Posted October 8, 2020
Support from the farm safety net should be hitting farmers’ mailboxes or accounts soon now that final marketing year average (MYA) prices are set for wheat, corn, sorghum and soybeans. These prices are an important piece of determining the payment rates under the Price Loss Coverage (PLC) and the Agricultural Risk Coverage (ARC) programs.
“With the release of the “Agricultural Prices” report by USDA on September 30, the 2019/2020 MYA prices are now final,” reported Rich Llewelyn and Art Barnaby in a publication issued by the K-State Department of Agricultural Economics. “The wheat price was finalized last month, at $4.58, with a corresponding PLC payment of $0.92 per bushel. These payments will be received later this month.”
A PLC payment is issued when the effective price is less than the reference price. The reference price is currently set at $5.50, while the effective price is determined by either the national average loan rate or the MYA price, whichever is higher. The difference between the effective price and the reference price sets the payment rate.
For the 2019/2020 wheat crop, the difference between the $5.50 reference price and the MYA price of $4.58 generated the $0.92 per bushel payment rate. K-State also released estimates for the MYA price for the 2020/2021 wheat crop. At $4.76, a PLC payment of $0.74 per bushel would be issued in October 2021.
According to K-State, to calculate total expected payment, farmers should multiply the PLC payment rate by their farm PLC yield. Then, multiply that total by 85 percent of base acres. The result is the total expected PLC payment for that farm.
ARC-CO payments are also influenced by the MYA price, but these payment rates are triggered based on county level revenue and yield data, rather than a national reference price. When actual county revenue falls below a crop’s guarantee for the program, a payment is triggered.
Benchmark revenue is calculated using a five-year Olympic average, meaning the highest and lowest values are excluded, multiplied by the five-year Olympic average county yield. That figure is then multiplied by 86 percent, setting the ARC-CO guarantee.
Actual crop revenue is then determined by multiplying the county yield by the MYA price. If this calculation falls below the ARC-CO guarantee, a payment is triggered based on the difference between benchmark revenue and actual crop revenue. Farmers would receive a payment equal to that difference multiplied by 85 percent of base acres for that commodity. One additional note, payments cannot exceed 10 percent of the ARC-CO benchmark revenue.
K-State estimated wheat needs a MYA price below $4.87 to generate an ARC payment. Barnaby and Robin Reid updated interactive maps for Kansas in July to show projected county-level payments under the ARC-CO program, which can be found on the AgManager website at https://agmanager.info/ag-policy/20192020-arc-county-projections/20192020-kansas-arc-county-projections.
The USDA’s Farm Service Agency (FSA) signaled it would start processing both PLC and ARC payments as early as this week, meaning farmers should see those payments rolling in - either via direct deposit or physical check - in the near future. Stay up-to-date on all updates to these programs at AgManager.Info.
Written by Julia Debes for Kansas Wheat