Minding Ag's Business

DTN's March 12 webinar "Farm Program Countdown: ARC or PLC: Which Safety Net Fits You?" emphasized how county yield history counts when estimating your future payouts under the 2014-2018 farm program.

USDA's latest marketing year price forecast for 2014-crop corn means "close to maximum" Agricultural Revenue Coverage (ARC) payments in big chunks of the Corn Belt come this October. Except for a band of counties from eastern Kansas to southern Indiana where average yields soared last fall, many corn farms could be eligible for payments of $60/acre or more, speakers agreed. But whether one county pays the ARC max and a neighboring county receives little or nothing depends largely on the official USDA estimate of county yields, Gary Schnitkey, a University of Illinois economist and Jonathan Coppess, a former FSA Administrator, said.

"It's really a tale of two counties," pointed out Coppess, of the University of Illinois Agricultural Law and Policy program. For example, McLean County, Illinois, averaged 217 bpa in 2014, above its county average yield, so it stands to trigger no ARC-county or PLC payment for last season's crop. On the other hand, DeKalb County with 192 bpa corn is in line to collect $79/base acre. Mississippi State University economist Keith Coble also found big differentials between neighboring counties in his state.

Here are several questions that popped up in the webinar.

QUESTION: ­What is the ARC-CO benchmark revenue and how is it calculated?­ -?­Jon­ S.

ANSWER: The benchmarks are calculated using Olympic rolling averages that take out the historic high and low in each 5-year period when updating each year of the farm program. For ARC-CO, multiply the 5-year Olympic average county average yields and 5-year Olympic average Marketing Year Average (MYA) national prices (from the National Ag Statistics Service). Then multiply by 86% and that is the benchmark revenue for your county. Keep in mind if your actual county revenue falls below this threshold, your maximum payment is only 10% of the benchmark.

QUESTION: ­In ARC-CO what does 10% maximum payment mean and how is it calculated?­--Jon S.

ANSWER: Refer to the benchmark revenue described above. Example: 150 bu. county yield Olympic average/acre x $5.29/bu. for 2014 corn Olympic MYA x 86% = $682.41 would be the county's benchmark price/acre. If actual average revenue for your county is less than this benchmark price in 2014, ARC-CO enrollees would be entitled to a payment equal to the difference, but not more than a maximum of $68.24/acre.

Obviously, every county has different average yields. The higher the yield history, the better protection you have in any one year.

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