Did High-Yield States Elect More PLC
The FSA released information on Monday that showed the amount of farms and acres electing ARC and PLC on both a national and state basis for each covered crop. I was curious if those states with very high yields (such as Missouri and Illinois) in 2014 would elect more PLC than other states since they would not get an ARC payment for 2014 and might get a small PLC payment.
The answer is a little bit of a mixed bag. Missouri corn growers elected PLC on 42% of their corn base acres and ARC on the rest. Kansas elected PLC on 13% of their acres. Illinois and Indiana each elected PLC on only 2% of their corn acres.
Iowa and Michigan farmers were guaranteed a much larger ARC payment than Illinois and Indiana, so your assumption would be that these farmers would elect even more ARC. However, both Iowa and Michigan corn farmers elected ARC on only 97% of their acres which is 1% lower than Illinois and Indiana.
I think the key reason for these farmers electing ARC versus PLC is the high Olympic Average price for the 2015 crop. We know that this price will be at least equal to the $5.29 price for 2014 (due to the 2009 price of $3.70 dropping off the average and the 2014 crop MYA price cannot be lower than $3.70 reference price). This implies a revenue guarantee for ARC of $4.55 which is much higher than the current FSA 2015 MYA price of $3.50. Therefore, in most cases, the actual MYA price for 2015 would have to drop under $3 for PLC to pay more than ARC.
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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