Latest Farm Bill Program Decisions: Will it pay for NE Producers this October?

It’s been several months since FSA offices throughout the nation scrambled to integrate the changes of the latest Farm Bill, also known as the Agricultural Act of 2014. In addition to having to work through the specific rules for the new programs, they also had to oversee its implementation at ground level. Producers, too, found themselves in the position of deciding which of three new programs in which to take part.

To review, in place of DCP and ACRE programs of farm bills past, the new farm bill offers:

• Price Loss Coverage (PLC), a price protection program that triggers payments when market year average prices fall below target levels, which are called reference prices.
• Agricultural Risk Coverage County (ARC-C), a revenue protection program that triggers payments when the county revenue per acre falls below a benchmark revenue guarantee per acre set for the county.
• Agricultural Risk Coverage Individual (ARC-I), a revenue protection program that triggers payments when there is a revenue-per-acre shortfall on the individual farm that falls below a benchmark revenue guarantee per acre for that farm.

Falling grain prices and bearish markets made for difficult decisions on the part of producers. To add even more pressure, whichever program in which they choose to enroll is permanent for the five year span of the bill, and cannot be changed.

So, here we are. The enrollment results provided by the USDA-FSA offer an interesting perspective on producers’ ultimate decisions. Would more farmers choose to keep or update their program payments yields or update their base acres?

Surprisingly, while many would have predicted that a greater majority would have chosen the more straightforward first option, enrollment data only showed 43 percent nationally did so. Many analysts conclude that perhaps this option was utilized less due to minimal yield histories, or by farms with minimal base acreage.

In Nebraska, data showed that more than 90 percent of corn and soybean FSA farms favored enrollment in ARC-CO over the PLC option. This means that a large number of farmers chose to update their base acres to their crop mix from 2009-2012, as opposed to keeping former acres, many of which had been the same since 1985.

UNL Agricultural Economics professor Bradley D. Lubben offers this analysis:

“While producers may have favored the moving-average revenue protection of ARC relative to the fixed-price protection of PLC, the results suggest producers may have ultimately weighed the expected payments across programs in the early years among the most important factors in making a decision.”

Lower projected farm income and lower crop prices have made cash flow considerations a top priority for producers in 2015. Since none of the primary crops grown in Nebraska are projected to qualify for 2014 PLC payments this October, producers opted for the ARC-CO option, which is projected to make hundreds of millions of dollars in payments.

Are you satisfied with your decision? Do you have concerns about the decision you made looking ahead to the next growing season? Please don’t hesitate to contact one of the UFARM professionals—we are glad to help discuss your options.

UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

Source consulted: Lubben, Bradley D. “Farm Program Payments and Protection Under ARC and PLC.” Cornhusker Economics. University of Nebraska-Lincoln Agricultural Economics. 05 Aug. 2015. Web. 10 Sep. 2015.