August 2015
Ag Insight

Ag Insight

Program enrollment period now open

Eligible producers may now formally enroll in the Agriculture Risk Coverage and Price Loss Coverage programs for 2014 and 2015. The enrollment period ends Sept. 30, 2015.

The outreach campaign conducted by USDA since the 2014 Farm Bill was enacted and extended deadlines are central to achieving an expected high level of participation, USDA officials believe.

Implementation efforts included working with universities to simplify the complex programs by providing online tools so producers can explore how program-election options would affect their operation in different market conditions. The tools were presented to almost 3,000 organizations across the country.

The Farm Service Agency also sent more than 5 million educational notices to producers nationwide and participated in some 4,880 educational events with more than 447,000 attendees.

The new programs, established by the 2014 Farm Bill, trigger financial protections for agricultural producers when market forces cause substantial drops in crop prices or revenues. More than 1.76 million farmers have elected ARC or PLC. Previously, 1.7 million producers had enrolled to receive direct payments (the program replaced with ARC and PLC by the 2014 Farm Bill). This means more farms have elected ARC or PLC than previously enrolled under previously administered programs.

Covered commodities under ARC and PLC include barley, canola, large and small chickpeas, corn, crambe, flaxseed, grain sorghum, lentils, mustard seed, oats, peanuts, dry peas, rapeseed, long grain rice, medium grain rice (includes short grain and sweet rice), safflower seed, sesame, soybeans, sunflower seed and wheat.

Upland cotton is no longer a covered commodity.

Sign-up in dairy program under way

Dairy farmers can now enroll in USDA’s Margin Protection Program for coverage in 2016.

Established by the 2014 Farm Bill, the voluntary program provides financial assistance to participating dairy operations when the margin – the difference between the price of milk and feed costs – falls below the coverage level selected by the farmer.

The enrollment period ends Sept. 30, 2015.

According to USDA officials, more than half of the nation’s dairy producers enrolled in the 2015 program, which exceeded expectations for the first year of the program.

The MPP gives participating dairy producers the flexibility to select coverage levels best suited for their operation. Participating farmers will remain in the program through 2018 and pay a $100 administrative fee each year.

Producers also have the option of selecting a different coverage level during open enrollment each year. MPP payments are based on an operation’s historical production.

A farm’s historical production will increase by 2.61 percent in 2016 if the operation participated in 2015, providing a stronger safety net.

 

Estate tax is hefty, but number of farms affected is small

The federal tax bite on farm estates can be significant, but only an estimated 2.7 percent of farm estates must file an estate tax return, with a much smaller share (about 0.8 percent) owing any federal estate tax. The figures are based on simulations using farm-level survey data from the 2013 Agricultural Resource Management Survey for the 2014 tax year.

On average, a farm estate that owed federal estate tax had a net worth of $11.1 million and a tax liability of $1.68 million, paying an average tax rate of 15 percent. Estates of small family farms (those with gross cash farm income below $350,000) faced the lowest average effective tax rate, while estates of large-scale family farms (those with GCFI of $1 million or more) were taxed at an average effective rate of 18 percent. 

Since 1916, the federal estate tax has been applied to the transfer of property at death. Under present law, the estate of a decedent, who at death owned assets in excess of the estate tax exemption amount ($5.43 million in 2015), must file a federal estate tax return; those estates are subject to a 40 percent tax rate on the nonexempt amount.

Energy price declines lower crop production expenses

Oil and natural gas prices dropped in the latter half of 2014, with expectations that energy prices will remain lower than previously projected through 2016.

Lower energy prices affect crop production expenses, which in turn influence planting decisions and commodity prices. However, the estimated acreage changes due to lower energy prices are small, according to USDA projections.

The effect of energy prices on the cost of producing particular crops depends on the level and share of production costs for direct energy inputs such as fuel and oil, as well as for inputs such as energy-intensive nitrogen fertilizers and agricultural chemicals.

Rice, cotton and corn have high energy-related production expenses, so lower-energy prices are expected to reduce operating expenses for those crops the most. Lower production costs provide an incentive to plant additional acreage, so plantings of most crops are expected to rise from what they would have been without the decline in energy prices. The exception is soybeans, whose plantings are estimated to fall initially due to relatively small production cost changes and large cross-commodity influences from corn, as they often compete with one another.

Export demand boosts sorghum prices

A strong increase in demand has pushed U.S. sorghum prices higher, resulting in a premium over corn expected to persist for the second consecutive marketing year.

While not without precedent, the season average price of sorghum has exceeded the price of corn in only 4 previous marketing years since 1981/82, and only 18 times in the 96-year history of sorghum price reporting. 

In recent years, the price of sorghum has been supported by unusually strong export demand, particularly from China. Sorghum is a common substitute for corn in feed rations and is also used for ethanol production in the United States.

Corn tends to be preferred over sorghum for livestock feed in most countries, so sorghum typically sells at a discount to corn in global markets. However, since sorghum does not face import quotas and other constraints that often delay or restrict shipments of corn and distillers dried grains from entering the country, China’s demand for U.S. sorghum has surged.

Imports by China were negligible before 2013, but that nation is now the principal buyer of U.S. sorghum and is expected to account for more than 90 percent of the 350 million bushels of sorghum the United States is forecast to export in the 2014/15 marketing year.

Report tells results of USDA research

A recent report tells of discoveries by USDA researchers that have led to new patents and inventions with the potential for commercial application and potential economic growth.

"USDA has a proven track record of performing research that has tangible benefits for the American public, and studies have found every dollar invested in agricultural research returns $20 to our economy," said Secretary of Agriculture Tom Vilsack.

According to the department’s 2014 Annual Report on Technology Transfer, USDA received 83 patents in fiscal year 2014, up from 51 patents in 2013. USDA filed 119 patent applications and disclosed another 117 new inventions, which may lead to future patents.

Helping drive these innovations, USDA has 267 active Cooperative Research and Development Agreements with outside partners, including universities, other organizations and more than 100 small businesses.

Highlighted discoveries from the annual report include:

Procedures to remove up to 98 percent of the allergens from peanuts without affecting the flavor;

A new process for pasteurizing shelled eggs using radio frequency energy 1.5 times faster than the current pasteurization process;

A portable method for identifying harmful bacteria in food that could improve the response to foodborne illness outbreaks; and

A new soil nitrogen test that rapidly and inexpensively determines the total amount of nitrogen in the soil available to a plant, reducing costs for farmers while benefiting the environment.