Minding Ag's Business

Plunging commodity prices are resetting potential corn payments under various Farm Bill options for 2014. The new calculations also point out how precarious price forecasting can be in assessing which farm program option fits each FSA farm. That's why so many experts encourage growers to wait until December or January before making a firm commitment to their farm program choices.

"By the end of January, the estimate for 2014/15 spring planted crops will be 'very' accurate," says Kansas State University economist Art Barnaby. And although USDA hasn't announced signup dates, it's unlikely signup will occur before January.

Whether ARC or PLC provides better protection is still a moving target. "When the Farm Bill was signed last February, it seemed like 2014-crop prices would make [farm supports] largely irrelevant for corn producers. Maybe it would be relevant for wheat and sorghum and solid for rice," Brad Lubben, a University of Nebraska economist and director of the North Central Risk Management Education Center in Lincoln, Neb. "Six months of bearish price news since then has raised the safety net for corn."

In contrast, wheat now looks likely to trigger little, if any, assistance in counties with normal yields. Sorghum stands to collect and long-grain rice's prospects for big payments have dimmed somewhat. Lubben thinks it's hard to envision soybean payments, but anything is possible.

On a farmdoc daily posting late last week, Carl Zulauf of Ohio State University recalculated expected 2014 ARC-CO and PLC payments per base acre (see online chart), based on the latest USDA crop reports and mid-price projections. Between August and September, USDA's projected season average price for 2014 dove from $3.80 to $3.50 per bu. That increases the odds that ARC-CO could offer $79/acre payments in his example, up from $41/acre last month. Corn PLC payments suddenly jumped from nothing to $26/acre due to that price shift. What's more, the lower prices go for 2014 corn, the better PLC looks.

Zulauf also forecast an $8/acre ARC-CO wheat price based on US average yields. In counties where yield losses ran rampant in 2014, payments could be larger.

While farm programs could come to the rescue of low incomes, timing of the payments could be an issue. In eastern South Dakota Friday, cash corn bids were running $2.60, nearly $2/bu. below breakeven for one of my farmer friends who was cleaning out remnants of last year's crop. He normally applies fertilizer in the fall, but the economics make that difficult. While he knows 2014 farm programs might generate sizable payments, he also knows checks won't be in the mail until nearly a year from now, in October 2015.

"That doesn't help cash flow," he says. "We've still got to pay the bills between now and then."

Read more at University of Illinois's farmdoc daily website

http://farmdocdaily.illinois.edu/…

and Kansas State's latest update at

http://www.agmanager.info/…

Follow me on Twitter@MarciaZTaylor

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