Ready or not it’s kind of that time again….. That is if you can fit us in while trying to get your head around the new farm bill …….. please be aware that we emailed PDF files of everyone’s APH yield records back in December – directly to the FSA offices. There are still issues, so don’t hesitate to contact us and we’ll sort it out. From what we understand, we’d highly recommend going through the reallocation and yield adjustment process.
We’re going to follow up on various subjects in this package, but we need to stress the Conservation Compliance part of the new Farm Bill. It does not affect 2015 coverage, but if you do not have a plan signed by 1 June 2015 – you will not have any subsidy payments for your 2016 coverage or any other USDA payment for that matter.
In addition to some more mailings – including final quotes in early March once the bushel prices are in place – we are hosting some Update Meetings again this year – we’ll send out specifics as we get closer to the actual dates, but plan to attend if it’s convenient:
3 FEB. - ORWELL AMERICAN LEGION - ASHTABULA – 2 PM
24 FEB. - COY SMITH FARM - LORAIN COUNTY
6 MAR. – HAMILTON FARM – CARROLL COUNTY
Our basic take is that there are no locked in payments from the Farm Bill programs, markets are down, 2015 inputs are up if anything, and very truthfully, your crop insurance coverage may be more important than ever. We know that these group meetings are not ideal to answer individual questions, but we think they are productive to get you thinking. And you may very well not need to make any changes for 2015, but contact us and we’ll arrange to meet with you personally if necessary.
Dale and all
Conservation Compliance – This has been a provision of the past Farm Bills, but with the 7 Feb. 2014 version (an important date !!) there are teeth (read that dollars). And as most of you are probably aware, there are two considerations for compliance – wetland / drainage and highly erodible. By 1 June 2015 you must have a signed FSA form 1026 on file or you will lose your eligibility for the crop insurance subsidy for 2016. This has nothing to do with 2015, and who know if this deadline will slip the way the other dates have so far – but don’t count on it. And we should clarify the significance of February 7th – if there is a violation on any farm you operate, you are ineligible for USDA programs, but if the violation was before the Feb. 7th date, your crop insurance will not be penalized for a prior violation – just don’t do it again …. :-)
Private Company Products – All of the companies have developed products to supplement your normal MPCI coverage – Hail, Flex Pricing, Extra Replanting, etc. – all are not subsidized, but some are good choices. An important point is that regardless of which company you have your MPCI policy with, you could purchase one of these add-on products from another company.
Flex pricing – Added Price Option – The regular bushel pricing process takes place during the month of February – averaging the CBOT close for Nov Beans and Dec Corn for all trading days in the month to establish the base coverage prices. Every company has developed private products that would allow some possible options. RCIS has a product that simply adds a fixed amount to the base bushel prices – limit of $ .50 for corn and $ 1.00 for beans – and regardless of the unit structure of the base policy, would adjust the add on coverage on an OU basis. However you get it, a higher bushel could be nice this year with the lower prices, and APO is a fixed amount that will definitely apply, and the OU is a neat wrinkle, but …. Premium is the un-subsidized cost of that extra coverage – approx. $10 per acre with EU on the base policy. Most of the others offer some form of multiple discovery choices – as in if you purchased it before the end of January, you could have coverage based on the highest average of Feb. through July for $7.00 from Heartland – that is based on an APH of 140 bu. per acre, and 80% coverage – and the kicker is ….. This concept “could” work great, but if the Feb. price turns out to be the highest, you’d pay that premium for nothing.
BEGINNING FARMER – One of the really positive parts of the new Farm Bill is an incentive for new producers to carry crop insurance. Basically, if you’ve never farmed more than five years anywhere in the country, we should talk. A lot of qualifications, but admin fee waived, premium discounts, and relaxed APH rules. Contact us if it might apply.
LGM MILK – FSA MPP – It has been an interesting product and roll-out to follow from our perspective. The FSA products are extremely cheap – on the order of a year’s worth of MPP coverage for the same cost of LGM for a month. But it also follows that you get what you pay for – the guarantees are much lower, especially with the $4.00 default product. Time will tell – milk prices are naturally already falling, but so are the feed costs, and these products are both built on the “gross margin” – your expected profit from milk sales above feed costs. On a per hundredweight premium basis the LGM was usually around $ .25 which adds up, but the potential pay out would also be far greater. For Ohio recently released numbers show that at some level, 34 % of the dairy herds in the state opted for MPP - LMG is in the low single digits.
LRP FATS – FEEDERS - A year ago this was a cheap way to back up what looked like expensive purchases of feeder cattle. I’ve never pushed them very hard, but purchased them myself, and last year as prices continued to improve through the year, there were no payments – still a sound business decision, and we ended up selling a ridiculous amount of beef. You’ve all followed the beef market, and we waffled like most producers. We would assume there is a lack of confidence that these markets can continue this year – where our premiums in 2014 to guarantee national sales prices of $1.55 plus per pound were costing us in the $15-18 range, in 2015 the guarantees are mostly down in the $1.45 range and the premiums would be $90 per head ………….. we haven’t bought as many feeders, and haven’t insured all that we have ………… But it’s a fickle product and fluctuates a lot – rates and offerings change daily and there may be a window ….
HAIL - REPLANT – Two add-on products that seem to be used more every year are separate Hail and extra Replant – both are included in your MPCI coverage (other than CAT), but these just bump up payments for these specific perils. If you already have these added to your policy, they will automatically continue for 2015, and we will send you a separate package to review in the near future. If you want to consider adding either, please contact us – Hail rates are $.45 /$100 for corn and $.90/$100 for bean – Replant for an extra $50 per acre for corn in most of our counties is $1.00 and beans $2.00 per acre.
2014 YIELDS – Just to be clear – at one time we had claims opened on every policy, but not every policy had claims worked on them, meaning that not all yields got reported into the system. If you know you did not complete the claims process – usually because you were fortunate and had great yields – then you need to complete our APH reports to get your APH updated – the companies are shooting for 15 February, so expect to hear from the troops if we still need your data.
CONTACTS – The toll free number will connect you directly to Jason. We really like email for questions or to schedule a meeting or call back. Other numbers are all on our website at www.dalehamilton.com
QUOTES/APPS - We’ll again plan on sending out quotes showing one level above and one below your current level of coverage – in early March. Even if you don’t need changes, please review the entity and individual tax ids – that end is more of a hassle than ever.