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Producers have until March 15 to make a couple of decisions involving the 2018 Farm Bill.
Program Reminders
The first decision is whether to update Price Loss Coverage (PLC) payment yields and whether to enroll in PLC or the Agriculture Risk Coverage (ARC) programs for the 2019 and 2020 crop years. Producers will need to make this program decision annually starting in 2021 Simple online tools can assist growers in understanding how this decision will impact their farms.
For a refresher, the ARC program includes ARC-County and ARC-Individual. The ARC-County program provides income support tied to historical base acres of covered commodities such as corn, soybeans, and wheat, and not current production. Payments with this program occur when the actual county crop revenue for a covered commodity is less than the ARC-County guarantee for the covered commodity.
The ARC-Individual program works the same as the ARC-County program, but the payments occur when actual revenue for all covered commodities is less than the farm’s average benchmark revenue. ARC-Individual requires a participating producer to enroll all covered commodities in the program.
The PLC program provides payments for a covered commodity when the market year average price (MYA) of a covered commodity is less than that commodity’s reference price set by the 2018 Farm Bill.
Decision Tools
Similar to the previous Farm Bill, two online tools can help producers make a decision between the two programs for all their covered commodities. Regardless of which tool you use, both are free, and two universities have provided information on how to use the programs.
The University of Illinois offers the 2018 Farm Bill Toolbox, which provides the Gardner Program Payment Calculator to estimate potential payments from the ARC-County and PLC programs based on the user’s farm data. The toolbox also includes a downloadable 2018 Farm Bill What If Tool allowing producers to input more specific farm data to assist in their decision.
The other tool is from the Agricultural & Food Policy Center at Texas A&M University. The 2018 Farm Bill Decision Aid allows a user to input individual farm data such as base acres, historical production of covered commodities, and irrigation and non-irrigation production. This tool also provides a user with estimated potential payments based on inputted data for the ARC-County and PLC programs.
Corn
Regardless of which tool you use, you will need to have some basic information for the program selection including PLC payment yield, base acres per farm, and potentially historical irrigated percentage (HIP). HIP can be found on form FSA-156EZ. For this article, I created a sample farm in Queen Anne’s County with a PLC Payment Yield of 125, base acres on the farm of 120, and HIP of 52 percent. Projected prices are based on USDA projections for 2019 and 2020 based on the FAPRI 2019 August Baseline Update for U.S. Agricultural Markets. The results for the farm are below:
The first row highlights what a potential PLC payment would look like in 2019 and 2020 based on the predictions. For this farm, it would appear that PLC could offer a $4,669 potential payment for the first two years of the 2018 Farm Bill. The HIP and base acres come into play with the ARC program. The second and third rows highlight what a potential ARC payment would look like in 2019 and 2020 based on the predictions. For this farm with ARC, the ARC program would offer a $1,920 potential payment over the first two years of the 2018 Farm Bill.
Which program should you select for corn? The project market year average (MYA) price is between $3.80 to $3.85 and the reference price for corn is $3.70. Although the calculators show potential PLC payments in 2019, that may not be the case. The payments in 2020 are estimated to be made in 2020, but at this point, we are basing these off-price projections from the Food and Agricultural Policy Research Institute (FAPRI) and these projections will change over time. The tool also allows you to put in your expected price. ARC county is projected in this example to make a payment, but that could potentially vary among counties in the state. Based on projections for this farm, PLC is probably the appropriate choice based on the potential payments for the first two years.
Soybeans
For soybeans, the sample farm in Queen Anne’s county had a PLC Payment Yield of 30bu/acre, HIP of 52 percent, and base acres of 90 acres. Projected prices are based on USDA projections for 2019 and for 2020 based on the FAPRI 2019 August Baseline Update for U.S. Agricultural Markets. The results for the farm are:
The first row highlights what a potential PLC payment would look like in 2019 and 2020 based on the predictions. For this farm, it would appear that PLC could offer a $1,309 potential payment for the first two years of the 2018 Farm Bill. The HIP and base acres come into play with the ARC program. The second and third rows highlight what a potential ARC payment would look like in 2019 and 2020 based on the predictions. For this farm with ARC, the ARC program would offer a $1,973 potential payment over the first two years of the 2018 Farm Bill.
Which program should a soybean producer pick? Current projections are for an MYA is $9/bu and the reference price is $8.40. Although the tools are projecting a PLC payment in 2019, that might not be the case. Small ARC payments are expected but again those could vary among counties. Based on projected payments, ARC may make sense for this farm.
Conclusions
Unlike the previous farm bill, the election you are facing is not for the entire life of the 2018 Farm Bill and will only be for the first two years (‘19 and ‘20). For the first two years, the model farm PLC potentially is the program to pick for corn and either PLC or ARC for soybeans. Before heading to the county FSA office, take a moment to run your own numbers through one of the two tools online to determine what could be a good option for your farm.