October 10, 2002
Online tool cuts through farm bill's base acre, yield options
WEST LAFAYETTE, Ind. Receiving the full benefit of the 2002 Farm Bill comes down to a farmer's decision-making ability on base acres and program yields, and a Web-based spreadsheet calculator developed by a Purdue University agricultural economist can help.
The free spreadsheet is on the web.
"The spreadsheet is designed to determine the best option for updating base acres and yields for a farm by trying to maximize the amount of money a farmer will receive over the life of the farm bill," said Allan Gray, the Purdue ag economist who developed the calculator.
The six-year farm bill runs through 2007. It offers producers a handful of possible base acre/program yield choices, each affecting the support payment amounts they'll receive from the government. Purdue's online spreadsheet projects future support payments from data a farmer enters.
"We calculate the estimated payments every year through 2007 from the farmer's inputs," Gray said. "Those include what their current base acres, or contract acres, are for corn and wheat, what his current farm program yields are for corn and wheat, the historical planted acres from 1998 to 2001 for corn, soybeans and wheat, and the yields on each of those in those years."
The analysis doesn't stop there, Gray said.
"What's unique about our spreadsheet is it takes 500 possible combinations of corn, soybean and wheat prices for 2002 to 2007," he said. "Each time we take one of those combinations, we figure out which option would be best, and then provide that to the farmer in a printable final report."
Farmers will need to enter about 15 acreage- and yield-related numbers to perform the calculations. They'll also need Excel software on their computers to run the spreadsheet program.
All this number crunching is necessary because the new farm bill makes major changes in federal agriculture programs. The legislation adds a new support payment a counter-cyclical payment to the traditional direct payments and marketing loans. It also establishes soybeans as a program crop and, for the first time in years, allows farmers to update base acres and program yields.
Farmers can receive counter-cyclical payments on qualified crops when market prices fall below a government-set target price. Target prices vary from crop to crop.
"That's one of a couple of unique things that happened with the 2002 Farm Bill," Gray said. "Another is farmers are now allowed to have base acres on soybeans. Throughout the history of farm programs going back to 1933, soybeans have never had equivalent treatment to corn."
In addition, "farmers are allowed to update their base acreages and update their yields, if they choose to do so, based on their average planting history and yields from 1998 to 2001," Gray said.
Farmers have not been permitted to adjust base acres up or down since 1990. Base acres are those acres of a particular crop a farmer counts toward support payments. Program yields represent the average crop production per acre.
"The rules have changed such that there are now five options available to the producer for updating their base acreages and yields," Gray said.
The five options include:
Option No. 1 Making no changes to existing base acres and program yields.
Option No. 2 Adding soybean base acres to current base acreage.
Option No. 3 Maximizing soybean base acres by trading other crops' base acres.
Option No. 4 Updating base acres using 1998-2001 historical planted acres and updating program yields for counter-cyclical payments.
Option No. 5 Trading selected base acres for additional soybean acres.
Farmers with 100 percent corn bases are likely to choose the first option, because corn base acres are worth more in support payments than other program crops, Gray said. Producers with significant soybean acreage could take advantage of options No. 2 and 4, while farmers with historical base in oats and soybeans could increase their support levels by selecting option No. 5. The fourth option is the only one permitting farmers to update their base acres and program yields for counter-cyclical payments.
"In the state of Indiana and, particularly, across the Corn Belt, we've had four years 1998 through 2001 of outstanding crops that were above trend," Gray said. "Because of that, updating yields for counter-cyclical payments can give farmers a pretty substantial boost in yields, both for corn and soybeans. Since you can't update yields under any other option, option No. 4 is pretty appealing to a farmer."
Farmers have until April 1 to select base acre and yield options and report them to their local office of the U.S. Department of Agriculture's Farm Service Agency. The sign-up period for the 2002 and 2003 direct payment and counter-cyclical payment programs ends June 2.
Writer: Steve Leer, (765) 494-8415, email@example.com
Source: Allan Gray, (765) 494-4323, firstname.lastname@example.org
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