2014 Farm Program Payment Estimates - July Update (Current as of early September)

2014 Farm Program Payment Estimates - July Update (Current as of early September)

Farm program payments for the 2014 crop will be due to producers in October 2015, after the 2014 crop marketing year is complete for all crops and national marketing year average prices are published as of the end of September. Price Loss Coverage (PLC) payments, if any, are directly calculated from the difference between these national marketing year average prices and the corresponding reference prices set in the 2014 Farm Bill. Agriculture Risk Coverage (ARC) payments, either under county coverage (ARC-CO) or individual coverage (ARC-IC), are dependent on both prices and yields. Currently available information as of late July 2015 allows for estimates of both PLC and ARC-CO payments, although actual payments will differ based on final price and yield determinations. As a note, estimates for ARC-IC payments are not included due to the complexity and uniqueness of the calculations to every farm operation that enrolled in ARC-IC, but any ARC-IC payments in Nebraska will be small in aggregate as enrollment in ARC-IC was very limited in the state.

With market prices in 2014 down substantially from recent levels, producers are looking to potential farm program payments as part of the cash flow on grain operations across the state this fall. For the minority of farms and crops enrolled in the PLC program, farm programs payments are expected to be non-existent as current forecasts for the nearly-complete marketing year average price are at or above levels that would trigger PLC payments. Nationally, only peanuts, long grain rice, and canola appear to be in line for 2014 crop PLC payments.

Conversely, ARC-CO payments for the majority of farms and crops in Nebraska are expected to add up to hundreds of millions of dollars across the state for the 2014 crop, but will vary substantially by crop, county, and practice (irrigated vs. nonirrigated). ARC-CO guarantees are calculated as the 5-year Olympic average national price multiplied by the 5-year Olympic average county yield multiplied by 90%. Given current prices expectations for the marketing year that are as much as 30% below the 5-year Olympic average, crop revenue will fall far short of the 90% ARC-CO guarantee except for counties, crops, and practices where yield results in 2014 were far above average or where 5-year Oympic average yields fell far short of expected yield levels due to more than one poor yield in the 2009-2013 period (one poor year would be excluded in the Olympic average, but a second poor year would bring the average down).

A recent Cornhusker Economics article on estimated farm program payments is available includes maps of projected ARC-CO payments by crop, county, and practice across the state for crops with available yield and price estimates. A full set of maps is available at http://agecon.unl.edu/farmbill/maps and a companion table of yield, price, and ARC-CO calculations is available as a PDF file to give specific insight into every available county-crop-practice combination. As more data and yield and price estimates are updated, this report will be updated as well.

Posted by Brad Lubben, August 11, 2015