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Serving: IL
Gary Schnitkey and Jonathan Coppess
OPENING UP: Ag economist Gary Schnitkey (left) has calculated the possibility of farm payment scenarios for decades. He worked with Jonathan Coppess, director of the Gardner Agriculture Policy Program, to put his algorithms in an easy-to-use web tool.

Farmdoc unveils PLC, ARC payment calculator

A free U of I web tool shows farmers the likelihood of insurance payments paying based off different reference price scenarios and 1,000 calculations.

University of Illinois ag economist Gary Schnitkey is offering his algorithms for calculating farm program payments to farmers and policymakers in an easy-to-use web tool called the Gardner-Farmdoc Payment Calculator.

Following passage of the 2018 Farm Bill, the Price Loss Coverage and Agriculture Risk Coverage programs were changed slightly, prompting Schnitkey and Jonathan Coppess, director of the Gardner Agriculture Policy Program, to approach the National Center for Supercomputing Applications in Urbana, Ill.

Programmers at the center helped them create a secure web portal for users to create a free account and run 1,000 calculations to show the range of possible payment scenarios, which will help inform their decision to sign up for PLC or ARC during crop years 2019 to 2023. All it takes is a few pieces of data and a click of the button at fd-tools.ncsa.illinois.edu.

“We basically built an algorithm to calculate ARC and PLC payments based on what’s historically happened to price and yields, and we can calibrate that off of current conditions, but we still base that on what’s happened in the past,” Schnitkey says. “You can start to sort of look at that like a weather forecast: Given what we know today, here’s the chance of each one of those scenarios making a payment.”

Already, the tool has been used over 3,000 times, and that’s expected to increase over the coming months as farmers finish harvest and start to think about crop insurance.

Coppess says future prices will always be subject to change, but by setting one of four potential reference price scenarios in the calculator, farmers will get a better idea of the range and likelihood of different payments. They’re weighted by their chance of happening based on previous events.

“When you think of a 56% chance of a $13 payment on PLC, for example, what does that mean?” Coppess asks. “We break that down into these different bins. You can click on analytical pieces, and you can see that out of 1,000 runs built around $3.70 or $3.64 for corn, where these payments would likely fall.

“That just gives them a lot more to think through. That isn’t just the payment — anybody can calculate a $3.64 market average is a 6-cents deficiency on the PLC. We’re giving them a range of possibilities.”

Grain price data are always a year behind in the calculator, but Coppess says they’ll be adding features to the calculator, such as letting farmers set their own reference price — “within reason,” he notes. “We’re probably not going to let you go down to 1-cent corn.”

While the calculator currently only works for corn, soybeans and wheat, more crops will be added to the tool soon. It will also continuously update as new data comes to feed more accurate predictions.

“This isn’t just part of the Farmdoc project,” Coppess says in reference to U of I’s outreach effort for ag decision-makers and farmers. “This is how we’re working to translate research and research capabilities out into the wider world — in this case, farmers and policymakers. It serves as an example that we can do this kind of work, and maybe even do more of it in the future for different areas.”

TAGS: Farm Bill
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