Minding Ag's Business

Farm programs could be the life raft that will keep many producers from drowning in farm losses over the next year or two, so don't let yourself get overwhelmed by multiple choices and moving parts when signing up for the 2014 Farm Bill. For 2014-crop corn alone, county-based Agricultural Risk Coverage (ARC) payments could approach $79/acre, based on USDA's September crop report forecasts. But whether Price Loss Coverage (PLC) pays over more over the life of the farm bill depends on how low and how long commodity prices remain in the basement. Adding crop insurance coverage to the mix further complicates your choices.

Two university websites apply the supercomputing equivalent of an IBM Watson to help growers and landowners optimize their revenue outcomes. USDA spent $3 million in grants to fund the simulators development, along with free webinars and other educational tools to help growers make informed choices. Unlike some state-based calculators, these programs cover all crops in all U.S. counties, plus their price scenarios are more robust.

When Texas A&M first launched its version of an online farm program calculator in 2002, more than 410,000 used the tool to analyze their farm program base acre and yield updates. In 2014, you'll need to input farm specific data like historic base, yield, typical harvest-time basis and future planted acres. You might need to access crop insurance records, Farm Service Agency records or consult your local Extension agent to help fill in the blanks. But once you do, the Texas A&M program will perform risk analysis, simulate 500 price projections and return an answer in less than 10 seconds, developers promise.

If you want to keep it simple, try a five-minute overview developed by the University of Illinois. This user-friendly computer tool creates a sample farm pre-populated with average county data. It taught me that what prices do over the next five years is the single most influential factor in the farm program choice, however. If I elected to use USDA's doomsday 5-year price forecasts, I got totally different results than if I chose the optimistic Congressional Budget Office's (CBO) scenarios or the more moderate price forecaste of the Food and Agricultural Policy Research Institute(FAPRI).

For example, using an average 1,542-acre corn-wheat-sorghum farm in Moore County, Texas with 65% crop insurance coverage and USDA's pessimistic prices, the Illinois calculator concluded that PLC would likely pay more over the next five years than ARC coverage ($55/acre on average for PLC plus SCO insurance versus $48/acre for ARC-CO). But with the two higher price estimates, ARC-CO would pay $32 or $34/acre, versus a PLC payment of $23 to $26. (Wheat and grain sorghum favored PLC in all scenarios).

I also simulated results for a typical 841-acre, Buchanan County, Iowa farm to test the theory that ARC works better for corn and soybean crops in the Corn Belt. Here, 80% or higher crop revenue insurance coverage is more standard, so growers find less benefit from SCO insurance protection. Under all 5-year price scenarios, ARC-CO trumped PLC, using the Illinois analysis.

Farming is a game of odds. But studying these calculators could improve your statistics. If prices hover as low as USDA forecasts over the next five years, a typical Buchanan County corn-soybean farmer has a 60% chance of reaching a $442,000 gross revenue goal with crop sales alone. With ARC-CO and crop insurance offering an extra life raft, that same farm's odds increase to 91%.

Let me know how you rate these calculators.

University of Illinois tool at http://fsa.usapas.com/…

Texas A&M tool at http://usda.afpc.tamu.edu/…

Follow me on Twitter@MarciaZTaylor

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