Minding Ag's Business

Since the 1930s, most farm program payments were triggered on price alone so were relatively easy to predict when commodity markets slumped. Beginning with the optional ACRE program in the 2008 farm bill, and now ARC-County in the 2014 law, forecasting depends on a combination of yields and prices. Those combinations and permutations could lead to some disappointing results once the new farm bill options are in full force.

USDA won't release official 2014 county soybean and corn yields until February. Just as in 2012, neighboring counties could have widely variable yields.

"Earlier it appeared as if the new ARC-County farm program was set to make some substantial payments to farmers, but farmers and bankers may want to be very conservative about the size of government payments they place in their budgets," says economist Brent Gloy. Hefty yields throughout much of the Corn Belt in 2014 could easily negate the potential of payments for last season's crop, he points out in a Dec. 29 blog post (http://ageconomists.com/…)

Many farm bill educational sessions have focused on the prospect of monster ARC-County corn payments in 2014, potentially running about $80/acre in counties with average yields, under USDA's latest 2014 season-average price projections. Key phrase is "average" yields. For general guidance, University of Illinois economist Gary Schnitkey points out that ARC-County will make higher payments than Production Loss Coverage (over the five-year farm program) if corn averages $3.30 or above (all five years), soybeans above $7.80 and wheat above $5.50.

Gloy says when it looked like season-average 2014 corn prices could run $3.60, it was easy to pencil out $80 to $45/acre ARC payments even with above-average yields, assuming a county's historic yield was 170 bu. and actual yields ran no more than 210 bpa in 2014. Should corn prices continue their bull run that started Oct. 1, however, average prices closer to $4 will drastically shrink that support. At 210 bpa, payments would be zero.

"Given the high yields reported in many areas, banking on large ARC-CO payments this year may be risky," Gloy says.

For dozens of articles to help you analyze your farm bill decisions, go to the University of Illinois's website http://farmdocdaily.illinois.edu/…

Ohio State University economist Carl Zulauf has compiled articles to help your farm program decisions. (The server was down temporarily, but this link should work later I http://aede.osu.edu/…

To study the range of farm bill outcomes using online calculators go to the University of Illinois website http://farmbilltoolbox.farmdoc.illinois.edu or Texas A&M's calculator at https://usda.afpc.tamu.edu/…

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