Time to update records, learn about new programs in Farm Bill
“If producers think prices will trend at or near current levels over the next five years, Agriculture Risk Coverage (ARC) is more likely to pay because the five-year Olympic market average price for many crops are above current prices,” he said. “But producers can only collect 10 percent of their coverage under the ARC program, and lower prices will cause the Olympic average price to decline over the life of the ARC program.”
Olympic averages are found by removing the high and low price before calculating the average of the remaining prices.
Price Loss Coverage – In the PLC program, farmers will receive payments if the crop price falls below certain “target” or reference prices. The USDA has set a $5.50-per-bushel reference price on wheat, for example, Barnaby said. If the cash wheat price falls below $5.50, farmers will be paid the difference between $5.50 and the lower price times their updated program yield times 85 percent of their base acres. Reference prices set as part of the new legislation for some other commodities (per bushel) include $3.70 for corn; $3.95 for grain sorghum; $8.40 for soybeans; $2.40 for oats; and $4.95 for oats.
“The (PLC) potentially has the bigger payout, but is less likely to happen than an ARC payment,” he said. If prices stay above the reference price, the PLC program will not make payments to farmers.”
Farmers who select PLC will be eligible for the Supplemental Coverage Option, as well, although that program will not be available until the 2015 crop year because the crop insurance contract change date has passed for 2014. Because it is insurance, it will follow insurance rules and payments will be based on county yields and insurance prices. It will cover a share of a farmer’s deductible in their farm level crop insurance, there is no payment limit, and the payments cannot be sequestered. SCO payments will be made six months earlier than ARC or PLC payments, but farmers must pay 35 percent of the SCO premium costs.
“Producers don’t have to make decisions right away, but now would be a good time for them to gather their records together. They’ll need acreage and yield data to update their information because many farmers will want to reallocate their base acres and update their program yields when they sign up,” Barnaby said. He expects updating base acres will increase feedgrain base acres and reduce wheat base acres; in both Kansas and at the national level.
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