Farm Bill ARC and PLC Payout Projections 2014-2018 Greg Halich [email protected] 311...

Farm Bill ARC and PLC Payout

Projections 2014-2018

Greg [email protected]

311 CE Barnhart Dept. Agricultural EconomicsUniversity of KentuckyLexington, KY 40546

Agricultural Economics

Corn and Soybean Prices2015-2018

Price Scenario: Corn Beans Wheat

Low $3.00 $7.75 $4.25 Med $4.00 $10.00 $5.75 High $5.00 $12.25 $7.25


Corn and Soybean Prices2015-2018

Price Scenario: Corn Beans Wheat

Low $3.00 $7.75 $4.25 Low-Med $3.50 $8.88 $5.00 Med $4.00 $10.00 $5.75


PLCCorn $3.70

Soybeans $8.40

Wheat $5.50

85% base acres

90% payment yield (for updated yields)

→ 76.5% multiplier

ExampleCorn 150 bu production history

$3.00/bu avg. marketing year price

$3.70 – $3.00 = $.70/bu margin

$.70/bu margin x 150 bu x .765

= $80/base acre PLC payout


Three Farm Level Yields

Corn YieldSoybean

YieldWheat Yield

125 bu 39.0 bu 60 bu

150 bu 45.5 bu 70 bu

175 bu 51.5 bu 80 buNote: Farm level avg. yields before 90% payment adjustment.

Baseline Scenario 2014 (per acre)$10.00 Soybeans

$3.50 Corn $6.00 Wheat

Estimated PLC Payment

Corn

PaymentSoybeansPayment

WheatPayment

125 bu corn $19 $0 $0

150 bu corn $23 $0 $0

175 bu corn $27 $0 $0

Note: per base acre

Baseline Scenario 2015-18 (per acre)$10.00 Soybeans



Corn


WheatPayment

125 bu corn $0 $0 $0

150 bu corn $0 $0 $0

175 bu corn $0 $0 $0

Note: per base acre

Low Price Scenario 2015-18 (per acre)$7.75 Soybeans



Corn


WheatPayment

125 bu corn $67 $19 $57

150 bu corn $80 $23 $67

175 bu corn $94 $26 $77

Note: per base acre

Low-Med Price 2015-18 (per acre)$8.88 Soybeans



Corn


WheatPayment

125 bu corn $19 $0 $23

150 bu corn $23 $0 $27

175 bu corn $27 $0 $31

Note: per base acre


ARC (County)

85% base acres

86% program crop revenue benchmark

10% payment range

→ 76 – 86% coverage

Estimated ARC Coverage Larue County 2014

Corn Soybeans Wheat

Olympic Avg Yield 150.0 47.3 63.3

Olympic Avg Price $5.29 $12.27 $6.39

Olympic Avg Revenue $793 $581 $405

Revenue Guarantee (start) $682 $499 $348

Revenue Guarantee (end) $603 $441 $308


$3.50 Corn $6.00 Wheat ARC Payout

Corn


WheatPayment

125 bu corn $67 $25 $0

150 bu corn $67 $25 $0

175 bu corn $67 $25 $0

Note: Assumed 143 bu corn, 47 bu soybeans, 74 bu wheat 2014; per base acre

Estimated ARC Coverage Larue County 2015

Corn Soybeans Wheat

Olympic Avg Yield 140.0 46.3 67.7

Olympic Avg Price $5.29 $12.27 $6.56

Olympic Avg Revenue $740 $568 $444

Revenue Guarantee (start) $637 $489 $382

Revenue Guarantee (end) $563 $432 $337



Corn


WheatPayment

125 bu corn $48 $7 $2

150 bu corn $48 $7 $2

175 bu corn $48 $7 $2

Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat 2015

Med-Low Price 2015 (per acre)$8.88 Soybeans


Corn


WheatPayment

125 bu corn $63 $48 $38

150 bu corn $63 $48 $38

175 bu corn $63 $48 $38


Low Price Scenario 2015 (per acre)$7.75 Soybeans


Corn


WheatPayment

125 bu corn $63 $48 $38

150 bu corn $63 $48 $38

175 bu corn $63 $48 $38


ARC Payout 2015-18 (per acre)$4.00 Corn $10.00 Soybeans $5.75 Wheat

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $48 $7 $2

2016 $15 $22 $15

2017 $0 $0 $0

2018 $0 $0 $0

Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat 2015-2018

PLC Payout 2015-18 (per acre)$4.00 Corn $10.00 Soybeans $5.75 Wheat

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $0 $0 $0

2016 $0 $0 $0

2017 $0 $0 $0

2018 $0 $0 $0


Yields Drop 20% in 2017

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $48 $7 $2

2016 $15 $22 $15

2017 $44 $47 $36

2018 $0 $0 $0

Note: Assumed 145/48/66 bu corn/beans/wheat 2015,16,18; 116/38/53 bu corn/beans/wheat 2017


Yields Drop 20% in 2017

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $0 $0 $0

2016 $0 $0 $0

2017 $0 $0 $0

2018 $0 $0 $0


Low Price Scenario 2017

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $48 $7 $2

2016 $15 $22 $15

2017 $51 $47 $36

2018 $0 $0 $0



Low Price Scenario 2017

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $0 $0 $0

2016 $0 $0 $0

2017 $80 $23 $67

2018 $0 $0 $0

Sharp Increase and then Decrease in Prices

Corn Soybeans Wheat

2014 $3.50 $10.00 $6.00

2015 $4.00 $10.00 $5.75

2016 $5.00 $12.25 $7.25

2017 $4.00 $10.00 $5.75

2018 $3.50 $8.88 $5.00

ARC Payout 2015-18 (per acre)Sharp Increase then Decrease in Prices

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $48 $7 $2

2016 $0 $0 $0

2017 $0 $21 $14

2018 $9 $15 $31

Average $25 $14 $9


PLC Payout 2015-18 (per acre)Sharp Increase then Decrease in Prices

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $0 $0 $0

2016 $0 $0 $0

2017 $0 $0 $0

2018 $23 $0 $27

Average $9 $0 $5

Major Drop in Prices

Corn Soybeans Wheat

2014 $3.50 $10.00 $6.00

2015 $4.00 $10.00 $5.75

2016 $3.50 $8.88 $5.00

2017 $3.00 $7.75 $4.25

2018 $3.00 $7.75 $4.25

ARC Payout 2015-18 (per acre)Major Drop in Prices

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $48 $7 $2

2016 $59 $50 $39

2017 $50 $47 $36

2018 $33 $22 $34

Average $51 $30 $22


PLC Payout 2015-18 (per acre)Major Drop in Prices

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $0 $0 $0

2016 $23 $0 $27

2017 $80 $23 $67

2018 $80 $23 $67

Average $41 $9 $32

Even Worse Prices

Corn Soybeans Wheat

2014 $3.50 $10.00 $6.00

2015 $3.50 $8.88 $5.00

2016 $3.00 $7.75 $4.25

2017 $2.50 $6.62 $3.50

2018 $3.00 $7.75 $4.25

ARC Payout 2015-18 (per acre)Even Worse Prices

Corn Soybeans Wheat

2014 $67 $25 $0

2015 $63 $48 $38

2016 $58 $50 $39

2017 $49 $45 $36

2018 $22 $3 $33

Average $52 $34 $29


PLC Payout 2015-18 (per acre)Even Worse Prices

Corn Soybeans Wheat

2014 $23 $0 $0

2015 $23 $0 $0

2016 $80 $23 $67

2017 $138 $62 $107

2018 $80 $23 $67

Average $69 $21 $48


Discussion

• ARC vs PLC

→ Corn

→ Soybeans

→ Wheat • PLC better with pessimistic prices. • PLC + SCO may be better overall• Low base acre % favors PLC + SCO

Farm Bill ARC and PLC Payout Projections 2014-2018 Greg Halich [email protected] 311...

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