Prevented Planting & Ever-changing Policies

1. Prevented Planting & Ever-changing Policies Ohio Ag Managers – July 9, 2019 Ben Brown Photo Credit- Arissa Kennedy

2. Logistics • The College of Food, Agricultural, and Environmental Sciences at Ohio State University created a web page for producers trying to navigate this year’s challenging conditions it can be found at www.go.osu.edu/AgCrisis • For questions about this presentation, please submit to Ben Brown- brown.6888@osu.edu

3. Terminology • Corn in Ohio • June 5 is Ohio’s Final Plant Date • Late Planting Period (June 6 through June 25) guarantee reduces 1%/ day. • Soybeans in Ohio • June 20 is Ohio’s Final Plant Date • Late Planting Period (June 21 through July15) guarantee reduces 1%/ day • Prevent Plant is failure to plant a crop by the final planting date or the late planting period. • Projected Prices • For Corn it’s the average of the December futures contract during the month of February 2019 = $4.00 • For Soybeans it is the average of the November futures contract during the month of February 2019 = $9.54 • Harvest Prices • Unknown as of now, but set in October of the average of the same contracts above. * Prevent Plant payments are made on projected price only

4. “Market Facilitation Payments 2.0” What we know- On May 23, 2019 “The President has authorized USDA to provide up to $16 billion in programs, which is in line with the estimated impacts of unjustified retaliatory tariffs on U.S. agricultural goods and other trade disruptions.” • $14.5 billion in direct payments to producers through the Market Facilitation Program where “M” stands for Mystery to Producers • Similar to 2018, but with changes • $1.4 billion to the Food Purchase and Distribution Program • $100 million to the Agricultural Trade Promotion Program

5. “Market Facilitation Payments 2.0” • What we know • “Producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, tree nut producers, fresh and sweet cherries, cranberry, fresh grape, dairy, hogs and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019. Those per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. Moreover, total payment-eligible plantings cannot exceed total 2018 plantings.” Example- Buckeye County Payment Rate of $50/ acre and a producer has: 150 acres corn 300 acres soybeans 50 acres wheat 50 acres alfalfa Can no exceed 2018 planted acreage! MFP payment would equal $50 x 550 acre = $27,500 in total divided over three payments

6. “Market Facilitation Payments 2.0” • What we know • “Payments will be made in up to three tranches, with the second and third tranches evaluated as market conditions and trade opportunities dictate. The first tranche will begin in late July/early August as soon as practical after Farm Service Agency crop reporting is completed by July 15th. If conditions warrant, the second and third tranches will be made in November and early January.” Previous Example- Brutus Buckeye has total payments equaling $27,500 If the three payments are split 1st payment 50% = $13,750 2nd payment 25%= $6,875 3rd payment 25% = $6,875 We do not know what the percentage split will be, but the first one is the only one guaranteed.

7. Possible MFP County Payment Formula- • First- What could a payment look like? • The program is going to make payments to hog and dairy producers as well as tree nuts, cranberry and grape producers. Pork and dairy represented 8% of the payments last time. • Let’s say all those commodities stay at 10% of the total. 14.5 billion * 90% gives us a total of 13 billion in money available for the other crops. • There was 319 million acres of eligible crops planted in 2018. • $13 billion divided by 319 million acres means that the average of all these acres would be $41/acre. • However, it is on the trade impact of each individual county not on an average of all counties so there will be some counties below $41/acre and there will be some above $41/acre. • Second- How could county payments be determined • Potentially there will be a payment rate set for each commodity like before. Then multiplied by the intended planting of 2019 and the sum of that divided by 2018 production. • Expected per acre payment for Ohio somewhere between $40- $70 per acre. It could be bigger or smaller, this is just my best estimate right now.

8. “Market Facilitation Payments 2.0” • What we don’t know • We do not know what the exact payment rates are going to be for each county. This will lead many people to speculate what the payments are going to be and rumors will start to circulate. • We do not know what the share of the three tranches is going to be. The first is guaranteed, the next two are on an as needed basis- similar to MFP last year. • We also do not know what Congress is going to do with the disaster aid bill. • Why this is important to understand? • The MFP 2.0 is going to make payments on acres that are planted to one of the following crops: alfalfa, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton and wheat. • It is NOT going to make payments on preventive plant acres alone (maybe on cover crops). • Producers that take prevent planting will forgo their right to an MFP payment that we do not know at this time.

9. MFP- Cover Crops • There have been several policy changes made for 2019 only that apply to cover crops due to wet weather and late planting: • RMA moved the haying and grazing date of cover crops up to September 1, for 2019 only. Normally set on November 1. • Cover crops can be turned into baleage, silage, and haylage after September 1. Typically harvesting cover crops in this manner is not allowed. • Allows the potential for a minimal MFP payment on cover crops deemed potentially harvestable. • Ohio NRCS is adding an additional $4 million to cover crop establishment though the Environmental Quality Incentive Program. – June 28, 2019 • Application process started July 1st and will continue until funds are exhausted. • Interested producers should visit their local USDA Service Center

10. MFP- Cover Crops

11. MFP- Cover Crops • Cover crops, including corn and soybeans, need to be planted as cover crops, and in many cases those production practices will differ from grain crops. • Producers can seek cover crop advice for 2019 prevented planting acres from cover crop experts defined by RMA: • Employed by cooperative Extension Service or USDA NIFA • Employed by the agricultural departments of universities • Certified by the American Society of Agronomy as Certified Crop Advisers and Certified Professional Agronomists • Certified by the National Alliance of Independent Crop Consultants as Certified Professional Crop Consultants • Certified by the American Society for Horticultural Sciences • Certified by the International Society of Arboriculture as Certified Arborists

12. Congressional Disaster Aid- Passed June 3, 2019 • $19 billion in disaster assistance • There is 3 B. in disaster payments available for producers who cannot get their crop in due to flooding. • USDA is allowed but not required to increase the prevented plant payment up to 90% of the value of the crop for insured acres or 70% for uninsured acres. (Not expecting the full 90%, maybe around 5%) • No idea what countieswill be covered! • The Ohio Farm Service Agency and the Governor have the ability to request by not authorize a disaster declaration. Both have • It also allows that the Harvest Price instead of the Projected Price will be used to estimate value of the crop. • Producers required to buy insurance the next 2 crop years

13. Why is this a big deal?? • Same coverage as before: 170 APH, 80% coverage, $4.00 Projected Price • Guaranteed Revenue= (170 x 0.80 x $4.00) = $544/acreminus harvested • Prevent Plant as of today: • $544/acre x 0.55= $299.20/ acres • Possible Prevent Plant with Congress’s Disaster Aid Bill if Passed: • $544/acre x 0.90= $489.60/ acre ($489.60- $299.20 = $190.40 difference) • Let’s Change the Projected Price to a Random Harvested Price • (170 x 0.80 x $4.00) x 0.55= $299.20 • (170 x 0.80 x $4.70) x 0.55 = $351.56($351.56- $299.20 = $52.36 difference)

14. Summary • Unknowns of Market Facilitation payment size for county based payments in 2019 and percentage share of three payment system • Cover crops may be eligible for a minimal MFP payment on “potentially harvestable” cover crops • Rules have changed on using cover crops on prevented planting acres, check with your local crop insurance provider before making decisions. • The Federal Disaster Aid Bill could provide some extra benefit to producers, but parameters are uncertain at this time. • Both FSA and Ohio’s Governor have requested disaster declaration • Unclear what counties will be eligible for benefits

15. This spring and summer has been tough, but if you need someone to talk to- always feel free to call me on my cell below! We are here for you! Ben Brown College of Food, Agriculture, and Environmental Sciences Department of Agriculture, Environmental, and Development Economics Agriculture Administration Building, Room 235 2120 Fyffe Road, Columbus, OH 43201-1067 660-492-7574- Mobile brown.6888@osu.edu 614-688-8686- Phone aede@osu.edu