PLC May Benefit Banner, Dawes, And Deuel Dryland Corn Acres

By Jessica Johnson and Robert Tigner
UNL Extension Educators

Farm owners with non-irrigated corn base acres in Banner, Dawes, and Deuel counties may receive higher payments for their 2014 crop in the Price Loss Coverage (PLC) Farm Bill commodity program rather than the Agriculture Risk Coverage–County (ARC-CO) program, according to the University of Illinois APAS Sample Farm estimates.

In these three Panhandle counties the ARC–CO corn payments are calculated separately for irrigated and non-irrigated acres. Dryland producers in these counties will use the county average dryland yield to calculate their payment.

Under the PLC program, payments will be made based on the farm's updated "CC yield," now called a "PLC yield." For many dryland producers the "substitute yield" used to update yields for Banner, Dawes, and Deuel will be higher than their actual production. This yield increase gives PLC an advantage in potential payments.

Let's look at a farm in Banner County as an example.

PLC

Farmland owners with corn base acres in Banner County can update their PLC yield to 65 bushels per acre or higher. For the purposes of this example, we will assume the PLC yield for this farm is 65 bushels per acre. As of March 4, the current estimated Marketing Year Average (MYA) price per bushel was $3.61 (FAPRI Feb. 17, 2015).  If the price estimate is correct, this farm would receive a 9-cent payment per bushel for 85% of the farm's 100 corn base acres, or about $497.25 in 2014.

The 2015-18 MYA price estimates, according to FAPRI, do not trigger a PLC payment.  Probabilities of payout for PLC in Banner County from 2015 to 2018 are just under a 50% chance of the price being below $3.70 per bushel.

ARC-CO

Using USDA NASS data, it is determined that the five-year Olympic average yield for non-irrigated corn in Banner County is 46 bushels per acre. The five-year Olympic average price for corn from 2009-13 is $5.29 per bushel. These Olympic averages are multiplied together to obtain the Banner County non-irrigated corn benchmark for 2014, $243.34 per acre. The payment guarantee is equal to 86% of the benchmark, in this case $209.27 per acre.

Dividing the ARC-CO benchmark by the USDA NASS yield (Feb. 19, 2015) provides the maximum 2014 MYA price to obtain an ARC-CO payment.

The 2014 Banner County non-irrigated yield for corn is 60.9 bushels per acre, according to USDA NASS. For Banner County the MYA price must be below $3.44 per bushel to receive an ARC-CO payment. The current estimated MYA price per bushel is $3.61. If the price and yield estimates are correct, those who enroll their corn base acres in ARC-CO for Banner County may not receive a non-irrigated corn ARC-CO payment for 2014.

In 2014, the probability of ARC-CO payment for non-irrigated corn base acres in Banner County is just over 60%. In 2015, the probability is just under 50%. In 2016 the probability of payments drops to 30% and remains at or below that point through 2018.

This example is provided for educational purposes only. The MYA price estimate changes every month, and there is no guarantee that the estimated price will be the final price used to calculate payments. USDA NASS yields are used as an approximate value until FSA determines the final yield value for each county.  USDA yields are not yet available for Dawes or Deuel County.

For non-irrigated producers in counties that have separated irrigated and non-irrigated ARC-CO calculations, the program election decision for corn acres is more difficult than in other counties in the Panhandle.

Source:unl.edu