2014 Farm Program Payment Estimates - Mid-September Update

2014 Farm Program Payment Estimates - Mid-September Update

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. Updated payment estimates are available based on price estimates from the September 11 supply and demand report from USDA and companion price estimates for farm program purposes reported by USDA-FSA. While those prices are not final estimates until September is complete and the full marketing year is tabulated, the price estimates do represent 11 months of marketings as well as estimates of September prices, so they should be very accurate, thus the shift to a single price estimate instead of a price band as reported in previous months' supply and demand reports.

If the current marketing year estimates for the 2014 crop are accurate, there will be Price Loss Coverage (PLC) payments for just four crops, peanuts, long grain rice, canola, and corn. The marketing year average price estimate for corn is currently  $3.68 per bushel, just below the $3.70 reference price, resulting in a $0.02 PLC payment rate. For other primary Nebraska crops, the payment rate is zero, as the marketing year average price estimate is at or above the legislated reference price. As a result, projected PLC payments are small to nonexistent for Nebraska crop producers for the 2014 crop.

Conversely, Agriculture Risk Coverage (ARC) 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 guarantees for county level coverage (ARC-CO) 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 Olympic 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).

ARC protection at the individual farm coverage level (ARC-IC) could also result in substantial payments, but due to unique farm-by-farm calculations, it is impossible to project the size of any payments. Furthermore, enrollment in ARC-IC was very limited such that total ARC-IC payments in Nebraska will be small regardless of the outlook.

A recent Cornhusker Economics article on estimated farm program payments is available at http://agecon.unl.edu/farm-program-payments-and-protection-under-arc-and-plc and 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 are 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. These maps and tables have been updated with the price estimates as of September 11 and provide the best estimate of farm program payments to be issued to producers in October. An important note to these estimates is that farm program payments are subject to budget sequestration, which means all payments would be reduced by approximately 7% from calculated rates, based on current estimates for sequestration. The tables and maps represent calculated payments per base acre, including the 85% paid acre factor, but do not reflect budget sequestration, so actual payments to producers will be reduced.

 

Posted by Brad Lubben, Friday, September 25, 2015