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 785-532-1515, e-mail barnaby@ksu.edu.
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
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
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
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 $750,000. 9. 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
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
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 50 137 19,035 8,096,395 495,725 374,068 425.34 26.04 6.39 19.65 2,035 75.5% 4,408 55 19 1,899 831,946 56,360 39,879 438.10 29.68 8.68 21.00 1,905 70.8% 4,708 60 75 8,384 4,013,738 388,178 270,698 478.74 46.30 14.01 32.29 1,239 69.7% 4,700 65 294 47,535 25,040,993 2,443,080 1,673,704 526.79 51.40 16.19 35.21 1,136 68.5% 4,627 70 940 183,709 103,404,175 11,475,692 8,088,466 562.87 62.47 18.44 44.03 908 70.5% 4,664 75 1,546 379,006 234,290,272 26,384,016 18,649,347 618.17 69.61 20.41 49.21 813 70.7% 4,550 80 1,415 462,679 312,131,994 34,181,823 22,373,665 674.62 73.88 25.52 48.36 827 65.5% 4,447 85 215 80,560 58,218,277 7,161,095 3,663,048 722.67 88.89 43.42 45.47 880 51.2% 4,411 Michigan Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 4,564 50 67 9,941 2,726,282 129,313 95,164 274.25 13.01 3.44 9.57 4,178 73.6% 6,837 55 20 2,174 627,530 40,289 28,073 288.65 18.53 5.62 12.91 3,098 69.7% 7,145 60 74 7,848 2,489,882 180,141 123,236 317.26 22.95 7.25 15.70 2,547 68.4% 7,092 65 276 33,529 11,294,097 1,076,551 700,092 336.85 32.11 11.23 20.88 1,916 65.0% 7,236 70 979 156,189 58,173,607 6,643,609 4,313,452 372.46 42.54 14.92 27.62 1,448 64.9% 7,048 75 1,632 329,753 132,816,727 15,872,974 10,907,833 402.78 48.14 15.06 33.08 1,209 68.7% 6,983 80 1,527 401,630 178,259,505 22,053,995 14,281,471 443.84 54.91 19.35 35.56 1,125 64.8% 6,759 85 210 63,765 30,599,847 4,408,482 2,219,242 479.88 69.14 34.33 34.80 1,149 50.3% 6,642 Average to hit AGI limit 6,968 *Source of data: Risk Management Agency s w ebsite at http://w 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 50 300 51,264 6,727,488 1,066,840 718,625 131.23 20.81 6.79 14.02 2,853 67.4% 14,288 55 81 14,123 2,038,415 337,276 216,587 144.33 23.88 8.55 15.34 2,608 64.2% 14,290 60 706 129,446 20,974,921 3,575,158 2,301,290 162.04 27.62 9.84 17.78 2,250 64.4% 13,886 65 7,922 1,151,821 205,590,239 35,724,568 21,306,742 178.49 31.02 12.52 18.50 2,162 59.6% 13,656 70 18,712 3,356,772 659,571,231 126,688,664 76,037,620 196.49 37.74 15.09 22.65 1,766 60.0% 13,359 75 7,385 1,505,576 327,628,814 66,534,076 39,151,397 217.61 44.19 18.19 26.00 1,538 58.8% 12,924 80 889 274,997 65,998,280 13,231,714 7,814,363 240.00 48.12 19.70 28.42 1,408 59.1% 12,500 85 114 33,779 8,551,525 1,807,102 872,340 253.16 53.50 27.67 25.82 1,549 48.3% 12,591 Oklahoma Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 13,437 50 354 90,707 9,783,114 2,118,645 1,428,364 107.85 23.36 7.61 15.75 2,540 67.4% 17,385 55 70 19,397 2,266,229 574,332 373,039 116.83 29.61 10.38 19.23 2,080 65.0% 17,653 60 923 272,462 36,528,181 8,617,667 5,544,931 134.07 31.63 11.28 20.35 1,965 64.3% 16,783 65 3,416 924,488 134,920,573 32,395,057 19,314,340 145.94 35.04 14.15 20.89 1,915 59.6% 16,702 70 3,893 1,350,205 218,162,174 52,878,829 32,192,762 161.58 39.16 15.32 23.84 1,678 60.9% 16,246 75 814 338,777 57,784,460 15,128,031 9,634,347 170.57 44.65 16.22 28.44 1,407 63.7% 16,489 80 39 22,347 4,391,416 997,901 653,191 196.51 44.65 15.43 29.23 1,368 65.5% 15,266 85 10 4,335 893,462 205,531 102,756 206.10 47.41 23.71 23.70 1,687 50.0% 15,465 Average to hit AGI limit 16,499 *Source of data: Risk Management Agency s w ebsite at http://w w w.rma.usda.gov/ 7
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 50 147 38,882 18,861,851 792,932 548,386 485.10 20.39 6.29 14.10 2,836 69.2% 3,865 55 57 26,189 13,356,794 800,640 531,837 510.02 30.57 10.26 20.31 1,970 66.4% 4,044 60 283 70,164 39,594,380 2,490,203 1,631,449 564.31 35.49 12.24 23.25 1,720 65.5% 3,987 65 3,940 791,655 483,843,847 33,728,807 20,564,347 611.18 42.61 16.63 25.98 1,540 61.0% 3,988 70 12,939 2,648,034 1,665,806,440 145,991,278 88,705,780 629.07 55.13 21.63 33.50 1,194 60.8% 4,173 75 11,384 2,585,856 1,774,951,076 169,724,001 103,107,028 686.41 65.64 25.76 39.87 1,003 60.7% 4,097 80 3,492 1,035,067 779,978,531 79,648,186 46,707,465 753.55 76.95 31.82 45.13 886 58.6% 3,981 85 748 277,557 231,944,911 26,198,371 12,212,457 835.67 94.39 50.39 44.00 909 46.6% 3,814 Nebraska Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 3,994 50 91 17,884 5,860,095 274,432 187,211 327.67 15.35 4.88 10.47 3,821 68.2% 5,722 55 27 5,786 2,232,879 99,798 64,654 385.91 17.25 6.07 11.17 3,580 64.8% 5,345 60 209 30,456 12,002,912 679,837 444,608 394.11 22.32 7.72 14.60 2,740 65.4% 5,709 65 2,763 331,393 143,818,446 9,267,223 5,670,708 433.98 27.96 10.85 17.11 2,338 61.2% 5,617 70 9,173 1,210,565 549,272,801 47,094,546 28,609,838 453.73 38.90 15.27 23.63 1,693 60.7% 5,785 75 9,125 1,375,104 662,604,518 64,969,680 39,231,156 481.86 47.25 18.72 28.53 1,402 60.4% 5,837 80 3,023 597,784 306,596,372 33,337,738 19,341,975 512.89 55.77 23.41 32.36 1,236 58.0% 5,849 85 643 150,301 85,566,255 10,854,349 4,994,730 569.30 72.22 38.99 33.23 1,204 46.0% 5,599 Nebraska Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 5,683 50 55 7,141 896,314 122,556 82,118 125.52 17.16 5.66 11.50 3,478 67.0% 14,938 55 9 1,153 213,875 20,563 13,159 185.49 17.83 6.42 11.41 3,505 64.0% 11,119 60 80 12,953 2,276,468 272,733 174,549 175.75 21.06 7.58 13.48 2,968 64.0% 12,802 65 1,218 167,558 30,763,791 4,332,857 2,569,787 183.60 25.86 10.52 15.34 2,608 59.3% 13,276 70 3,879 593,618 122,986,777 18,691,531 11,073,496 207.18 31.49 12.83 18.65 2,144 59.2% 12,670 75 2,734 378,393 85,614,503 14,202,445 7,990,172 226.26 37.53 16.42 21.12 1,894 56.3% 12,430 80 401 54,677 13,512,817 2,477,260 1,267,128 247.14 45.31 22.13 23.17 1,726 51.2% 12,139 85 59 11,024 2,797,576 588,641 227,722 253.77 53.40 32.74 20.66 1,936 38.7% 12,561 Average to hit AGI limit 12,742 *Source of data: Risk Management Agency s w ebsite at http://w ww.rma.usda.gov/ 8
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 50 275 36,093 15,079,219 980,699 708,918 417.79 27.17 7.53 19.64 2,037 72.3% 4,488 55 69 11,223 5,336,280 361,032 267,178 475.48 32.17 8.36 23.81 1,680 74.0% 4,338 60 250 32,824 16,450,942 1,481,640 1,050,907 501.19 45.14 13.12 32.02 1,249 70.9% 4,489 65 1,782 259,987 152,656,426 10,748,653 7,060,293 587.17 41.34 14.19 27.16 1,473 65.7% 4,151 70 6,172 1,171,549 744,469,829 60,220,916 39,665,809 635.46 51.40 17.55 33.86 1,181 65.9% 4,131 75 10,586 2,644,036 1,877,122,201 153,325,263 101,263,497 709.95 57.99 19.69 38.30 1,044 66.0% 3,962 80 6,844 2,244,372 1,777,867,701 151,615,170 94,342,310 792.14 67.55 25.52 42.04 952 62.2% 3,787 85 1,381 496,675 429,522,619 41,597,194 20,363,463 864.80 83.75 42.75 41.00 976 49.0% 3,686 Minnesota Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 4,129 50 172 26,945 6,608,824 397,448 282,674 245.27 14.75 4.26 10.49 3,813 71.1% 7,645 55 30 5,947 1,544,195 114,302 76,577 259.66 19.22 6.34 12.88 3,106 67.0% 7,943 60 230 35,708 9,340,862 946,741 630,500 261.59 26.51 8.86 17.66 2,265 66.6% 8,601 65 1,557 272,704 84,599,882 7,863,129 4,933,337 310.23 28.83 10.74 18.09 2,211 62.7% 7,857 70 5,635 1,182,696 416,774,221 40,282,623 26,116,368 352.39 34.06 11.98 22.08 1,811 64.8% 7,449 75 10,594 2,405,059 984,919,377 95,868,310 60,901,844 409.52 39.86 14.54 25.32 1,580 63.5% 6,868 80 7,654 1,818,527 872,495,034 83,059,994 48,921,314 479.78 45.67 18.77 26.90 1,487 58.9% 6,253 85 1,734 449,969 239,918,209 24,967,001 12,023,665 533.19 55.49 28.76 26.72 1,497 48.2% 5,978 Minnesota Wheat, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 7,324 50 163 26,429 6,324,582 729,531 527,255 239.30 27.60 7.65 19.95 2,005 72.3% 7,835 55 28 2,980 714,569 90,029 63,152 239.79 30.21 9.02 21.19 1,888 70.1% 8,601 60 176 40,049 11,204,761 1,770,273 1,207,215 279.78 44.20 14.06 30.14 1,327 68.2% 8,042 65 732 161,000 49,341,718 7,749,761 5,050,076 306.47 48.14 16.77 31.37 1,275 65.2% 7,953 70 1,767 488,907 162,499,525 26,533,410 18,550,958 332.37 54.27 16.33 37.94 1,054 69.9% 7,898 75 1,503 437,139 162,336,272 26,948,754 18,089,013 371.36 61.65 20.27 41.38 967 67.1% 7,573 80 298 74,691 29,403,702 4,926,279 3,098,229 393.67 65.96 24.47 41.48 964 62.9% 7,621 85 45 8,297 3,346,359 633,781 312,094 403.32 76.39 38.77 37.62 1,063 49.2% 7,903 Average to hit AGI limit 7,928 *Source of data: Risk Management Agency s w ebsite at http://w ww.rma.usda.gov/ 9
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 50 140 19,603 9,773,409 186,597 135,339 498.57 9.52 2.61 6.90 5,794 72.5% 3,761 55 70 9,386 5,135,957 140,930 99,252 547.19 15.01 4.44 10.57 3,783 70.4% 3,769 60 218 28,864 17,580,940 599,174 412,434 609.10 20.76 6.47 14.29 2,799 68.8% 3,694 65 2,887 345,855 226,142,053 9,530,873 5,972,357 653.86 27.56 10.29 17.27 2,316 62.7% 3,728 70 8,742 1,191,422 826,308,985 49,551,202 30,934,441 693.55 41.59 15.63 25.96 1,541 62.4% 3,785 75 18,922 3,258,229 2,469,446,062 170,718,013 106,067,142 757.91 52.40 19.84 32.55 1,229 62.1% 3,711 80 17,103 4,190,809 3,443,748,462 260,617,937 155,792,229 821.74 62.19 25.01 37.17 1,076 59.8% 3,651 85 6,806 2,175,761 1,944,857,607 161,105,220 78,267,894 893.87 74.05 38.07 35.97 1,112 48.6% 3,566 Iowa Soybeans, Revenue Protecti, to reach a $750,000 AGI Average to hit AGI limit 3,708 50 154 23,207 7,694,155 121,482 88,962 331.54 5.23 1.40 3.83 10,435 73.2% 5,655 55 54 6,231 2,264,604 56,007 37,606 363.44 8.99 2.95 6.04 6,628 67.1% 5,675 60 189 21,107 8,269,422 271,985 184,904 391.79 12.89 4.13 8.76 4,566 68.0% 5,743 65 2,463 253,377 107,965,723 4,194,823 2,580,765 426.11 16.56 6.37 10.19 3,927 61.5% 5,720 70 7,311 870,186 395,265,472 22,219,571 13,724,979 454.23 25.53 9.76 15.77 2,536 61.8% 5,779 75 16,708 2,336,965 1,152,106,467 76,581,079 46,432,871 492.99 32.77 12.90 19.87 2,013 60.6% 5,705 80 15,541 2,770,084 1,474,605,599 110,004,425 63,946,758 532.33 39.71 16.63 23.08 1,733 58.1% 5,636 85 6,234 1,293,560 741,963,381 63,701,211 30,189,952 573.58 49.24 25.91 23.34 1,714 47.4% 5,557 Average to hit AGI limit 5,684 *Source of data: Risk Management Agency s w ebsite at http://w w w.rma.usda.gov/ 10
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 50 137 19,035 8,096,395 495,725 374,068 425.34 26.04 6.39 19.65 2,035 75.5% 1,469 55 19 1,899 831,946 56,360 39,879 438.10 29.68 8.68 21.00 1,905 70.8% 1,569 60 75 8,384 4,013,738 388,178 270,698 478.74 46.30 14.01 32.29 1,239 69.7% 1,567 65 294 47,535 25,040,993 2,443,080 1,673,704 526.79 51.40 16.19 35.21 1,136 68.5% 1,542 70 940 183,709 103,404,175 11,475,692 8,088,466 562.87 62.47 18.44 44.03 908 70.5% 1,555 75 1,546 379,006 234,290,272 26,384,016 18,649,347 618.17 69.61 20.41 49.21 813 70.7% 1,517 80 1,415 462,679 312,131,994 34,181,823 22,373,665 674.62 73.88 25.52 48.36 827 65.5% 1,482 85 215 80,560 58,218,277 7,161,095 3,663,048 722.67 88.89 43.42 45.47 880 51.2% 1,470 Michigan Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1,521 50 67 9,941 2,726,282 129,313 95,164 274.25 13.01 3.44 9.57 4,178 73.6% 2,279 55 20 2,174 627,530 40,289 28,073 288.65 18.53 5.62 12.91 3,098 69.7% 2,382 60 74 7,848 2,489,882 180,141 123,236 317.26 22.95 7.25 15.70 2,547 68.4% 2,364 65 276 33,529 11,294,097 1,076,551 700,092 336.85 32.11 11.23 20.88 1,916 65.0% 2,412 70 979 156,189 58,173,607 6,643,609 4,313,452 372.46 42.54 14.92 27.62 1,448 64.9% 2,349 75 1,632 329,753 132,816,727 15,872,974 10,907,833 402.78 48.14 15.06 33.08 1,209 68.7% 2,328 80 1,527 401,630 178,259,505 22,053,995 14,281,471 443.84 54.91 19.35 35.56 1,125 64.8% 2,253 85 210 63,765 30,599,847 4,408,482 2,219,242 479.88 69.14 34.33 34.80 1,149 50.3% 2,214 Average to hit AGI limit 2,323 *Source of data: Risk Management Agency s w ebsite at http://w 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 50 300 51,264 6,727,488 1,066,840 718,625 131.23 20.81 6.79 14.02 2,853 67.4% 4,763 55 81 14,123 2,038,415 337,276 216,587 144.33 23.88 8.55 15.34 2,608 64.2% 4,763 60 706 129,446 20,974,921 3,575,158 2,301,290 162.04 27.62 9.84 17.78 2,250 64.4% 4,629 65 7,922 1,151,821 205,590,239 35,724,568 21,306,742 178.49 31.02 12.52 18.50 2,162 59.6% 4,552 70 18,712 3,356,772 659,571,231 126,688,664 76,037,620 196.49 37.74 15.09 22.65 1,766 60.0% 4,453 75 7,385 1,505,576 327,628,814 66,534,076 39,151,397 217.61 44.19 18.19 26.00 1,538 58.8% 4,308 80 889 274,997 65,998,280 13,231,714 7,814,363 240.00 48.12 19.70 28.42 1,408 59.1% 4,167 85 114 33,779 8,551,525 1,807,102 872,340 253.16 53.50 27.67 25.82 1,549 48.3% 4,197 Oklahoma Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 4,479 50 354 90,707 9,783,114 2,118,645 1,428,364 107.85 23.36 7.61 15.75 2,540 67.4% 5,795 55 70 19,397 2,266,229 574,332 373,039 116.83 29.61 10.38 19.23 2,080 65.0% 5,884 60 923 272,462 36,528,181 8,617,667 5,544,931 134.07 31.63 11.28 20.35 1,965 64.3% 5,594 65 3,416 924,488 134,920,573 32,395,057 19,314,340 145.94 35.04 14.15 20.89 1,915 59.6% 5,567 70 3,893 1,350,205 218,162,174 52,878,829 32,192,762 161.58 39.16 15.32 23.84 1,678 60.9% 5,415 75 814 338,777 57,784,460 15,128,031 9,634,347 170.57 44.65 16.22 28.44 1,407 63.7% 5,496 80 39 22,347 4,391,416 997,901 653,191 196.51 44.65 15.43 29.23 1,368 65.5% 5,089 85 10 4,335 893,462 205,531 102,756 206.10 47.41 23.71 23.70 1,687 50.0% 5,155 Average to hit AGI limit 5,500 *Source of data: Risk Management Agency s w ebsite at http://w ww.rma.usda.gov/ 11
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 50 147 38,882 18,861,851 792,932 548,386 485.10 20.39 6.29 14.10 2,836 69.2% 1,288 55 57 26,189 13,356,794 800,640 531,837 510.02 30.57 10.26 20.31 1,970 66.4% 1,348 60 283 70,164 39,594,380 2,490,203 1,631,449 564.31 35.49 12.24 23.25 1,720 65.5% 1,329 65 3,940 791,655 483,843,847 33,728,807 20,564,347 611.18 42.61 16.63 25.98 1,540 61.0% 1,329 70 12,939 2,648,034 1,665,806,440 145,991,278 88,705,780 629.07 55.13 21.63 33.50 1,194 60.8% 1,391 75 11,384 2,585,856 1,774,951,076 169,724,001 103,107,028 686.41 65.64 25.76 39.87 1,003 60.7% 1,366 80 3,492 1,035,067 779,978,531 79,648,186 46,707,465 753.55 76.95 31.82 45.13 886 58.6% 1,327 85 748 277,557 231,944,911 26,198,371 12,212,457 835.67 94.39 50.39 44.00 909 46.6% 1,271 Nebraska Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1,331 50 91 17,884 5,860,095 274,432 187,211 327.67 15.35 4.88 10.47 3,821 68.2% 1,907 55 27 5,786 2,232,879 99,798 64,654 385.91 17.25 6.07 11.17 3,580 64.8% 1,782 60 209 30,456 12,002,912 679,837 444,608 394.11 22.32 7.72 14.60 2,740 65.4% 1,903 65 2,763 331,393 143,818,446 9,267,223 5,670,708 433.98 27.96 10.85 17.11 2,338 61.2% 1,872 70 9,173 1,210,565 549,272,801 47,094,546 28,609,838 453.73 38.90 15.27 23.63 1,693 60.7% 1,928 75 9,125 1,375,104 662,604,518 64,969,680 39,231,156 481.86 47.25 18.72 28.53 1,402 60.4% 1,946 80 3,023 597,784 306,596,372 33,337,738 19,341,975 512.89 55.77 23.41 32.36 1,236 58.0% 1,950 85 643 150,301 85,566,255 10,854,349 4,994,730 569.30 72.22 38.99 33.23 1,204 46.0% 1,866 Nebraska Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1,894 50 55 7,141 896,314 122,556 82,118 125.52 17.16 5.66 11.50 3,478 67.0% 4,979 55 9 1,153 213,875 20,563 13,159 185.49 17.83 6.42 11.41 3,505 64.0% 3,706 60 80 12,953 2,276,468 272,733 174,549 175.75 21.06 7.58 13.48 2,968 64.0% 4,267 65 1,218 167,558 30,763,791 4,332,857 2,569,787 183.60 25.86 10.52 15.34 2,608 59.3% 4,425 70 3,879 593,618 122,986,777 18,691,531 11,073,496 207.18 31.49 12.83 18.65 2,144 59.2% 4,223 75 2,734 378,393 85,614,503 14,202,445 7,990,172 226.26 37.53 16.42 21.12 1,894 56.3% 4,143 80 401 54,677 13,512,817 2,477,260 1,267,128 247.14 45.31 22.13 23.17 1,726 51.2% 4,046 85 59 11,024 2,797,576 588,641 227,722 253.77 53.40 32.74 20.66 1,936 38.7% 4,187 Average to hit AGI limit 4,247 *Source of data: Risk Management Agency s w ebsite at http://w ww.rma.usda.gov/ 12
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 50 275 36,093 15,079,219 980,699 708,918 417.79 27.17 7.53 19.64 2,037 72.3% 1,496 55 69 11,223 5,336,280 361,032 267,178 475.48 32.17 8.36 23.81 1,680 74.0% 1,446 60 250 32,824 16,450,942 1,481,640 1,050,907 501.19 45.14 13.12 32.02 1,249 70.9% 1,496 65 1,782 259,987 152,656,426 10,748,653 7,060,293 587.17 41.34 14.19 27.16 1,473 65.7% 1,384 70 6,172 1,171,549 744,469,829 60,220,916 39,665,809 635.46 51.40 17.55 33.86 1,181 65.9% 1,377 75 10,586 2,644,036 1,877,122,201 153,325,263 101,263,497 709.95 57.99 19.69 38.30 1,044 66.0% 1,321 80 6,844 2,244,372 1,777,867,701 151,615,170 94,342,310 792.14 67.55 25.52 42.04 952 62.2% 1,262 85 1,381 496,675 429,522,619 41,597,194 20,363,463 864.80 83.75 42.75 41.00 976 49.0% 1,229 Minnesota Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1,376 50 172 26,945 6,608,824 397,448 282,674 245.27 14.75 4.26 10.49 3,813 71.1% 2,548 55 30 5,947 1,544,195 114,302 76,577 259.66 19.22 6.34 12.88 3,106 67.0% 2,648 60 230 35,708 9,340,862 946,741 630,500 261.59 26.51 8.86 17.66 2,265 66.6% 2,867 65 1,557 272,704 84,599,882 7,863,129 4,933,337 310.23 28.83 10.74 18.09 2,211 62.7% 2,619 70 5,635 1,182,696 416,774,221 40,282,623 26,116,368 352.39 34.06 11.98 22.08 1,811 64.8% 2,483 75 10,594 2,405,059 984,919,377 95,868,310 60,901,844 409.52 39.86 14.54 25.32 1,580 63.5% 2,289 80 7,654 1,818,527 872,495,034 83,059,994 48,921,314 479.78 45.67 18.77 26.90 1,487 58.9% 2,084 85 1,734 449,969 239,918,209 24,967,001 12,023,665 533.19 55.49 28.76 26.72 1,497 48.2% 1,993 Minnesota Wheat, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 2,441 50 163 26,429 6,324,582 729,531 527,255 239.30 27.60 7.65 19.95 2,005 72.3% 2,612 55 28 2,980 714,569 90,029 63,152 239.79 30.21 9.02 21.19 1,888 70.1% 2,867 60 176 40,049 11,204,761 1,770,273 1,207,215 279.78 44.20 14.06 30.14 1,327 68.2% 2,681 65 732 161,000 49,341,718 7,749,761 5,050,076 306.47 48.14 16.77 31.37 1,275 65.2% 2,651 70 1,767 488,907 162,499,525 26,533,410 18,550,958 332.37 54.27 16.33 37.94 1,054 69.9% 2,633 75 1,503 437,139 162,336,272 26,948,754 18,089,013 371.36 61.65 20.27 41.38 967 67.1% 2,524 80 298 74,691 29,403,702 4,926,279 3,098,229 393.67 65.96 24.47 41.48 964 62.9% 2,540 85 45 8,297 3,346,359 633,781 312,094 403.32 76.39 38.77 37.62 1,063 49.2% 2,634 Average to hit AGI limit 2,643 *Source of data: Risk Management Agency s website at http://www.rma.usda.gov/ 13
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 50 140 19,603 9,773,409 186,597 135,339 498.57 9.52 2.61 6.90 5,794 72.5% 1,254 55 70 9,386 5,135,957 140,930 99,252 547.19 15.01 4.44 10.57 3,783 70.4% 1,256 60 218 28,864 17,580,940 599,174 412,434 609.10 20.76 6.47 14.29 2,799 68.8% 1,231 65 2,887 345,855 226,142,053 9,530,873 5,972,357 653.86 27.56 10.29 17.27 2,316 62.7% 1,243 70 8,742 1,191,422 826,308,985 49,551,202 30,934,441 693.55 41.59 15.63 25.96 1,541 62.4% 1,262 75 18,922 3,258,229 2,469,446,062 170,718,013 106,067,142 757.91 52.40 19.84 32.55 1,229 62.1% 1,237 80 17,103 4,190,809 3,443,748,462 260,617,937 155,792,229 821.74 62.19 25.01 37.17 1,076 59.8% 1,217 85 6,806 2,175,761 1,944,857,607 161,105,220 78,267,894 893.87 74.05 38.07 35.97 1,112 48.6% 1,189 Iow a Soybeans, Revenue Protecti, to reach a $250,000 AGI Average to hit AGI limit 1,236 50 154 23,207 7,694,155 121,482 88,962 331.54 5.23 1.40 3.83 10,435 73.2% 1,885 55 54 6,231 2,264,604 56,007 37,606 363.44 8.99 2.95 6.04 6,628 67.1% 1,892 60 189 21,107 8,269,422 271,985 184,904 391.79 12.89 4.13 8.76 4,566 68.0% 1,914 65 2,463 253,377 107,965,723 4,194,823 2,580,765 426.11 16.56 6.37 10.19 3,927 61.5% 1,907 70 7,311 870,186 395,265,472 22,219,571 13,724,979 454.23 25.53 9.76 15.77 2,536 61.8% 1,926 75 16,708 2,336,965 1,152,106,467 76,581,079 46,432,871 492.99 32.77 12.90 19.87 2,013 60.6% 1,902 80 15,541 2,770,084 1,474,605,599 110,004,425 63,946,758 532.33 39.71 16.63 23.08 1,733 58.1% 1,879 85 6,234 1,293,560 741,963,381 63,701,211 30,189,952 573.58 49.24 25.91 23.34 1,714 47.4% 1,852 Average to hit AGI limit 1,895 *Source of data: Risk Management Agency s w ebsite at http://w ww.rma.usda.gov/ 14