December 2008
Background
The Direct and Counter - cyclical Payment Program (DCP) provides payments to eligible producers on farms enrolled for the 2008 through 2012 crop years. There are two types of DCP payments - direct payments and counter-cyclical payments. Both are calculated using the base acres and payment yields established for the farm. DCP is authorized by the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) and is administered by the U.S. Department of Agriculture's Farm Service Agency (FSA). Regulations covering the 2008 Farm Bill provisions, other than stop-gap provisions, have not yet been promulgated. This fact sheet addresses only matters already in place or basic statutory provisions governing the programs.
Eligible Producers
To be eligible for DCP payments, owners, operators, landlords, tenants, or sharecroppers must:
- share in the risk of producing a crop on base acres on a farm enrolled in DCP, and be entitled to share in the crop available for marketing from the base acres or would have shared had a crop been produced;
- annually report the use of the farm's cropland acreage;
- comply with conservation and wetland protection requirements on all of their land;
- comply with planting flexibility requirements;
- use the base acres for agricultural or related activities; and
- protect all base acres from erosion, including providing sufficient cover as determined necessary by the county FSA committee, and control weeds.
Eligible Commodities
Base acres and payment yields are established for the following commodities:
- grain sorghum, including dual purpose varieties that can be harvested as grain;
- long grain rice and medium grain rice (which includes short grain rice), excluding wild rice;
- canola, crambe, flaxseed, mustard seed, rapeseed, safflower, sesame seed and sunflower seed, including oil and non-oil varieties, or any oilseed designated by the secretary;
Pulse crops will be added as an eligible commodity beginning with the 2009 crop year for counter-cyclical payments only. Pulse crops are defined as dry peas, lentils, small chickpeas (Garbanzo bean, Desi), and large chickpeas (Garbanzo bean, Kabuli).
Under provisions of the 2008 Farm Bill, farms with 10 base acres or less were made ineligible for the DCP. However, P.L. 110-398 made that provision inapplicable to the 2008 crop only. For 2009, the rule still applies. Reconstitutions of farms with 10 base acres or less are now allowed.
Direct Payments
The 2008 Farm Bill continues the direct payments that began under the Farm Security and Rural Investment Act of 2002. Direct payment rates for the eligible DCP commodities are as follows:
- Grain sorghum: $0.35 per bushel
- Upland cotton: $0.0667 per pound
- Rice, long grain: $2.35 per hundredweight
- Rice, medium/short grain: $2.35 per hundredweight
- Soybeans: $0.44 per bushel
- Other oilseeds: $0.80 per hundredweight
For each commodity, the total direct payment for the 2009 crop year for producers on a farm is determined by multiplying 83.3 percent of the farm's base acreage times the farm's direct payment yield times the direct payment rate. For 2012, the payment percentage changes from 83.3 to 85 percent of the farm's base acreage.
The following is an example for 2009 corn:
Base acres planted to corn:
100 acres x 83.3%
83.3 acres payment acres
x 110 bushels direct payment yield
x $0.28 per bushel direct payment rate
$2,566.00 direct payment
Direct payments are not based on producers' current production choices, but instead are tied to established base acres and yields.
Counter-cyclical Payments
In addition to direct payments, the 2008 Farm Bill authorizes counter-cyclical payments, which provide support counter to the cycle of market prices as part of a "safety net" in the event of low crop prices. Counter-cyclical payments for a commodity are only issued if the effective price for a commodity is below the target price for the commodity. Target prices, as provided by the 2008 Farm Bill, for each commodity are as follows:
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Wheat | $3.92/bu | $3.92/bu | $4.17/bu |
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Corn | | $2.63/bu | $2.63/bu |
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Grain sorghum | $2.57/bu | $2.57/bu | $2.63/bu |
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Barley | $2.24/bu | $2.24/bu | $2.63/bu |
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Oats | $1.44/bu | $1.44/bu | $1.79/bu |
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Upland cotton | $0.7125/lb | $0.7125/lb | $0.7125/lb |
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Rice, long grain | $10.50/cwt | $10.50/cwt | $10.50/cwt |
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Rice, medium/short grain | $10.50/cwt | $10.50/cwt | $10.50/cwt |
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Soybeans | $5.80/bu | $5.80/bu | $6.00/bu |
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Other oilseeds | $10.10/cwt | $10.10/cwt | $12.68/cwt |
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Dry peas | Not available | $8.32/cwt | $8.32/cwt |
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Lentils | Not available | $12.81/cwt | $12.81/cwt |
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Chickpeas, small (Garbanzo bean, Desi) | Not available | $10.36/cwt | $10.36/cwt |
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Chickpeas, large (Garbanzo bean, Kabuli) | Not available | $12.81/cwt | $12.81/cwt |
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Peanuts | $495/ton | $495/ton | $495/ton |
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The counter-cyclical payment rate is the amount by which the target price of each commodity exceeds its effective price. The effective price for each commodity equals the direct payment rate plus the higher of:
- the national average market price received by producers during the marketing year as determined by the secretary (see Example A); or the national loan rate for the commodity (see Example B).
Example A:
If the 2009 national average market price for soybeans is $5.10 per bushel:
$0.44 direct payment rate
+ $5.10 average market price*
$5.54 effective price
(*Average market price is used since it is higher than the 2008 national loan rate of $5.00)
$5.80 target price
-$5.54 effective price
$0.26 counter-cyclical payment rate
Example B:
If the 2010 national average market price for soybeans is $4.90 per bushel:
$0.44 direct payment rate
+$5.00 national loan rate*
$5.44 effective price
(*National loan rate is used since it is higher than the average market price)
$5.80 target price
$5.44 effective price
$0.36 counter-cyclical payment rate
For each commodity, the total 2008 counter-cyclical payment for producers on a farm is determined by multiplying 85 percent of the farm's base acres times the farm's counter-cyclical payment yield times the counter-cyclical payment rate.
An example for 2009 soybeans (using the counter-cyclical payment rate of $0.26) is:
100 acres base acres planted to soybeans
85 acres, payment acres
x 30 bushels per acre counter-cyclical payment yield
x $0.26 per bushel counter-cyclical payment rate
$663.00 counter-cyclical payment
For 2009 crops, counter-cyclical payments are not available for "other oilseeds" (sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed) because the sum of their national loan rate and direct payment rate is equal to or greater than their target price. For 2010 through 2012, counter-cyclical payments are available for "other oilseeds" due to an increase in their target price.
Timing of Payments
For crop years 2009 through 2011, producers may elect to receive their direct payments in two installments:
- The first advance payment for up to 22 percent of the total payment is provided by statute to be made available:
- For crop years beginning 2009 through 2011, beginning in December of the calendar year prior to the harvest year.
- The balance of the total direct payment is available in October of the crop year. Producers who do not elect to take the first direct payment will receive the entire direct payment that October.
- For 2012, there is no advance direct payment.
For crop years 2009 through 2010, producers may elect to receive two counter-cyclical payments per year:
- A partial payment will be available after completion of 180 days of the marketing year for the crop. These payments cannot exceed 40 percent of the total projected payment.
- Final payments are made beginning October 1, or as soon as practicable thereafter, after the end of the marketing year for the crop. Producers who do not elect to take the partial payment will receive the entire counter-cyclical payment at this time.
- For fiscal years 2011 and 2012, there is no partial counter-cyclical payments. Final payments are made beginning October 1, or as soon as practicable thereafter, after the end of the marketing year for the crop.
Producers must refund to FSA counter-cyclical payments that exceed the final and total counter-cyclical payment for each respective crop. This situation may occur when actual market prices exceed the projected market prices used in determining the partial counter-cyclical payment rates.
The DCP payment schedules for 2008 and 2009 crop years are in the following tables.
2008 Scheduled Timetable for DCP Payments |
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Month/Year | Commodity |
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Barley Oats Wheat | Peanuts Rice Upland Cotton | Corn Sorghum Soybeans | "Other" Oilseeds |
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Marketing Year | June 1 -May 31 | August 1 - July 31 | September 1 - August 31 | September 1 - August 31 |
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Enrollment to September 2008 | Advance Direct | Advance Direct | Advance Direct | Advance Direct |
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Beginning October 2008 | Final Direct | Final Direct | Final Direct | Final Direct |
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Beginning December 2008 | Partial CC 1\ | | | |
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Beginning February 2009 | | Partial CC 1\ | | |
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Beginning March 2009 | | | Partial CC 1\ | |
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Beginning October 2009 | Final CC | Final CC for Peanuts & Upland Cotton 2\ | Final CC | |
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Beginning February 2010 | | Final CC for Rice | | |
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1\ Producers must request advance counter-cyclical payments no later than 60 days prior to the end of the marketing year for that covered commodity.
2\ For upland cotton, the final marketing year average price estimate will be published by the National Agricultural Statistics Service in a notice between October 9, 2009 and October 12, 2009?coincident with the October Crop Production report. Final counter-cyclical payments for upland cotton will be available soon after this date.
| Month/Year | Commodity |
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Barley Oats Wheat | Dry Peas Lentils | Peanuts Rice Upland Cotton | Corn Sorghum Soybeans | "Other" Oilseeds | Large Chickpeas Small Chickpeas |
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Marketing Year | June 1 - May 31 | July 1 - June 30 | August 1 - July 31 | September 1 -August 31 | September 1 - August 31 | September 1 - August 31 |
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December 2008 to September 2009 | Advance Direct | | Advance Direct | Advance Direct | Advance Direct | |
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Beginning October 2009 | Final Direct | | Final Direct | Final Direct | Final Direct | |
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Beginning December 2009 | Partial CC 1\ | | | | | |
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Beginning January 2010 | | Partial CC 1\ | | | | |
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Beginning February 2010 | | | Partial CC 1\ |
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Beginning March 2010 | | | | Partial CC 1\ | | Partial CC 1\ |
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Beginning October 2010 | Final CC | Final CC | Final CC for Peanuts & Upland Cotton 2\ | Final CC | | Final CC |
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Beginning February 2011 | | | Final CC for Rice | | | |
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1\ Producers must request advance counter-cyclical payments no later than 60 days prior to the end of the marketing year for that covered commodity.
2\ For upland cotton, the final marketing year average price estimate will be published by the National Agricultural Statistics Service in a notice between October 9, 2010 and October 12, 2010?coincident with the October Crop Production report. Final counter-cyclical payments for upland cotton will be available soon after this date.
Sign-up Period
The DCP sign-up period for the 2009 crop began Dec. 22, 2008 and ends June 1, 2009. Annual sign-ups for the 2010-2012 crops will begin Oct. 1 of each applicable contract year and end June 1 of that contract year, set in accordance with DCP regulations. The CCC-509 sign-up form, "Direct and Counter-cyclical Program Contract," includes base acres, payment acres, payment yields, producer payment shares, advance direct and counter-cyclical payment selections, and signatures of the producer and county office representative.
Unlike years past, producers may NOT enroll a farm in DCP after June 1 of the applicable contract period. There are no late filed provisions for contract years 2009-2012.
All owners and operators who will share in the DCP payments on the farm must sign the CCC-509 by June 1 of the contract period.
Farm producers must apply for DCP on an annual basis.
The following documents are required and applicable determinations must be made before the county committee can approve a producer's share on the CCC-509 for payment:
- a farm operating plan (CCC-902 and related forms);
- an average adjusted gross income certification (CCC-926);
- a certification of compliance with highly erodible land and wetland conservation provisions (AD-1026).
A certification of the acreage of all cropland on the farm (FSA-578) is needed before final payments can be issued.
Planting Flexibility Provisions
Producers who participate in DCP may plant cropland in excess of the total base acreage on the farm to any commodity. However, producers are subject to certain restrictions on the planting of wild rice, fruits, and vegetables (other than mung beans and pulse crops). Information on wild rice, fruits and vegetable restrictions is contained in the FSA fact sheet "Direct and Counter-cyclical Payment Program: Wild Rice, Fruit, and Vegetable Provisions." A 2009 fact sheet will be available on FSA's Web site at: http://www.fsa.usda.gov; click on "find FSA fact sheets."
Planting transferability Pilot Project
The 2008 Farm Bill provides for the development of a pilot project for certain states to permit the planting of cucumbers, green peas, lima beans, pumpkins, snap beans, sweet corn, and tomatoes grown for processing on base acres during each of the 2009 through 2012 crop years. DCP base acres on a farm for a crop year will be reduced by an acre for each acre planted under the pilot program. This program is dependent on regulations not yet issued which will cover eligibility and the method by which producers can be approved for participation.
The number of base acres eligible during each crop year for the pilot year for the pilot project is:
Illinois: 9,000
Indiana: 9,000
Iowa: 1,000
Michigan: 9,000
Minnesota: 34,000
Ohio: 4,000
Wisconsin: 9,000
For More Information
Further information on DCP and other FSA programs are available at local FSA offices or on FSA's Web site at: http://www.fsa.usda.gov
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