The 2018 Farm Bill: Overview & Outlook Jonathan Coppess & - PowerPoint PPT Presentation

The 2018 Farm Bill: Overview & Outlook Jonathan Coppess & Nick Paulson www.farmdocdaily.illinois.edu www.farmdoc.illinois.edu

2018 F ARM B ILL .—CBO B ASELINE Outlays, CBO April 2018 Baseline • CBO projected spending, $90,000 mandatory programs: $80,000 $70,000 $60,000 1. Farm Programs (Title I); $50,000 2. Conservation (Title II) $40,000 $30,000 3. Nutrition and SNAP (Title $20,000 IV) $10,000 $0 4. Crop Insurance (Title XI). 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Commodities Conservation Crop Insurance Nutrition Source: Congressional Budget Office

R EVIEW : A GRICULTURAL A CT OF 2014 Difference In Spending (2014 Baseline Estimate-Revised 2018) $8,000 $6,000 $4,000 $2,000 Millions in Outlays $0 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 Year 1 Year 2 Year 3 Year 4 Year 5 Commodity Conservation Nutrition Crop Insurance Source: Congressional Budget Office

B ACKGROUND : S UPPLEMENTAL N UTRITION A SSISTANCE P ROGRAM Historic & Estimated SNAP Spending & Participation (USDA and CBO) • Largest program by $80,000.00 60,000 spending and people. $70,000.00 50,000 • Low-income $60,000.00 assistance; counter- Thousands of People 40,000 Millions of Dollars $50,000.00 cyclical. $40,000.00 30,000 • House partisan $30,000.00 20,000 dispute; dropped in $20,000.00 conference; no 10,000 changes. $10,000.00 $0.00 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019p 2021p 2023p 2025p 2027p Participation Spending

Conservation Program: Spending & 2018 Baseline Conservation Program Outlays, Revised (CBO) $7,000 $6,000 $5,000 Millions in Outlays $4,000 $3,000 $2,000 $1,000 $0 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 CRP CSP EQIP ACEP RCPP

R EVIEW : C ONSERVATION P ROGRAMS • CRP is dominant Total Conservation Spending by Program, 2009-2017; top 20 states (USDA) source of $3,000 conservation funds; Millions $2,500 • IL benefits more $2,000 from CSP ($212m) $1,500 than EQIP ($151m). $1,000 $500 • IL receives on average 9.8% of $0 EQIP funds and 13.7% of CSP funds nationally. EQIP CSP Easement CRP RCPP

2018 F ARM B ILL : C ONSERVATION  Expanded CRP: 27m acres; 30-year contracts; limits on rental payments.  Blended CSP and EQIP with fixed funding levels; increased EQIP.  Acreage-based CSP eliminated, existing contracts continue; potential for 1-year extension for 2019.

2018 F ARM B ILL : C ROP I NSURANCE Crop Insurance Baseline (CBO)  Crop Insurance is largely $9,000 unchanged; New $8,000 provisions for cover crops: $7,000 $6,000 Millions in Outlays  defines termination $5,000 (NRCS or local expert); $4,000 $3,000  Cover crops considered a $2,000 good farming practice; $1,000 termination should not $0 impact insurability. 2019p 2020p 2021p 2022p 2023p 2024p 2025p 2026p 2027p 2028p Prem. Sub. Delivery Exp. Underwriting

R EVIEW : A GRICULTURAL ACT OF 2014; T ITLE I S PENDING Title I Total Payments (CBO, through April 2018) $9,000 $8,000 $7,000 Millions in Outlays $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Corn Soybeans Wheat Upland Cotton* Rice Peanuts Other Commodities Dairy

ARC-CO C ORN E XAMPLE ARC-CO PLC Payment Estimator Input Use Defaults State Illinois County Champaign Help Crop Corn Type All Print PLC Payment Yield 130 What-If Change the county yields and Market Year Average (MYA) prices for 2018 to see payments under ARC-County and PLC. Payments are stated per base acre, as such they are multiplied by .85. If there are 100 base acres per farm, multiple the result below by 100. Input Agricultural Risk Coverage (ARC) - County Price Loss Coverage (PLC) County MYA Benchmark ARC ARC Guarantee 4 Payment 5 Price 1 Yield 2 Price 3 Payment 6 Year Yield 2009 190 3.55 2010 169 5.18 2011 164 6.22 2012 123 6.89 2013 168 4.46 $/acre $/acre 2014 216 3.70 167 5.29 760 0.00 0 2015 189 3.61 167 5.29 760 61.36 9 2016 210 3.36 174 4.79 717 8.86 35 2017 207 3.36 189 3.95 642 0.00 35 2018 187 3.60 202 3.70 643 0.00 10 Five-Year Average 14.04 18 National loan rate equals: 1.95 Reference price equals: 3.70

ARC-CO S OYBEAN E XAMPLE ARC-CO PLC Payment Estimator Input Use Defaults State Illinois County Champaign Help Crop Soybeans Type All Print PLC Payment Yield 42 What-If Change the county yields and Market Year Average (MYA) prices for 2018 to see payments under ARC-County and PLC. Payments are stated per base acre, as such they are multiplied by .85. If there are 100 base acres per farm, multiple the result below by 100. Input Agricultural Risk Coverage (ARC) - County Price Loss Coverage (PLC) County MYA Benchmark ARC ARC Guarantee 4 Payment 5 Price 1 Yield 2 Price 3 Payment 6 Year Yield 2009 56 9.59 2010 56 11.30 2011 51 12.50 2012 47 14.40 2013 53 13.00 $/acre $/acre 2014 64 10.10 53 12.27 559 0.00 0 2015 64 8.95 53 12.27 559 0.00 0 2016 67 9.47 56 11.87 572 0.00 0 2017 64 9.33 60 10.86 560 0.00 0 2018 65 8.60 64 9.63 530 0.00 0 Five-Year Average 0.00 0 National loan rate equals: 5.00 Reference price equals: 8.40

A DDITIONAL C HALLENGES FOR C OMMODITIES • Trump Administration & tariff conflict; • Especially with China and for soybeans; • Market Facilitation Program (MFP) payments.

U PDATED S ITUATION FOR T ITLE I • Continued lower prices = increased spending in ARC/PLC • Addition of Seed Cotton + MFP + Cotton Ginning • MFP: 2 Rounds ($0.01-corn; $1.65-soybeans); 2 nd just announced ($4.8b)

A GRICULTURAL I MPROVEMENT A CT OF 2018  Election for 2019 & 2020 crops between ARC and PLC;  Revisit election for 2021 through 2023 crops;  ARC-CO: administrative county; to use 80% t-yield plug and crop 2014 90% 2008- 157.5 2012 (175 insurance trend adjusted yields; update avg.) 2018 0.81 2013-  PLC: Optional yield update. 155.9; no 2017 (192.5 update avg.)

A GRICULTURAL I MPROVEMENT A CT OF 2018  PLC: reference price escalator;  Effective reference = 85% of 5-year Olympic moving average; up to 115% of statutory reference.  MAL/LDP: increased loan rates.

2018 F ARM B ILL : F ARM P ROGRAMS — C ORN  USDA Chief Economist Corn Price Example forecast; $4.95 $4.45  MYA expected above $3.95 Reference Price ($3.70) $/bu thru 2026; $3.45 $2.95  Effective reference price $2.45 “escalator” (85% of 5 $1.95 year Olympic moving average) not effective. Ref. Price MYA 85% 5YOMA Sources: USDA NASS (actual) and OCE (projections)

2018 F ARM B ILL : F ARM P ROGRAMS — S OYBEANS  USDA Chief Economist Soybeans Price Example forecast; $11.00 $10.00  MYA expected above $9.00 Reference Price ($8.40) $/bu all years; $8.00 $7.00  Effective reference price $6.00 “escalator” (85% of 5 $5.00 year Olympic moving average) not effective. Ref. Price MYA 85% 5YOMA Sources: USDA NASS (actual) and OCE (projections)

2018 F ARM B ILL : F ARM P ROGRAMS — W HEAT • USDA Chief Economist Wheat Price Example forecast; $6.44 $5.94 • MYA expected to remain $5.44 below Reference Price $4.94 $/bu ($5.50); $4.44 $3.94 • Effective reference price $3.44 “escalator+ (85% of 5 $2.94 year Olympic moving average) not effective. Ref. Price MYA 85% 5YOMA Sources: USDA NASS (actual) and OCE (projections)

Gardner Agriculture Policy Program and National Center for Supercomputing Applications. 2018 FARM BILL: ARC/PLC SIMULATION FARMDOC TOOL

THANK YOU Jonathan Coppess (jwcoppes@illinois.edu) Nick Paulson (npaulson@illinois.edu) www.farmdocdaily.illinois.edu www.farmdoc.illinois.edu