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Yield variation could alter farm bill program choices

Yield variation could alter farm bill program choices
Big differences between counties complicate decisions between 2014 Farm Bill's Agriculture Risk Coverage or Price Loss Coverage

Newly released county yield data for 2014 could cause some growers to rethinkĀ  conventional wisdom about farm bill program choices. While decisions may not change, big yield variation from county to county in key states could complicate choices.

Land owners already face two big deadlines on Feb. 27, decisions about whether to update program yields and retain or reallocate base acres. Those choices likely won't be swayed by the new county yield data, but the next big decision, program selection, looms March 31.

Related: Download a Farm Bill decision spreadsheet

FARM BILL CHOICE: Big differences between counties complicate decisions between ARC and PLC

The new data doesn't appear to affect the retain or allocation decision. In most cases, corn base still looks like it should pay more than soybeans.

But the program choice could be a tougher call. Most growers are likely to focus on either Agriculture Risk Coverage at the county level, or Price Loss Coverage. PLC almost certainly will pay nothing for soybean s in 2014. PLC pays on base acres if the average cash price is less than the reference price, which is $8.40 for soybeans, $1.80 below USDA's current forecast.

PLC payments for 2014 corn likely will be small, if they are made at all. Currently USDA forecasts the average corn price for the 2014 crop at $3.65, a nickel below the reference price of $3.70. While that would generate only a small payment, around $5 for many growers, many counties don't look like they qualify for a payment in 2014 under the ARC program.

Related: Decision time nears - farm bill program choices must be made soon

That's because county yields in some areas far exceeded the Olympic average price used to calculate payments. For example, in Macon County, Ill., the Olympic average for 2014 was 170 bushels per planted acre. That looks at the average from 2009 to 2013, tossing out the high and the low yields.

But the newly released yield data show Macon County average a whopping 234 bushels per planted acre in 2014, more than 38% better than the Olympic yield. Even though the difference between the price used to calculate payments was high, $5.29, the huge bump in yields offset the lower price for the crop.

By contrast, in Carrol County, Ill., the Olympic yield per planted acre is 184 bpa. But yields came in at just 194 bpa, only a 6% gain. That meant ARC would pay a benefit for growers who chose that program, around $84 net.

It's still unclear how the 2014 yield disparity will affect potential income projections for the entire five years of the program, which runs through the 2018 crop year. Plus, PLC payments are made on an individual farm basis, further clouding paybacks.

TAGS: USDA Soybeans
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