This post should not be construed as legal advice
In the coming months, many of you will have important decisions to make regarding the new Farm Service Agency (FSA) programs. Will you select the new Price Loss Coverage (PLC) option, Agricultural Risk Coverage – County Level (ARC-CO), or Agricultural Risk Coverage – Individual Option (ARC-IC)? This decision will not be easy one. Once FSA issues the details, I will put out information on how to use decision making tools under development. Today, I want to cover an issue that landlord and tenants will need to consider, especially those with crop-share leases. Many of those leasing land may need to update FSA’s Power of Attorney form (FSA-211) in order to make these decisions for the landlord.
The current regulations allow for the landowner to make decisions related to payment yield and base acre reallocation. This means landlords (as the landowner) will have the ability to decide on how to reallocate base acres and updating payment yields. The decision of which program to elect to participate in for the life of the farm bill will be with the producer on the farmer (either landowner or tenant depending on the situation). As we will discuss, having an updated power of attorney will work to limit educating landowners and allow the tenant the ability to make these decisions.
A power of attorney (POA) is a legal document allowing one party, or grantor, to grant the authority to act as the grantor’s agent/attorney-in-fact to a third party. For example, your estate plan (you have an estate plan, right?) typically includes a Durable Power of Attorney which allows your spouse, a child(ren), or another person to make decisions for you and continue to pay bills for you if you become incapacitated in some way. The power of attorney you grant can be broad as you want or as narrow as you need it to be, it just depends on your situation.
For those that have never completed a form FSA-211, why do you need to consider completing one? Completing the POA and having it approved by FSA allows a tenant to make the decisions on which farm programs (PLC, ARC-CO, or ARC-IC) the leased farmland will be enrolled in for the life of the 2014 Farm Bill. The lease does not have to run the life of the farm bill but future tenants will be stuck with the program decision made by the original tenant. Allowing the current tenant to make these decisions is potentially helpful to those landowners who are far removed from agriculture and may not understand exactly how these programs will operate or impact the tenant’s current operation.
One important detail to remember is landowners will have to make the ARC-CO or PLC decision or the whole farm into ARC-IC for each covered commodity with base acres on the farm. This decision is going will require landowners to consider how each program works, what is currently being produced on the farm, and thoughts on future prices and yields for those crops. This will not be an easy decision and will require some work on the part of the decision maker.
This also means landlords who have very little connection with the farmland (such as those who inherited from an older generation or bought it as an investment) will need to be educated on the new programs and how each one potentially impacts different crops depending on different yield conditions and commodity prices. This education will be important for those crop-share rent landlords who may potentially be able to participate in payouts by the three new programs. Updating the FS-211 would allow the tenant with a better grasp on these issues to make these decisions for the landlord.
Farmland owned by multiple landlords may also benefit from a signed FS-211. This will put the decision in the hands of either one of the landlords or in the hands of the tenant, reducing the need to educate multiple landlords who may have little at stake to make the best decision for the tenant.
Tenants who get signed POAs will still want to communicate why a decision was made in the end. Prior to signup, show your landlord printouts from the decision tools that show why you choose one program over the other for each covered commodity for PLC and ARC-CO or why you elected to put the entire farm in ARC-IC. This will help the landlord better understand the decision and help explain that decision to a possible future tenant.
For more information on the 2014 Farm Bill, see AREC's Farm Bill page. This page will be updated with timely information as it becomes available.
This post is brought to you as a partnership by: