Pick Contingency Plans - 3
Marcia Zarley Taylor DTN Executive Editor
Wed Aug 20, 2014 12:01 PM CDT
(Page 1 of 2)

EDITOR'S NOTE: Join DTN for a free webinar, "ARC or PLC Choices: Which Farm Bill Contingency Plan is Right for You?" Aug. 21 with economists Carl Zulauf of Ohio State University and Gary Schnitkey of the University of Illinois. They will help you analyze your farm bill 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. To register for Thursday, Aug. 21, 9:00-10:00 a.m. CDT, go to….

Long-grain rice, sorghum and barley producers could lean toward the PLC program based on 2014 prospects, but ARC-CO pays better for corn. Soybean and wheat producers likely would need low county yields to trigger ARC payments in 2014, according to Ohio State University's Carl Zulauf. (DTN graphic by Nick Scalise)

The event will be recorded for later viewing in case you are unable to make the original time.

HADDONFIELD, N.J. (DTN) -- Dee Vaughan knows he has two emergency defenses against low revenues on his dryland crops near Dumas, Texas: crop insurance and the 2014 Farm Act's safety nets. After years of severe drought, farmers across the southwest and Great Plains may face big gaps in the first.

All U.S. growers will likely face crop insurance guarantees for 2015 far below corn's 2011-13 glory days, since planting guarantees are based on current futures prices. But drought worse than the Dust Bowl has repeatedly whittled Moore County's dryland yields on wheat and grain sorghum: the Texas Panhandle county suffered non-irrigated wheat yield losses 50% or more below their long-term average in 2006, 2007, 2011, 2012, 2013 and 2014, he said. On his personal dryland wheat operation, he suffered severe yield losses in 2006, 2007 and 2011. Both Vaughan and the county averaged abnormally low sorghum yields 2011 to 2013.

"About 80% of my ground is irrigated, so I personally did not have the losses to the degree producers who are 100% non-irrigated did," he said. With so many wipeouts lowering 10-year Actual Production History (APH), conventional crop insurance won't come close to protecting what locals would consider a sustainable revenue, he noted. "In Texas, because of higher losses, we already have higher rates," Vaughan said. "It's pretty rare to see insurance coverage above 60% to 65% because it's so expensive."

His worry about unrealistically low APHs is compounded by the fact that USDA was authorized to allow an APH fix for those wipeout years under the new farm law, but elected not to implement the change until the 2016 crop due to manpower shortages.

"Now we're hearing some Texas farm lenders say they'd be hard pressed to advance operating credit for some growers next season," a frustrated Vaughan said. He questioned why USDA is getting a pass and believes it still could hire outside contractors to implement rules in time for 2015.

"The current APH rules and yield plugs were not written to deal with drought situations which occur only every few decades," he said. So until the issue is resolved, farm programs will be vital to his risk management strategies.


Welcome to the 21st century farm safety net: Growers must commit to a five-year farm program option later this winter. But whether grain producers receive more farm program assistance through the Agriculture Revenue Coverage Program (ARC) or the Production Loss Coverage Program (PLC) depends on how long and how severely low prices last. ARC assistance also varies depending on a county's average yield from year to year.

So many variables are a sharp departure from past counter-cyclical farm programs and raise the possibility that farm supports will be difficult to predict.

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