Farm Bill Decisions
Farm Bill: Been receiving questions on farm bill since before Christmas and just hadn’t taken time to dig into it till this week. Viewing charts is helpful to me, so I’ve added some to jenreesources.com, including one from Robin Reid from K-State which is helpful in understanding how program payments are triggered. If you missed the UNL/FSA farm bill webinar, you can view it at: https://go.unl.edu/x0i9. I am not running simulations this year and don’t recommend that you do it either. The Texas A&M tool is a very good tool, but it will show you a range of probabilities beyond what is realistic for this 2022 decision, barring some type of trainwreck. If you’d like to very easily see for yourself what yields and prices would be necessary to trigger program payments, download the spreadsheet from K-State (and I have an example on my blog): https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc.
Looking at any potential payments for the 2021 crop, projected prices are substantially above the PLC price payments for crops like corn, soybean, wheat, and sorghum grown in Nebraska and would take a 23-33% price reduction to trigger a PLC payment. They’re also substantially above (30-47%) the price and would take a 30-40% county yield loss to trigger ARC-Co. I’m unsure counties with more substantial wind damage from July 9, 2021 wind storm had enough county average yield loss to trigger and ARC-Co payment…and many may have chosen PLC corn last year with the prices at the time anyway.
Decisions for 2022 need to be made by March 15, 2022. For 2022, neither ARC-Co nor PLC would be anticipated to trigger for corn, soybean, wheat, sorghum with current USDA projected prices (which are just numbers at this time). K-State does a nice job of compiling the different sources of 2022/2023 MYA prices and updating them every month here: https://www.agmanager.info/crop-insurance/risk-management-strategies/projections-and-sources-myaprices-arc-and-plc-commodity. Different election decisions (ARC-Co or PLC) can be made for crops in different FSA farm numbers if you’d like to spread risk. Fields with higher yields would be more favorable for your PLC decisions.
A consideration for ARC-Co for corn, soybean, wheat, or milo would be if a county has a lot of non-irrigated acres and one anticipates a drought event in 2022. That may look additionally favorable if the county has the opportunity to split crops into irrigated and non-irrigated decisions.
For soybean, ARC-Co is potentially a little more favorable than PLC, but still most likely won’t trigger a payment. The Soybean MYA price would need to fall below $8.40 to trigger a PLC payment and below $7.84 to trigger an ARC-Co payment with an average yield.
For corn, the MYA price would need to fall below $3.70 to trigger a PLC payment and below $3.18 to trigger an ARC-Co payment with an average yield. Robin Reid with K-State shares, “Strong export demand currently would lead us to believe that PLC payments are unlikely, but again, much uncertainty exists. A farmer could select PLC for the downside price protection or, if they are optimistic that current high prices are here to stay, selecting ARC-County would give them a higher likelihood of payment if county yields are low. In the case of irrigated corn, the likelihood of a yield loss large enough to trigger an ARC-County payment is less, so irrigated base may lend itself more to PLC.” I would note, this is true unless the county has a history of major storm events which traditionally have impacted county average yields, thus making ARC-Co irrigated also an option.
For wheat, PLC has been favorable in the past, but current prices are well above the $5.50 reference price. And for sorghum, PLC has also been favorable in the past with a $3.95 reference price, but again, current prices are well above this.
Bottom line, it’s not anticipated that either PLC nor ARC-Co will trigger program payments for 2022 at this time. I think many farmers would prefer good crops and decent prices. ARC-Co and PLC are tools for risk management and perhaps crop insurance tools will play an even bigger factor in managing risk for this coming year.