SURE Farm Program North Central Iowa Crop Land

SURE Farm Program North Central Iowa Crop & Land Stewardship Clinic Iowa Falls, Iowa December 30, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate. edu 515 -294 -9911 Department of Economics

Supplemental Revenue Assistance Payments Program (SURE) Ø Part of the 2008 Farm Bill Ø Permanent disaster assistance Ø Provides payments to producers in disaster counties for crop losses Ø Run by the Farm Service Agency, USDA Ø Covers the 2008 -2011 crops Department of Economics

Supplemental Revenue Assistance Payments Program (SURE) Ø Based on crop insurance program, noninsured crop assistance program, and disaster declarations Ø Whole-farm revenue protection, not commodity-specific Department of Economics

SURE Triggers Ø Declared “disaster county” by Secretary of Agriculture or contiguous to one Ø Farm with losses exceeding 50% of normal production (value) in a calendar year Ø At least one crop must have a 10% (or greater) production loss Department of Economics

All Crops Must Be Covered Ø But there are some exceptions ØPasture ØCrops with an expected value of less than 5% of the total expected value of production on the farm Ø Value = Crop insurance price X yield ØCrops on which the producer has received a waiver Department of Economics

SURE Settings Ø Participation and revenue guarantee tied to crop insurance Ø Farm revenue, including some government payments, used to determine payment Ø Payments set as 60% of the difference between guarantee and actual revenue ØLimited to $100, 000 per producer ØPayments not known or paid until the end of the marketing year Department of Economics

SURE Guarantee for 2008 Ø Farm guarantee is the sum of Ø 120%*Crop insurance price election*Crop insurance coverage level*Planted acres* Max(APH or CCP yield), for insurable commodities Ø 125%*NCAP price election*Planted acres* Max(NCAP or CCP yield), for non-insurable commodities Ø For an individual crop, the guarantee can not be greater than 90% of the crop’s expected revenue Ø Crop insurance coverage level minimum = 70% Department of Economics

SURE Guarantee for 2009 and Beyond Ø Farm guarantee is the sum of Ø 115%*Crop insurance price election*Crop insurance coverage level*Planted acres* Max(APH or CCP yield), for insurable commodities Ø 120%*NCAP price election*Planted acres* Max(NCAP or CCP yield), for non-insurable commodities Ø For an individual crop, the guarantee can not be greater than 90% of the crop’s expected revenue Department of Economics

SURE Expected Farm Revenues Ø Expected farm revenue is the sum of ØMax(APH or CCP yield)*Planted acres*100% of the crop insurance price for insurable commodities Ø 100% of NCAP yield*100% of NCAP price*Planted acres for non-insurable commodities Department of Economics

Department of Economics

SURE Increases Guarantees Crop 2008 2009 -11 Ø Adds 20% to value insurance SURE of crop insurance guarantee if signed up by March 2008; 65% 80. 5% 74. 75% else 15%. 70% 84% 80. 5% Ø Minimum for 2008 is 80. 5% (equivalent of 75% 90% 86. 25% 70% guarantee x 80% 90% 115%) 85% 90% Ø Maximum is 90% Department of Economics

SURE Actual Farm Revenues Ø Actual farm revenue is the sum of ØHarvested acres*Farm yield*National seasonaverage price for all commodities Ø 15% of direct payments ØAll CCP or ACRE payments ØAll marketing loan benefits ØAll crop insurance or NCAP payments Ø Net of premiums (to a minimum of $0) ØAny other disaster assistance payments Department of Economics

2008 SURE Map Department of Economics

2009 SURE Map Department of Economics

SURE Payment Ø Guarantee minus actual revenue aggregated for all crops x 60% Ø Limit of $100, 000 per year per payment limitation Department of Economics

Example Ø Crop insurance (RA) Ø 75% guarantee Ø 160 bu/acre APH yield Ø$5. 40 indemnity price Ø$648 per acre guarantee for RA Ø$16 per acre premium Ø SURE guarantee Ø 120% of $648 = $778 / acre guarantee ØNo additional premium Department of Economics

Example Ø Crop insurance ØActual yield was 140 bu. per acre (12% loss) ØHarvest crop insurance price was $3. 74 ØActual revenue was $524 per acre ØCrop insurance payment was $648 - $524 = $124 per acre Department of Economics

Example Ø SURE ØActual yield = 140 bu/acre Ø 2008 marketing year price = $4. 06/bu ØMarket revenue = 140*4. 06 = $568. 40/acre ØCrop insurance benefit = $124 - $16 = $108 Ø 15% of direct payment = $3 ØTotal revenues = $679. 40 ØShortfall = $778 - $679. 40 = $98. 60/acre ØPayment = 60% * $98. 60 = $59. 16/acre Department of Economics

Will I get a SURE payment? Ø Are you in an eligible county or have a 50% or greater production loss Ø Do you have a 10% production loss on at least one crop Ø Price declines matter Corn Soybeans $5. 40 to $4. 06 = 24. 8% $13. 36 to $9. 97 = 25. 4% So, even higher yields, up to 120% of the APH yield, on other crops could still result in a SURE payment. Department of Economics

Department of Economics Source: Dr. William Edwards, ISU

SURE Payment per Acre for 2008 (50% corn, 50% soybeans) Insurance Guarantee 85% 10% Yield Loss RA CRC $ 7 $25 20% Yield Loss RA CRC $33 $46 80% $17 $35 $43 $56 75% $27 $45 $53 $66 70% $26 $44 $51 $65 65% $36 $44 $61 $75 Department of Economics Source: Dr. William Edwards, ISU

What to do? Ø Find out if you are in an eligible county for 2008 and 2009 Ø Estimate potential payments ØAg Decision Maker calculator at www. extension. iastate. edu/agdm/ Ø Watch for FSA announcements Department of Economics

Information Needed Ø Yields submitted for crop insurance, for all land farmed Ø Crop insurance payments received Ø USDA commodity payments received Ø RMA will turn over yield and acre data to FSA Ø FSA will aggregate data across farms Department of Economics

Summary of SURE Ø SURE provides 15 to 20% added coverage above the crop insurance guarantee (up to 90%). Ø All crops must be insured (except crops that are less than 5% of total crop value). Ø All crops and all farms per producer are added together to calculate coverage and losses. Ø Payment is 60% of loss. Department of Economics

Decision Points for SURE Ø If all crops will be insured anyway, there is no added cost for SURE. Ø If additional crops have to be insured, there is an added cost. Ø$300 per crop for catastrophic coverage Ø$250 per crop for NAP coverage ØStandard APH or revenue insurance at a low level could be cheaper for small areas Department of Economics

How will SURE affect my crop insurance decision? Ø May have to insure minor crops Ø Higher or lower levels of crop insurance give a higher or lower SURE trigger Ø Producers who insure at the 80% or 85% level get less additional coverage due to 90% cap Department of Economics

How will SURE affect my crop insurance decision? Ø SURE is for all crops and all acres together Ø SURE pays only 60% of the revenue loss Department of Economics

2008 SURE Map Department of Economics

2009 SURE Map Department of Economics

SURE Sign-up Ø Sign-up for the 2008 crop year starts Jan. 4, 2010 Ø See your local FSA office to sign-up Ø Sign-up will likely conclude by Mar. 1 Department of Economics

Thank you for your time! Any questions? My web site: http: //www. econ. iastate. edu/faculty/hart/ Iowa Farm Outlook: http: //www. econ. iastate. edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ Department of Economics