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Volume 8, Number 11 - November 2002

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Livestock Compensation Program

Agriculture Secretary Ann M. Veneman recently announced that approximately $752 million is being made available to livestock producers in the form of drought relief assistance. While the majority of row crop acreage will be covered by crop insurance, livestock producers have relatively few risk management tools available. This program is being offered due to the lack of opportunities for livestock producers to mange risk. According to the most recent National Agricultural Statistics Service (NASS) pasture and rangeland condition report, 26 states reported at least 50% of pasture and rangeland rated as "poor" or "very poor."

Payments are based upon the number of eligible livestock owned as of June 1, 2002. Livestock must have been owned for 90 days or more before and/or after that date. Eligible livestock and payments rates are based upon $18 per animal consuming unit (indexed against beef cattle) and are as follows:

Eligible Livestock Payment/Head
Beef Cows $18.00
Dairy Cows $31.50
Stockers $13.50
Buffalo & Beefalo $18.00
Sheep $ 4.50
Goats $ 4.50

To sign-up contact your local USDA Farm Service Agency county office. Payments are to be made available shortly after sign-up.

(Author: Wesley Tucker, Agriculture Business Specialist)

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Farm Bill Decisions Necessary

Decisions made now will greatly affect farm income for at least the next six years and possibly beyond. Therefore, time invested this fall evaluating your options may pay big dividends. Remember, there are five base acreage options to choose from and four yield options available. Several good management tools are available for evaluating each of these options and their forecasted payments over the next six years (be sure to use a current tool from a reputable source). Your local Extension Agriculture Business Specialist can assist you with using these decision support tools and help you understand the various components of the farm bill. The following information is what is required for each farm unit to use with most decision models:

County Origin of Farmland __________
Total Farmland Acres __________
Total CRP Acres __________
Total Double Crop Acres __________

Eligible Crop Previous 2002 PFC
Base Acres
Previous 2002 PFC Yield

Eligible Crop Planted and Preventive Planted Acres Average Yield
  1998 1999 2000 2001 1998 1999 2000 2001

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How Does the Cash Flow?

The Farm Security and Rural Investment Act of 2002 (The New Farm Bill), not only has new terms and payments, but also has different timing and payment rates. It is important for farmers to know when the payments can be expected and make any necessary arrangements with lenders.

Keep in mind everyone that participates in the program will receive direct payments. Counter cyclical payments are based upon price, so there may or may not be a payment. may or may not be a payment. As of September 27, USDA has announced there will be no October (2002) advanced counter cyclical payment for wheat, corn, grain sorghum, barley, oats and soybeans, based on forecasted market prices for this crop marketing year (2002-2003). See table below.

October 2002 - Final DP for 2002 crop (less avanced AMTA)
- Adv. 35% of estimated CCP for 2002
December 2002 - Adv. 50% DP for 2003
February 2003 - Adv. 35% estimated CCP for 2002
July 2003 - Final CCP for 2002 small grain crop
October 2003 - Final DP for 2003
- Final CCP for 2003 corn & soybean
- Adv. 35% estimated CCP for 2003
December 2003 - Adv. 50% DP for 2004
  • CCP = Counter-Cyclical Payment (based on price, so there may be times with no payment)
  • Adv. = Advanced (these payments are optional and the producer can elect to not take them and take 100% with the final payment)
  • Note: Persons must be signed up prior to receiving any 2002 Farm Bill payments

This calendar of dates indicates there could be a big cash crunch in the next few months. Many farmers elected to take their whole PFC payment for 2002, which means their final Direct Payment for 2002 will be fairly small (amount of oilseeds added and the difference in rate changes). There will not be any advanced counter cyclical payment this fall due to higher market prices and no LDP payment this fall, due to higher prices. Farmers will have the option of receiving up to 50% of their 2003 Direct Payment in December 2002 if they are signed up in the new program. That is a change from previous years, where farmers had the option to receive 100% advance payment in the old PFC program.

The new program is going to cause transition/cash flow pains the next several months. It is extremely important to study the program and determine when you will receive payments.

(Authors: Wesley Tucker and Mary Sobba, Agriculture Business Specialists)

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Year-End Income Tax Planning Tidbits

The close of another tax year is approaching - now is the time for taxpayers to calculate their year-to-date taxable income, estimate income and expenses for the balance of the year, and to consider appropriate adjustments. Provisions in the Economic Growth & Tax Relief Act of 2001 (2001 Act), the Job Creation and Worker Assistance Act of 2002, and the 2002 Farm Bill are creating many changes and conditions under which year-end tax planning will likely pay substantial dividends. The following are some of the tax issues for which you will want to be aware.

(Author: Parman Green, Agriculture Business Specialist)

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Publishing Information

Ag Connection is published monthly for Central Missouri Region producers and is supported by University of Missouri Extension, the Commercial Agriculture program, the Missouri Agricultural Experiment Station and the MU College of Agriculture, Food and Natural Resources. Managing Editor: Kent Shannon.