By Ryan Flaming, County Extension Agent, Agriculture & Natural Resources
2014 Farm Bill Meetings
I will be helping put on two 2014 Farm Bill meetings, at the Newton High School auditorium December 16 at 7pm, and at the Halstead High School auditorium December 22nd at 7pm. I will be talking about the economics of the farm bill and showing some decision aids to help the farms make a choice on which plan to sign up for. At the meeting I will show you examples of where the PLC plan will benefit you the most and where the ARC plan will benefit you the most.
If you are worried about catastrophic price loss, PLC will offer the most risk protection. It does not cap out until $125,000 ($250,000 with spouse) per year and will pay when Marketing Year national prices are below the reference prices set for the life of the Farm Bill. ARC provides protection for revenue losses (losses in price and/or yield) but caps out at 10% of benchmark revenue. It also has a 14% deductible before it kicks in, so only losses from 76% to 86% of benchmark revenue are covered. To hedge your bets, you may consider putting some commodities in PLC and some in ARC-CO.
You have to estimate the likelihood of payments under each program, as well as the potential payment amount to determine which program will have the most benefits over the entire life of the farm bill. Look at long-term projections for national Marketing Year prices and consider your own price forecasts. If you think national prices will be lower than PLC reference prices in several years, choose PLC because it could pay out more often and in greater amounts than ARC. If you think the combination of national prices and county yields will be the lower than the benchmark revenue for your county in several years, choose ARC as it likely pay more often.
With ARC-CO (county) vs ARC-IC (individual) you need to remember ARC-IC only pays on 65% of the entire farm base, where PLC or ARC-CO pays on 85% of base acres for each commodity with base. This is a large difference to overcome, so most farmers will not consider ARC-IC. Farmers with very high yields (at least 30% higher) compared to the county yield may consider ARC-IC since benchmark revenue will be higher. This will create larger payments per acre before ARC caps out at 10% of benchmark revenue. However, if your farm is diversified (planting many different covered commodities), you may prefer the ARC at the county level, since losses will be paid commodity by commodity. Losses in one commodity will not be offset by higher revenue from another, which could happen in ARC-IC.
I will have a slide show to show examples of where PLC and ARC will kick in payments according the county average yields and MYA (marketing year average) prices.
My goal for this presentation is to enable you to make the best decision possible for your farm. I will try to answer questions you have at the meeting. Please call the Extension office at 316-284-6930 by Monday, December 15 so that plenty of handouts are available. I look forward to seeing everyone there.