998-2001. This would include ZERO
years. If you have no current (old) base for a crop, you still qualify
for updated base (your 1998-2001 average). DP and CCP will be
made on 85% of the base.
IF BASES ARE UPDATED, producers may also elect to update
the farm’s Payment Yield. Your options are (1) keep current yield,
(2) the “70% Option”, or (3) the “93 ½% Option”. DP will be made
only at the current (old) yield level. CCP will be made at the elected
yield.If you do not currently have an established yield, one will
be established for you.
Timing of Base and Yield Election
“as soon as practical …. Secretary shall provide notice to owners
“provided only once”
“the manner in which the election must be made and the time
periods … . must be submitted by the Secretary”
Example of CCP Payment Yield Update Options
Current (1996 Farm Bill) Payment Yield: 600 lbs/ac
1998-2001 Payment Yield: 800 lbs/ac
Keep Current Bases
Keep Current Payment Yield
Keep Current Payment Yield
Update (1998-2001) Base
Elect 70% Option
Elect 93 ½ % Option
Base/Yield Alternatives *
You must elect a single option for all bases and payment yields. You
cannot update base on some crops and not update others. You cannot
update CCP yield unless bases are updated. You cannot choose
one CCP yield option for one crop and a different option for other crops.
* Excluding peanuts.
* Double payments received as part of financial assistance legislation
Base Acres Needed To Reach $40,000 DP Limitation
Base Acres To Reach $65,000 CCP Limitation
Payments on 85% of Acres Shown
Acres of Cotton Needed To Reach LDP/MLG Limit
Payments Per Acre of Base At Various Cotton Prices
LDP/MLG On Actual Acres Harvested
650 Lb DP Yield, 720 Lb CCP Yield, and 750 Lb Actual Yield
Comparison of 2002 Farm Bill To ’96 Bill
@ 40-Cent Cotton, Updated Base and Yield
Net Returns With and Without Payments
At 40-Cent Cotton