Below are several questions that will ask you to demonstrate your understanding of how these farm programs work. You will likely have to use the class overheads and/or the materials posted on the class web page to answer some them. Suppose a farmer owns a 200 acre FSA farm that includes 100 base acres for corn with a 112 bu/ac payment yield and 50 base acres of soybeans with a payment yield of 28 bu/ac. On that FSA farm in 2014, the farmer planted 130 ac of corn that had an average yield of 187 bu/ac, and 40 acres of soybeans that had an average yield of 51 bu/ac, and has 30 acres of alfalfa. Suppose that in September 2015, the USDA announces that the 2014 national marketing year average price is $3.55 for corn and $8.90 for soybeans. Suppose the farm is in Smith County, WI (not a real county) and the USDA announcers a 2014 guarantee of $710/ac for corn and $430 for soybeans for Smith County, WI. Suppose in September 2015, the USDA announces that the actual 2014 average corn yield in Smith County is 170 bu/ac and 45 bu/ac for soybeans.

1. Price Loss Coverage (PLC)

Suppose the farmer signed up for PLC for both the corn and soybeans.

1. What events trigger a corn PLC payment and a soybean PLC payment for this farm?
2. What will the farm’s PLC payments be for the 2014 crop year?
3. If the farmer had planted all 200 acres in corn, how would the PLC payments change?
4. How would the farm’s PLC payments change if the farmer instead planted 150 acres of wheat and 50 acres of oats?
5. How would the farm’s PLC payments change if the farmer used futures markets to sell the corn for $4.50/bu and the soybeans for $12.60/bu?
6. How would the farm’s PLC payments change if the farmer sold the corn at harvest for
   $3.20/bu and the soybeans for $8.10/bu?
7. How would the farm’s PLC payments change if the farm’s actual harvested yields for 2014 were 100 bu/ac for the corn and 20 bu/ac for the soybeans?

B. County Agricultural Risk Coverage (ARC)

Suppose the farmer signed up for county ARC for both the corn and soybeans.

1. What events trigger a county ARC payment for corn and for soybean for this farm?
2. What will the farm’s county ARC payments be for the 2014 crop year?
3. If the farmer had planted all 200 acres in corn, how would the ARC payments change?
4. How would the farm’s ARC payments change if the farmer instead planted 150 acres of wheat and 50 acres of oats?
5. How would the farm’s ARC payments change if the farmer used futures markets to sell the corn for $4.50/bu and the soybeans for $12.60/bu?
6. How would the farm’s ARC payments change if the farmer sold the corn at harvest for
   $3.20/bu and the soybeans for $8.10/bu?
7. How would the farm’s ARC payments change if the farm’s actual harvested yields for 2014 were 200 bu/ac for the corn and 60 bu/ac for the soybeans?

C. Marketing Assistance Loans

1. How many bushels of corn and of soybeans did the farmer harvest in 2014?
2. If the farmer enrolled half of the harvested corn and all of the harvested soybeans, how large of a Marketing Assistance Loan would the farm receive?
3. The farmer pays back the corn Marketing Assistance Loan on January 15th when the posted county price is $3.50/bu. Would the farmer receive a Loan Deficiency Payment? Ignoring interest payments, processing fees, and tax issues, how much does the farmer pay back?
4. Suppose the farmer actually sells the corn on April 12th for $1.90/bu. How does this affect the loan deficiency payment?

D. Agriculture Policy Analysis System (APAS) Decision Tool Suppose you operate several FSA farms in Dane County WI, all with corn, soybean, wheat and oat base acres. For this problem, you will use the Agriculture Policy Analysis System (APAS) developed by the University of Illinois for the USDA: http://fsa.usapas.com/ to help make your decision between PLC or ARC for your FSA farms. Specifically, look at the APAS sample farm for Dane County: choose the state and county and once it loads, look at the "Expected Program Payments" and once that loads, look at "Expected Program Payments per Acre by Crop."

1. APAS should default to the 1 year horizon (i.e., expected per acre payments by crop for the 2014 crop year), using CBO price expectations and a 75% coverage level for the underlying crop insurance policy. For this problem, switch to using the longer-term 5 year horizon. Once this is set up, enter the expected program payments per acre for both ARC and PLC plus SCO for each crop, using both the CBO price expectations and the USDA price expectations. To get these values, simply float your mouse over each bar plot and a little pop up should appear reporting the expected payment to the nearest $/acre.
   
2. Based on your table, which program do you recommend for each crop (ARC or PLC plus SCO) and why?

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Solution: The downloadable solution consists of 9 pages, 1746 words and 1 charts.
Deliverable: Word Document