NEWS
Pick Contingency Plans - 2
Marcia Zarley Taylor DTN Executive Editor
Mon Aug 25, 2014 12:40 PM CDT
(Page 1 of 2)

EDITOR'S NOTE: For a broader view of factors to consider for farm programs, join Ohio State's Carl Zulauf and University of Illinois' Gary Schnitkey for a free DTN/The Progressive Farmer webinar on Aug. 21 at 9 a.m. CDT. You can register at http://dld.bz/…

Farm program payments could cap out for corn farmers under some early scenarios in the Agricultural Risk Coverage (ARC) program. The farm bill has new rules for payment limits and income eligibility. (DTN graphic by Nick Scalise)

OMAHA (DTN) -- Congress sought to simplify calculations such as payment limits on commodities and income eligibility when drafting the new farm bill, but larger family operations are still going to have to walk through some scenarios on payment caps.

At current 2014 payment forecasts, for example, corn growers in some areas could hit the payment cap on less than 2,000 acres.

In general, commodity payments are largely capped at $125,000 per person. People must also report under $900,000 adjusted gross income annually to stay eligible for farm programs.

Wayne Myers, director of farm-program services for the accounting firm Kennedy & Coe, has been doing a lot of seminars around the country about the farm bill. He said farmers still have a large learning curve when it comes to understanding nuances in the farm programs.

"It's kind of a surprise when you visit with producers," Myers said. "They aren't too knowledgeable."

Late last month, USDA sent out notices to farmers about current base acres and counter-cyclical yields. The notices generated some calls to Kennedy & Coe from producers to review planting history. For instance, USDA may be missing data for producers who have bought new ground in the past five years, Myers said.

Declining prices and farm programs that protect per-acre revenue mean payment limits may become more important to farmers than under the old farm bill. The single limit under all the programs could generate larger payments to producers, depending on where the marketing-year price lands.

ARC-PLC BASICS

The $125,000 per-person cap on commodity programs includes all payments under the Agricultural Risk Coverage Program (ARC), the Price Loss Coverage Program, (PLC), marketing loans and loan-deficiency payments. There is no limit on marketing-loan forfeitures. The $125,000 limit is tied to the individual or legal entity, not the farm.

Peanut growers have a special exclusion carved out. They can cap out $125,000 from all other commodities, but also a separate $125,000 for peanut payments.

ARC is a revenue program designed to supplement crop insurance. ARC has two versions, the countywide coverage that pays on 85% of base acres and the individual coverage level at the farm that pays on 65% of base acres.

PLC pays on 85% of base acres or updated yields up to 90% of the 2008-12 average yield per planted acre. PLC pays when the market price for the commodities averages below the reference price set in the law.

Under the law, farmers can split their farm programs for each individual commodity. For example, a diversified farmer might put corn and sorghum into ARC while enrolling soybeans, winter wheat and barley in PLC. Payments for both PLC and ARC are factored based on the market-year average price, meaning actual payment rates won't be finalized until the end of the marketing year for the crop.

"Even though they raised the limitation, you could have some limitation issues," Myers said. "The trouble is we are always going to be a year behind before we know what these payments are because PLC and ARC both use the 12-month national average price."

PAYMENT SCENARIOS

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