Farm
Program
Review
CBO’s
Upland
Co.on
Baseline
FY13-‐21
Average
$1,400
Other
Net
Loan
MLG/LDP
ACRE
CCP
DP
$1,200
$1,000
470
Million
$
$800
151
$600
151
$400
591
590
$200
416
$0
Mar
'10
Baseline
Mar
'11
Baseline
Mar
'11
w/Deficit
Red.
CreaTng
an
AlternaTve
• Use
upland
co8on
CCP,
DP
and
ACRE
baseline
to
fund
program
that
integrates
with
crop
insurance
and
delivered
by
RMA
• Maintain
a
markeDng
loan
through
FSA
but
make
least
change
possible
to
saDsfy
Brazil
• Paid
on
planted
acres
and
not
base
Why
an
Insurance
Program?
• Risk
Management
is
popular
jusDficaDon
of
farm
programs
• Be8er
chance
to
avoid
(or
at
least
miDgate)
payment
limits
and
eligibility
• Insurance
programs
were
challenged
as
part
of
Brazil
case
and
not
found
to
cause
serious
prejudice
• Basic
concepts
are
currently
in
place
• Chance
to
direct
co8on’s
money
to
new
co8on
program
Why
not
an
Insurance
Program?
• Fraud
and
abuse
• Could
be
too
costly
• Not
all
regions
of
Co8on
Belt
use
insurance
to
the
same
extent
• Time
constraints
this
fall
may
hinder
insDtuDng
new
program
Stacked
Income
ProtecTon
Plan
(STAX)
Crop insurance establishes a
per-acre expected revenue
Stacked
Income
ProtecTon
Plan
(STAX)
Current products offer
opportunities to cover deep
losses
Stacked
Income
ProtecTon
Plan
(STAX)
Better protection is needed
for shallow losses
Current products offer
opportunities to cover deep
losses
Stacked
Income
ProtecTon
Plan
(STAX)
Some deductible remains
Better protection is needed
for shallow losses
Current products offer
opportunities to cover deep
losses
Stacked
Income
ProtecTon
Plan
(STAX)
Some deductible remains
Better protection is needed
for shallow losses
This
is
STAX
Current products offer
opportunities to cover deep
losses
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
General
DescripDon
X%
to
Z%
(Z
Similar
to
a
GRIP-‐type
program;
Available
at
Area-‐wide
Income
likely
<
county
level,
county
groupings
or
CRD;
ProtecTon
100%)
Designed
to
cover
shallow
losses.
Basic
Individual
Choose
from
currently
available
insurance
0%
to
X%
ProtecTon
products.
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
Projected
Price
Average
closing
value
of
the
December
Area-‐wide
Income
70%
to
95%
contract
for
relevant
pre-‐planTng
period
ProtecTon
(same
as
current
insurance
products)
Average
closing
value
of
the
December
Basic
Individual
0%
to
70%
contract
for
relevant
pre-‐planTng
period
ProtecTon
(same
as
current
insurance
products)
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
Area-‐wide
Price
ProtecDon
Higher
of
1)
Average
closing
value
of
the
Area-‐wide
Income
70%
to
95%
December
contract
for
relevant
pre-‐planTng
ProtecTon
period
or
2)
Fixed
Reference
Price
Basic
Individual
Only
applies
to
Area-‐wide
Income
0%
to
70%
ProtecTon
ProtecTon
1/15-‐2/14
Average
of
Dec
Futures
$0.80
$0.75
$0.70
$0.65
$0.60
$0.55
$0.50
$0.45
$0.40
1982
1986
1990
1994
1998
2002
2006
2010
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
Harvest
Price
Average
closing
value
of
the
Dec
contract
for
Area-‐wide
Income
70%
to
95%
relevant
harvest
period
ProtecTon
(same
as
current
insurance
products)
Basic
Individual
0%
to
70%
Same
as
Area-‐wide
Income
ProtecTon
ProtecTon
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
Reference
Income
For
designated
area,
Area
Reference
Income
Area-‐wide
Income
70%
to
95%
=
higher
of
(Area-‐Wide
Price
ProtecDon
&
ProtecTon
Harvest
Price)
*
Expected
Area-‐wide
Yield
For
individual,
higher
of
(Projected
Price
&
Basic
Individual
0%
to
70%
Harvest
Price)
*
Individual
APH
Yield
ProtecTon
(same
as
current
insurance
products)
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
Realized
Income
Area-‐wide
Income
For
designated
area,
Area
Realized
Income
=
70%
to
95%
ProtecTon
Harvest
Price
*
Area-‐wide
Actual
Yield
Basic
Individual
For
individual,
Harvest
Price
*
Individual’s
0%
to
70%
ProtecTon
Actual
Yield
Stacked
Income
ProtecTon
Plan
(STAX)
Plan
IndemniDes
If
posiTve,
(95%
of
Area
Reference
Income)
Area-‐wide
Income
–
Area
Realized
Income;
Indemnity
may
not
70%
to
95%
ProtecTon
be
greater
than
25%
of
Area
Reference
Income
PosiTve
difference
between
70%
of
Basic
Individual
0%
to
70%
Individual
Reference
Income
and
Individual
ProtecTon
Realized
Income
STAX
Example
for
LeFlore
County
2009
2010
1. Projected Price (1/15-2/14 Avg Dec) $0.5470 $0.7181
2. Fixed Reference Price $0.6500 $0.6500
3. Area-wide Price Protection (Higher of 1 & 2) $0.6500 $0.7181
4. Expected Area-wide Yield per Pltd Acre 905 910
5. Area-wide Projected Income (3 * 4) $588 $654
6. Harvest Price (10/1-10/31 Avg Dec) $0.6563 $1.1233
7. Area-wide Reference Income (Higher of 3 & 6) * 4 $594 $1,022
8. 95% of Reference Income (95% of 7) $564 $971
9. Area-wide Actual Yield per Pltd Acre 602 1,145
10. Area-wide Realized Income (6 * 9) $395 $1,286
11. Income Shortfall (8 – 10 if 10 < 8) $169 $0
12. Maximum Indemnity (25% of 7) $148 $256
EsTmated
STAX
IndemniTes
Million
$
$2,500
EsTmated
Average
Maximum
$2,000
$1,500
$1,000
$500
$0
1982
1986
1990
1994
1998
2002
2006
2010
EsTmated
STAX
IndemniTes
Million
$
$2,500
Amount
due
to
Yield
Amount
due
to
Price
Total
IndemniTes
$2,000
$1,500
$1,000
$500
$0
1982
1986
1990
1994
1998
2002
2006
2010
Can
Co.on
Afford
STAX?
FY13-‐21
Average
$1,200
A&O
Area-‐Wide
Indem
ACRE
CCP
DP
$1,000
$800
470
Million
$
151
$600
151
$400
591
590
$200
416
$0
Mar
'10
Base
Mar
'11
Base
Mar
'11
w/DefRed
STAX
QuesTons
for
AlternaTve
Program
• Score
of
Area-‐wide
coverage?
• InteracDon
with
current
crop
insurance
baseline?
• Adjust
percentages
of
STAX
and
level
of
premium
subsidies
to
meet
budget?
MarkeTng
Loan
Brazil’s
Primary
Argument
AWP
consistently
below
LR
Changes
to
MarkeTng
Loan
• Allow
level
of
LR
to
change
based
on
historical
AWP
– Example:
Set
LR
equal
to
2-‐Yr
moving
average
of
AWP
with
limits
• Maximum
LR
=
$0.52
• Minimum
LR
=
$0.47
• All
other
features
of
markeDng
loan
remain
unchanged
from
current
law
IllustraTon
Based
on
Historical
AWP
LR
would
have
been
$0.52
in
8
of
21
yrs;
$0.47
in
8
of
21
yrs
$0.90
2Yr
Avg
AWP
Max
Min
LR
$0.80
$0.70
$0.60
$0.50
$0.40
$0.30
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Farm
Policy
MeeDng
Delta
Council
August
30,
2011