New Method of Calculating Soybean Base Acres: Changes to the 2002 Farm Bill Decision Tool (version 5.0)

During the first week of October 2002, the Farm Service Agency introduced a new method of calculating soybean base acres under the 2002 Farm Bill. This method will impact base soybean acres under option 2 (i.e., retain 2002 Production Flexibility Contract (PFC) acres and add minimum eligible oilseed acres). The change in method also potentially impacts total program acres under option 3 (Exchange 2002 PFC acres for maximum oilseed acres) and option 5 (Exchange existing 2002 PFC acres with less than minimum or maximum oilseed acres). The change will not impact acres under option 1 (Retain 2002 PFC acres) or option 4 (Update acres). More detail on these options can be found here.

The change in method results in the same or higher soybean base acres. It also results in the same or higher total base acres. The net impact of the change is to increase potential payments under options 2, 3, and 5.

Because of these changes, we have revised the 2002 Farm Bill Decision Tool and introduced version 5.0. The change in base acre calculations is shown in the following example.

Example of Change in Soybean Base Acres

The change in the soybean base acres method is described for option 2. Under option 2, "old" program crop including corn, wheat, oats, and grain sorghum have the same base acres as under the 1996 Farm Bill, and the minimum number of soybean acres are added. Under the old method, the minimum soybean base acres are determined by first calculating eligible soybean acres for each year. A year's eligible soybean acres equals the minimum of:

1. Total program acres planted during the year minus PFC bases for old program corps (if the result is greater than zero, zero otherwise), or
2. Planted or prevented planted soybean acres during that year.

Then, eligible soybean acres are averaged to arrive at the minimum soybean base. Under the new method, soybean base acres equals the minimum of 1) total program acres minus current PFC acres averaged for 1998 through 2001 minus (negative numbers are replaced by zero), or 2) average soybean acres from 1998 through 2001. If the minimum is below zero, a zero soybean base is used.

The two methods are illustrated for an example farm that plants 100 acres of program crops each year (see Table 1) and has 60 PFC corn acres. The farm has two fields, one of 70 acres and one of 30 acres, that are rotated between corn and soybeans. The 70 acre field has corn and the 30 acre field has soybeans in 1998, the 70 acre field has soybeans and the 30 acre field has corn in 1999, and so on.

Under the old method, the maximum number of eligible acres for soybeans in each year is 40 acres (100 program acres - 60 PFC corn acres). In 1998 and 2000, planted soybean acres of 30 are below the maximum of 40; therefore, eligible soybean acres in these years are 30. Eligible soybean acres equals the average of 40 (eligible acres in 1998), 30 (eligible acres in 1999), 40 (eligible acres in 2000), and 30 (eligible acres in 2001). This average is 35. Under the old method, this farm would have had 60 acres of corn and 35 acres of soybeans.

The old method may result in lower total base acres than average plantings from 1998 through 2001. Under the old method, the example farm has a total of 95 base acres in both corn and soybeans, 5 acres below planted acres. This reduction occurs because acres eligible for soybeans are determined in each year rather than determining eligible acres based on four-year average planted and prevented plantings. The more extreme the differences in soybean planting per year, the greater the reduction in base acres from planted acres. In the above example, planting 100 acres of soybean in one year and 0 in the next results in 20 base soybean acres, 15 acres less than in the example in Table 1.

Under the new method, total program acres from 1998 through 2001 minus current PFC acres equal 40 acres (100 program acres - 60 program acres). This is less than the average soybean plantings of 50 acres from 1998 through 2001. Hence, the soybean base under this method equals 40 acres. Under this method, the farm has 60 acres of corn and 40 acres of soybeans. Rotation across years does not influence the final minimum soybean base acres.

Summary

This change in soybean acre method may result in higher soybean base acres under option 2. It will also result in higher total program acres under options 3 and 5. This change makes options 2, 3, and 5 more favorable compared to options 1 and 4.

Many farmers have used version 4 of the 2002 Farm Bill Decision Tool to project direct and counter-cyclical payments for the five options. It is advisable to re-run these calculations using version 5.0. The change in method will have the largest impact on farms that have rotations where 100 percent of corn is raised in one year and 100 percent in the next. Farms that have 50 percent of their farmland in corn and the other 50 percent in soybeans will not have acreage changes as a result of this new calculation method.

Prepared by: Gary Schnitkey, Department of Agriculture and Consumer Economics, University of Illinois, October 2002.