Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Monday 08/04/14

Expert Advice to Pick a Farm Bill Contingency Plan

Do you or your landowners need more coaching on your one-time 2014-2018 farm bill decisions? If farmers I interviewed last week in Indiana are typical, many growers spent the last decade wishing farm programs would go away. Now they are unaware that potential 2014 corn payments could rescue farm incomes from disaster this season--provided they do their homework.

"When congressional authors passed the Farm Bill last winter, they didn't contemplate as dramatic a drop in commodity prices as we've experienced," Jerry Lehnertz, vice president of lending for AgriBank says, referring to the 30% crash in average cash corn in the last 90 days . "But that's the exact situation where new programs like Agriculture Risk Coverage (ARC) come into play."

Activating the right income contingency plan is especially important for growers in western North Dakota now experiencing sub-$2.50 cash corn, Lehnertz says. He blames the problem on rail backlogs, particularly the lack of engines to put empty cars back on track. Some elevators tell DTN they have waited as long as five months for rail orders to be fulfilled, leaving elevator capacity filled to the brim even before wheat harvest began. What's more, rail car rates than ran $300 to $400 a car a year ago have ballooned to $3,000 to $3,500 now, he says. Eventually, those excess costs get passed on in bids, eroding farm incomes in the process.

But you'll need to act fast for your first Farm Bill deadlines. Landowners have just 60 days to respond to the letters the Farm Service Agency is mailing this week on whether to update historic farm program yields or reallocate base by FSA farm and commodity--if any of your records are incorrect, incomplete or missing. (If you opt for no changes, no response is necessary).

Many of these histories date back to the pre-biotech era of the 1980s. Since your farm program benefits hinge on a percentage of base and yield, ancient or inaccurate history could limit your future payments.

Later this winter, you'll make a one-time choice of which farm program safety net you favor when prices and/or yields hit adversity. Production Loss Coverage (PLC ) is a price-only program very similar to past Counter-Cyclical programs only with higher reference prices than in the past. ARC benchmarks revenue (season-average cash prices x yields) and pays when there is a shortfall. It has features that resemble GRIP insurance policies, based on county yields or individual yields.

If you can't come to agreement on which program will remain in force on 2014-2018 crops, PLC becomes the default . That could mean corn growers sacrificing $77/acre to $45/acre on 2014 ARC payments in some Midwest counties. (At the moment, 2014 wheat, corn and soybeans aren't likely low enough to trigger payments under PLC.)

Join DTN for a free webinar Aug. 21 with economists Carl Zulauf of Ohio State University and Gary Schnitkey of the University of Illinois as they help you analyze your options and prepare landowners for critical one-time decisions. Learn which conditions favor ARC or PLC and how each option will influence your crop insurance purchases in the years ahead. The webinar is co-sponsored by the National Corn Growers Association.

To register for "ARC or PLC Choices: Which Farm Bill Contingency Plan is Right for You? ," Thurs. Aug. 21, 9:00-10:00 am Central Time, go to https://dtn.webex.com/…

The event will be recorded for later viewing in case you find that time inconvenient.

In the meantime, please e-mail me your farm program questions for our expert panelists. We'll start to address some of those questions here in Minding Ag's Business.

Follow me on Twitter@MarciaZTaylor

Posted at 12:44PM CDT 08/04/14 by Marcia Zarley Taylor
Comments (1)
This post was corrected to reflect that landowners have 60 days to report incorrect, incomplete or missing records, USDA points out. If your history is correct, no response is necessary at this time. More information from USDA about the base and yield decision will follow.
Posted by Marcia Taylor at 3:34PM CDT 08/05/14
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