Where Do They Come Up With These Numbers?!
Yahoo News released an article yesterday estimating the amount of ARC and PLC payments for the 2014 crop year being in excess of $10 billion. We previously posted on how much the corn and soybeans payments might be for this crop year.
We assumed that corn prices would average $3.20 for the whole year, soybean prices would average sightly higher than $9. Since most of the wheat crop has already been sold for the 2014 marketing year and the estimated MYA price from the USDA is $5.90, it is likely only wheat farmers who sign up for ARC-CO and the county has a substantial drop in yield will receive any payment. Peanut and rice farmers will receive a decent size PLC or ARC payment, however, the total amount paid for these farmers is fairly minor, therefore, the key determination of total ARC and PLC payments will be corn and soybeans.
In our previous post, we estimated total corn payments at $4.5 billion and total soybean payments at about $1.3 billion. This results in total payments for corn and beans of about $5.8 billion. Let’s throw in another $1.2 billion for rice, peanuts and all the other crops and we arrive at total possible payments of $7 billion which is a long ways from $10 billion. Also, this assumes that corn will be at $3.20 MYA for the full year and beans will be in the low $9. Prices over the last two months have averaged much greater than those amounts with lots of sales. It will most likely be very tough to get down to those prices.
Additionally, since there are so many larger farmers with the most amount of production, it is likely that the actual amount allowed as payments may be even lower than our original estimates. We tried to place an estimate on those amounts, but the actual amount that will be disallowed may be higher than our estimates and the difference could easily exceed a billion dollars.
It is always interesting how the mainstream media will key in the worst case number when in reality, that number is probably half of the highest number they show. The CBO did estimate that total ARC and PLC payments for this year would be about $3.8 billion. If prices stay low, the final number will be perhaps at worst $3 billion higher, which compared to the approximate $70 billion spent on the SNAP programs is not that major.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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