Proposed means testing for eligibility to purchase crop insurance 1

Transcription

1 Disclaimer: This web page is designed to aid farmers with their marketing and risk management decisis. The risk of loss in trading futures, optis, forward ctracts, and hedge-to-arrive can be substantial and no warranty is given or implied by the author or any other party. Each farmer must csider whether such marketing strategies are appropriate for his or her situati. This web page does not represent the views of Kansas State University. Proposed means testing for eligibility to purchase crop insurance 1 Introducti. There are at least two amendments being offered in the Senate that will create a means test for eligibility to purchase crop insurance. One proposal is a maximum limit of $750,000 Adjusted Gross Income (AGI) to be eligible for crop insurance purchase. While this AGI limit would affect few farmers, it is unlikely to stop at $750,000. In the 2008 Farm Bill debate there was a House amendment to limit AGI to $250,000 for crop insurance eligibility. Therefore, even farmers under the $750,000 limit should be ccerned because the AGI limit will likely be lowered in the future, if an AGI limit were established. If the AGI limit becomes law, it would be the first government backed insurance program with a means test. A $250,000 AGI limit will eliminate eligibility for crop insurance purchase about the same number of farmers as the previously proposed $40,000 premium subsidy limit. A $250,000 AGI limit has greater impact corn while the previously proposed $40,000 premium subsidy limit would have a greater impact wheat. The crop insurance program ly became actuarially sound after 1995 when participati started to increase, especially with the introducti of Crop Revenue erage in 1996 (renamed Revenue Protecti). Because these are 1 Prepared by G. A. (Art) Barnaby, Jr., Professor, Department of Agricultural Ecomics, K-State Research and Extensi, Kansas State University, Manhattan, KS 66506, June 8, 2012, Phe , [email protected].

2 the larger farms, the insurance premium pool will shrink by more than the reducti in the number of farmers insured. This could ce again cause chric underwriting losses that were referred to as unintended subsidies. Crop insurance is not a traditial entitlement program. Farmers in some cases have paid in premiums for years, but have collect no indemnity payments. Their ly benefit is they paid lower premium costs, but it is a negative cash flow for that farmer. By ctrast farmers pay nothing for the Farm Service Agency (FSA) commodity programs and receive payments directly, i.e. a positive cash flow. How would an AGI Limit Work? The analysis assumes the FSA commodity program AGI limit of $750,000 would be administered the same for crop insurance purchase eligibility. However, e could justify a higher AGI limit for crop insurance because average farmers pay 40% of the cost for crop insurance and nothing for FSA commodity program benefits. FSA applies the AGI limit to the individual tax return and also to corporatis and other entities. The corporati or partnership must be under the $750,000 limit and so must the individual stock holders. If any stock holder is over the $750,000 AGI limit, then the FSA prorates payments to the corporati. If it were to apply to crop insurance e would assume the agent and insurance company would need to prorate the premium and any indemnity payments. Under current FSA rules (it could be different for crop insurance), a husband and wife filling a joint return could each have a $750,000 limit for a total of $1.5 milli for the family, if a CPA will file the paper work stating that both the husband and wife would be under the $750,000 limit had they filed separate returns. This is necessary otherwise two unrelated people farming and living together would each qualify for a $750,000 limit or $1.5 milli for the two people. Otherwise it would pay to get a divorce and live together so that each pers has a $750,000 limit. Farmers would shift sales and expenses to keep the AGI under any limit. Most farmers already do these things to avoid taxes at a higher marginal rate. One possible way for larger farmers to avoid an AGI limit is to use a C corporati and the farmer becomes a crop share landlord to the C corporati. The C corporati receives farm payments (and e would assume crop insurance purchase eligibility) as lg as the AGI is below $750,000 in the C corporati. The CPA accountant can keep that AGI low by paying out rents and other items to the farmer from the C corporati. A very successful western Kansas CPA with many farm clients suggested many of his current S corporatis would change to C corporatis, if the AGI limit were applied to crop insurance. Apparently there are ways to avoid the double taxing from the C corporati, but a complicating factor is Kansas eliminated state income tax for small business, but this may not apply to a C corporati. Another way to avoid the AGI limit is to increase the number of farms by adding partners (s or daughter) but this is 2

3 complicated and famers should spend the mey for the legal and accounting expertise to make this work. Required to Hit the AGI Limit. The estimated acres to hit a $750,000 AGI limit for Michigan, Kansas, Oklahoma, Nebraska, Minnesota, and Iowa are presented in tables 1, 2, 3, 4, and 5. These results are based the following assumptis: 1. The APH is the lg run average yield. 2. The crop insurance price is equal to the selling price; with a negative basis this overstates the estimated gross revenue. 3. The coverage level does not impact the expected gross revenue, as it does the crop insurance subsidy, therefore based the APH the average number of acres to hit the AGI limit is likely the best estimate. 4. Assumes expenses equal the lg run average expense ratio equal to 80% of the gross revenue. 5. Assumes the farmers did not use strategies to limit income below $750,000, as discussed above. Clearly farmers will work to avoid the limit and is the reas any budget savings will likely be less than the forecast. Effectively the estimated acres are the maximum before the farmer needs to create strategies to avoid the AGI limit. Michigan corn farmers would need about 4,564 acres or 6,968 acres of soybeans to hit the $750,000 AGI limit. These are the maximum acres for single crop farmer. Most farmers plant more than e crop. For example, if this Michigan farmer planted both soybeans and corn, then it would reduce the maximum number of acres for each crop planted because they are combined in the AGI calculati. It would require about 13,437 acres of Kansas wheat and 16,499 acres of Oklahoma wheat to hit the $750,000 AGI limit. Nebraska corn, 3,994 acres; soybeans 5,683 acres; wheat 12,742 acres: Minnesota corn, 4,129 acres; soybeans 7,324 acres; wheat 7,928 acres: Iowa corn, 3,708 acres; soybeans 5,684 acres: would be required to hit a $750,000 AGI limit. The crop insurance data is not separated for irrigati, so the combined Nebraska corn values overstate the number of irrigated corn acres needed to hit the $750,000 AGI limit. Because there is also an amendment to limit the AGI to $250,000, the estimated acres needed to hit a $250,000 AGI was also completed and reported in tables 6, 7, 8, 9, and 10. Michigan corn 1,521 acres, soybeans 2,323 acres: Kansas wheat 4,479 acres: Oklahoma wheat 5,500 acres: Nebraska corn, 1,331 (combined irrigated and n-irrigated) acres; soybeans 1,894 acres; wheat 4,247 acres: Minnesota corn, 1,331 acres; soybeans 1,894 acres; wheat 4,247 acres: Iowa corn, 1,236 acres; soybeans 1,895 acres: would be required to hit a $250,000 AGI limit. 3

4 Note the range of acres needed to hit a $40,000 premium subsidy limit depends the coverage level. For example, Iowa corn requires acres between 5,794 and 1,076 to hit the $40,000 premium subsidy limit vs. 1,236 acres to hit the $250,000 AGI limit (table 10). For Iowa corn a $250,000 AGI limit is more restrictive in most cases than the previously proposed $40,000 premium subsidy limit. The reverse was true for wheat. It would have taken more than double the acres to hit the $250K AGI limit vs. the $40,000 premium subsidy limit. For example, Kansas wheat requires acres between 2,853 and 1,408 to hit the $40,000 premium subsidy limit vs. 4,479 acres to hit the $250,000 AGI limit (table 7). Csequences of an AGI limit for crop insurance purchase eligibility: 1. Crop insurance is not an entitlement that makes payments to individuals, in this case farmers. Farmers can pay premium for years, but collect nothing from crop insurance, i.e. a negative cash flow. This is a current complaint from corn farmers who think their premium rates are too high. 2. Once a means test is in place there is no reas to believe the limit will increase, but lots of reass to believe a future Cgress will reduce the limit. There was a 2008 House amendment offered that would have put a $250,000 limit the AGI for crop insurance purchase eligibility. 3. Crop insurance would be the ly current government backed insurance program that has a means test. Currently there is no means test for home owners flood insurance or Medicare. 4. Large fruit, vegetable and n-program crop producers would need to manage their AGI to keep it under the limit for the first time. Many of these farmers have no experience working with FSA program limits, but they have purchased crop insurance. 5. Because crop insurance is a major risk tool for lenders, a market down turn or a major crop failure could have a major impact Farm Credit and Ag lenders making these large ag loans without crop insurance. Would Cgress stand by or would they provide ad hoc disaster aid and even aid to the ag lenders? In the 1980 s Cgress did provide help to Farm Credit and provided FmHA loan guarantees farm loans so Ag lenders could survive. 6. If the AGI limit were to eliminate large farmers from the insurance pool, that would also reduce the premium paid in to the pool and may impact the actuarial soundless of crop insurance. Crop insurance ly achieved actuarial soundness after large participati was achieved. If the pool shrinks e could end up with an unsound program. Prior to 1995 it was comm with a small insurance pool for the indemnity payments to exceed the premiums, and was referred to as the unintended subsidy. This issue would become very large if the AGI 4

5 limit were further reduced to $250,000 that was offered as a House amendment in the 2008 Farm Bill debate. 7. Changing from an S corporati to a C corporati would allow farmers to limit the impact of an AGI limit eligibility for crop insurance purchase, but require additial administrative and accounting costs. 8. A spouse could file a separate tax return and double the limit to $1.5 milli or a joint filer can achieve the same ends by having their CPA certify that both parties would have AGIs below $750, Shifting sales and expenses between years can help to avoid any AGI limit. 10. Keeping AGI below $750,000 limits Federal income taxes paid and in some cases state income taxes paid. 11. The current FSA limit also includes a secd n-farm $500,000 AGI limit that adds to the complexity. If these are landlords over the $500,000 AGI n-farm limit, they will simply change to cash rent. This would shift more risk to farmers and that increases the need for crop insurance to cover the additial risk. 12. If any stock holder in a C corporati has an adjusted AGI over $750,000 (or n-farm AGI over $500,000) then FSA prorates the payments. One would assume premium and indemnity payments would also need to be prorated. 13. Adds administrative cost for farmers, crop insurance agents and insurance companies to tract entities and collecting full premium when a famer is over the AGI limit. 14. Adds FSA administrative costs assuming they determine eligibility for farmers under the limit because they will now have to certify the nprogram crop producers. Administrati s Plan. During a telephe radio interview, I was asked about the administrati s proposal to limit subsidy to 50% of the premium, but no other limits (this was news to me, may be the reader has more informati). If this debate were about budget savings, then Cgress would accept the Administrati plan to cap the percent subsidy at 50%, but no means testing or other limits. Because farmers currently pay about 40% of the premium, this average would increase farmer paid premiums because they would now pay at least 50% of the premium cost. CAT buyers would have to pay 50% of their premium, 85% insured farmers would see no change in farmer paid premiums, and the amount of farmer paid premium increases would vary by coverage level. Those free CAT ctracts in Florida and California can provide over a milli dollars of coverage as was recently documented AgManger.info. The farmer paid share of the premium would increase by 5-10% for most farmers at the buyup coverage levels currently being purchased. This policy issue is clearly about more than saving mey or even farmers. 5

6 A 50% premium subsidy cap would save real mey because it is an across the board cut in subsidy that cannot be avoided. Assuming farmers did not reduce coverage as a result of higher farmer paid premiums, the savings would be over $1.3 billi annually or more because some farmers would reduce their coverage. Many of the CAT buyers who receive free coverage would be the most likely to drop their coverage. By ctrast, the AGI limit would save very little budget because farmers would work to avoid the limit, therefore even very large farmers may still be able to buy crop insurance. This 50% cap percent subsidy is more ecomically efficient than a means test because this policy creates no new incentive to change type of entity, change leases, shifting income, no added administrative cost, etc. Farmers will not like paying a higher share of their premiums, but if this were the choice vs. means testing then many farmers would prefer the cap the maximum subsidy rate, even if the current means test does not affect them. Many farmers would assume ce a means test is policy it is more likely that the limit will be reduced in the future and they too will be eliminated from the crop insurance program. Summary. The AGI creates large public and private administrative costs to avoid an AGI limit. It is a dead weight loss the agricultural industry because there would be no incentives to alter an organizati or change management without this policy change. If farmers are eliminated from the program, then likely ad hoc disaster aid will ce again be proposed and perhaps help for ag lenders. The reducti of farms in the pool may also affect actuarial results. Crop insurance would become the first government backed insurance program with a means test. 6

7 Table 1. Michigan Corn and Soybean acres needed to reach $750,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average Earn ium Michigan Corn, Revenue Protecti, to reach a $750,000 AGI erage. Farmer / Ac Effe ctive AGI rate ,035 8,096, , , , % 4, , ,946 56,360 39, , % 4, ,384 4,013, , , , % 4, ,535 25,040,993 2,443,080 1,673, , % 4, , ,404,175 11,475,692 8,088, % 4, , , ,290,272 26,384,016 18,649, % 4, , , ,131,994 34,181,823 22,373, % 4, ,560 58,218,277 7,161,095 3,663, % 4,411 Michigan Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 4, ,941 2,726, ,313 95, , % 6, , ,530 40,289 28, , % 7, ,848 2,489, , , , % 7, ,529 11,294,097 1,076, , , % 7, ,189 58,173,607 6,643,609 4,313, , % 7, , , ,816,727 15,872,974 10,907, , % 6, , , ,259,505 22,053,995 14,281, , % 6, ,765 30,599,847 4,408,482 2,219, , % 6,642 Average to hit AGI limit 6,968 *Source of data: Risk Management Agency s w ebsite at w w.rma.usda.gov/ Table 2. Kansas and Oklahoma Wheat acres needed to reach $750,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Kansas Wheat, Revenue Protecti, to reach a $750,000 AGI erage. Farmer / Ac Effective AGI rate ,264 6,727,488 1,066, , , % 14, ,123 2,038, , , , % 14, ,446 20,974,921 3,575,158 2,301, , % 13, ,922 1,151, ,590,239 35,724,568 21,306, , % 13, ,712 3,356, ,571, ,688,664 76,037, , % 13, ,385 1,505, ,628,814 66,534,076 39,151, , % 12, ,997 65,998,280 13,231,714 7,814, , % 12, ,779 8,551,525 1,807, , , % 12,591 Oklahoma Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 13, ,707 9,783,114 2,118,645 1,428, , % 17, ,397 2,266, , , , % 17, ,462 36,528,181 8,617,667 5,544, , % 16, , , ,920,573 32,395,057 19,314, , % 16, ,893 1,350, ,162,174 52,878,829 32,192, , % 16, ,777 57,784,460 15,128,031 9,634, , % 16, ,347 4,391, , , , % 15, , , , , , % 15,465 Average to hit AGI limit 16,499 *Source of data: Risk Management Agency s w ebsite at w w.rma.usda.gov/ 7

8 Table 3. Nebraska Corn, Soybean and Wheat acres needed to reach $750,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Nebraska Corn, Revenue Protecti, to reach a $750,000 AGI erage. Farm er / Ac Effe ctive AGI rate ,882 18,861, , , , % 3, ,189 13,356, , , , % 4, ,164 39,594,380 2,490,203 1,631, , % 3, , , ,843,847 33,728,807 20,564, , % 3, ,939 2,648,034 1,665,806, ,991,278 88,705, , % 4, ,384 2,585,856 1,774,951, ,724, ,107, , % 4, ,492 1,035, ,978,531 79,648,186 46,707, % 3, , ,944,911 26,198,371 12,212, % 3,814 Nebraska Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 3, ,884 5,860, , , , % 5, ,786 2,232,879 99,798 64, , % 5, ,456 12,002, , , , % 5, , , ,818,446 9,267,223 5,670, , % 5, ,173 1,210, ,272,801 47,094,546 28,609, , % 5, ,125 1,375, ,604,518 64,969,680 39,231, , % 5, , , ,596,372 33,337,738 19,341, , % 5, ,301 85,566,255 10,854,349 4,994, , % 5,599 Nebraska Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 5, , , ,556 82, , % 14, , ,875 20,563 13, , % 11, ,953 2,276, , , , % 12, , ,558 30,763,791 4,332,857 2,569, , % 13, , , ,986,777 18,691,531 11,073, , % 12, , ,393 85,614,503 14,202,445 7,990, , % 12, ,677 13,512,817 2,477,260 1,267, , % 12, ,024 2,797, , , , % 12,561 Average to hit AGI limit 12,742 *Source of data: Risk Management Agency s w ebsite at ww.rma.usda.gov/ 8

9 Table 4. Minnesota Corn, Soybean and Wheat acres needed to reach $750,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium erage. Farm er / Ac Effective AGI rate Minnesota Corn, Revenue Protecti, to reach a $750,000 AGI ,093 15,079, , , , % 4, ,223 5,336, , , , % 4, ,824 16,450,942 1,481,640 1,050, , % 4, , , ,656,426 10,748,653 7,060, , % 4, ,172 1,171, ,469,829 60,220,916 39,665, , % 4, ,586 2,644,036 1,877,122, ,325, ,263, , % 3, ,844 2,244,372 1,777,867, ,615,170 94,342, % 3, , , ,522,619 41,597,194 20,363, % 3,686 Minnesota Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 4, ,945 6,608, , , , % 7, ,947 1,544, ,302 76, , % 7, ,708 9,340, , , , % 8, , ,704 84,599,882 7,863,129 4,933, , % 7, ,635 1,182, ,774,221 40,282,623 26,116, , % 7, ,594 2,405, ,919,377 95,868,310 60,901, , % 6, ,654 1,818, ,495,034 83,059,994 48,921, , % 6, , , ,918,209 24,967,001 12,023, , % 5,978 Minnesota Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 7, ,429 6,324, , , , % 7, , ,569 90,029 63, , % 8, ,049 11,204,761 1,770,273 1,207, , % 8, ,000 49,341,718 7,749,761 5,050, , % 7, , , ,499,525 26,533,410 18,550, , % 7, , , ,336,272 26,948,754 18,089, % 7, ,691 29,403,702 4,926,279 3,098, % 7, ,297 3,346, , , , % 7,903 Average to hit AGI limit 7,928 *Source of data: Risk Management Agency s w ebsite at ww.rma.usda.gov/ 9

10 Table 5. Iowa Corn and Soybean acres needed to reach $750,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Iowa Corn, Revenue Protecti, to reach a $750,000 AGI erage. Farmer / Ac Effe ctive AGI rate ,603 9,773, , , , % 3, ,386 5,135, ,930 99, , % 3, ,864 17,580, , , , % 3, , , ,142,053 9,530,873 5,972, , % 3, ,742 1,191, ,308,985 49,551,202 30,934, , % 3, ,922 3,258,229 2,469,446, ,718, ,067, , % 3, ,103 4,190,809 3,443,748, ,617, ,792, , % 3, ,806 2,175,761 1,944,857, ,105,220 78,267, , % 3,566 Iowa Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 3, ,207 7,694, ,482 88, , % 5, ,231 2,264,604 56,007 37, , % 5, ,107 8,269, , , , % 5, , , ,965,723 4,194,823 2,580, , % 5, , , ,265,472 22,219,571 13,724, , % 5, ,708 2,336,965 1,152,106,467 76,581,079 46,432, , % 5, ,541 2,770,084 1,474,605, ,004,425 63,946, , % 5, ,234 1,293, ,963,381 63,701,211 30,189, , % 5,557 Average to hit AGI limit 5,684 *Source of data: Risk Management Agency s w ebsite at w w.rma.usda.gov/ 10

11 Table 6. Michigan Corn and Soybean acres needed to reach $250,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Michigan Corn, Revenue Protecti, to reach a $250,000 AGI erage. Farm er / Ac Effe ctive AGI rate ,035 8,096, , , , % 1, , ,946 56,360 39, , % 1, ,384 4,013, , , , % 1, ,535 25,040,993 2,443,080 1,673, , % 1, , ,404,175 11,475,692 8,088, % 1, , , ,290,272 26,384,016 18,649, % 1, , , ,131,994 34,181,823 22,373, % 1, ,560 58,218,277 7,161,095 3,663, % 1,470 Michigan Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1, ,941 2,726, ,313 95, , % 2, , ,530 40,289 28, , % 2, ,848 2,489, , , , % 2, ,529 11,294,097 1,076, , , % 2, ,189 58,173,607 6,643,609 4,313, , % 2, , , ,816,727 15,872,974 10,907, , % 2, , , ,259,505 22,053,995 14,281, , % 2, ,765 30,599,847 4,408,482 2,219, , % 2,214 Average to hit AGI limit 2,323 *Source of data: Risk Management Agency s w ebsite at w w.rma.usda.gov/ Table 7. Kansas and Oklahoma Wheat acres needed to reach $250,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Kansas Wheat, Revenue Protecti, to reach a $250,000 AGI erage. Farm er / Ac Effe ctive AGI rate ,264 6,727,488 1,066, , , % 4, ,123 2,038, , , , % 4, ,446 20,974,921 3,575,158 2,301, , % 4, ,922 1,151, ,590,239 35,724,568 21,306, , % 4, ,712 3,356, ,571, ,688,664 76,037, , % 4, ,385 1,505, ,628,814 66,534,076 39,151, , % 4, ,997 65,998,280 13,231,714 7,814, , % 4, ,779 8,551,525 1,807, , , % 4,197 Oklahoma Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 4, ,707 9,783,114 2,118,645 1,428, , % 5, ,397 2,266, , , , % 5, ,462 36,528,181 8,617,667 5,544, , % 5, , , ,920,573 32,395,057 19,314, , % 5, ,893 1,350, ,162,174 52,878,829 32,192, , % 5, ,777 57,784,460 15,128,031 9,634, , % 5, ,347 4,391, , , , % 5, , , , , , % 5,155 Average to hit AGI limit 5,500 *Source of data: Risk Management Agency s w ebsite at ww.rma.usda.gov/ 11

12 Table 8. Nebraska Corn, Soybean and Wheat acres needed to reach $250,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Nebraska Corn, Revenue Protecti, to reach a $250,000 AGI erage. Farm er / Ac Effective AGI rate ,882 18,861, , , , % 1, ,189 13,356, , , , % 1, ,164 39,594,380 2,490,203 1,631, , % 1, , , ,843,847 33,728,807 20,564, , % 1, ,939 2,648,034 1,665,806, ,991,278 88,705, , % 1, ,384 2,585,856 1,774,951, ,724, ,107, , % 1, ,492 1,035, ,978,531 79,648,186 46,707, % 1, , ,944,911 26,198,371 12,212, % 1,271 Nebraska Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1, ,884 5,860, , , , % 1, ,786 2,232,879 99,798 64, , % 1, ,456 12,002, , , , % 1, , , ,818,446 9,267,223 5,670, , % 1, ,173 1,210, ,272,801 47,094,546 28,609, , % 1, ,125 1,375, ,604,518 64,969,680 39,231, , % 1, , , ,596,372 33,337,738 19,341, , % 1, ,301 85,566,255 10,854,349 4,994, , % 1,866 Nebraska Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1, , , ,556 82, , % 4, , ,875 20,563 13, , % 3, ,953 2,276, , , , % 4, , ,558 30,763,791 4,332,857 2,569, , % 4, , , ,986,777 18,691,531 11,073, , % 4, , ,393 85,614,503 14,202,445 7,990, , % 4, ,677 13,512,817 2,477,260 1,267, , % 4, ,024 2,797, , , , % 4,187 Average to hit AGI limit 4,247 *Source of data: Risk Management Agency s w ebsite at ww.rma.usda.gov/ 12

13 Table 9. Minnesota Corn, Soybean and Wheat acres needed to reach $250,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average Earn Ne t ium erage. Farmer / Ac Effe ctive AGI rate Minnesota Corn, Revenue Protecti, to reach a $250,000 AGI ,093 15,079, , , , % 1, ,223 5,336, , , , % 1, ,824 16,450,942 1,481,640 1,050, , % 1, , , ,656,426 10,748,653 7,060, , % 1, ,172 1,171, ,469,829 60,220,916 39,665, , % 1, ,586 2,644,036 1,877,122, ,325, ,263, , % 1, ,844 2,244,372 1,777,867, ,615,170 94,342, % 1, , , ,522,619 41,597,194 20,363, % 1,229 Minnesota Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1, ,945 6,608, , , , % 2, ,947 1,544, ,302 76, , % 2, ,708 9,340, , , , % 2, , ,704 84,599,882 7,863,129 4,933, , % 2, ,635 1,182, ,774,221 40,282,623 26,116, , % 2, ,594 2,405, ,919,377 95,868,310 60,901, , % 2, ,654 1,818, ,495,034 83,059,994 48,921, , % 2, , , ,918,209 24,967,001 12,023, , % 1,993 Minnesota Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 2, ,429 6,324, , , , % 2, , ,569 90,029 63, , % 2, ,049 11,204,761 1,770,273 1,207, , % 2, ,000 49,341,718 7,749,761 5,050, , % 2, , , ,499,525 26,533,410 18,550, , % 2, , , ,336,272 26,948,754 18,089, % 2, ,691 29,403,702 4,926,279 3,098, % 2, ,297 3,346, , , , % 2,634 Average to hit AGI limit 2,643 *Source of data: Risk Management Agency s website at 13

14 Table 10. Iowa Corn and Soybean acres needed to reach $250,000 AGI vs. acres to reach a $40,000 Revenue Protecti (RP) crop insurance subsidy limit, assuming state average ium Iow a Corn, Revenue Protecti, to reach a $250,000 AGI erage. Farm er / Ac Effe ctive AGI rate ,603 9,773, , , , % 1, ,386 5,135, ,930 99, , % 1, ,864 17,580, , , , % 1, , , ,142,053 9,530,873 5,972, , % 1, ,742 1,191, ,308,985 49,551,202 30,934, , % 1, ,922 3,258,229 2,469,446, ,718, ,067, , % 1, ,103 4,190,809 3,443,748, ,617, ,792, , % 1, ,806 2,175,761 1,944,857, ,105,220 78,267, , % 1,189 Iow a Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1, ,207 7,694, ,482 88, , % 1, ,231 2,264,604 56,007 37, , % 1, ,107 8,269, , , , % 1, , , ,965,723 4,194,823 2,580, , % 1, , , ,265,472 22,219,571 13,724, , % 1, ,708 2,336,965 1,152,106,467 76,581,079 46,432, , % 1, ,541 2,770,084 1,474,605, ,004,425 63,946, , % 1, ,234 1,293, ,963,381 63,701,211 30,189, , % 1,852 Average to hit AGI limit 1,895 *Source of data: Risk Management Agency s w ebsite at ww.rma.usda.gov/ 14