Effective Reference Price – What About Wheat and Soybeans
In our last post, we tried to see if there would be any adjustment to the reference price for corn ARC or PLC payments. In this post, we do the same analysis for wheat and soybeans.
The current reference price for wheat is $5.50. The maximum effective reference price is 115% of this number of $6.33. The current expected MYA price for the 2018-19 marketing year ended May 31 is $5.20. The highest MYA price since the 2014 Farm Bill was the first year at $6.87.
For my analysis, I assumed next year’s MYA would be the current reference price of $5.50 and then added a $1 to it each year reaching $8.50 in 2022. This would finally get the effective reference price to $5.53 which is 3 cents higher than the current price. It would be nice for us to see that pricing, but I don’t think any betting person would take those odds even at a million to one.
For soybeans, the current reference price is $8.40 and FSA expects this year’s MYA price to end up at $8.60. The maximum effective reference price for soybeans is $9.66 (115% of $8.40).
For may analysis, I started with $8.40 for the 2019 MYA and then added $1 to it each year arriving at a final MYA price of $11.40 in 2022. For 2023, the effective reference price calculation would only be $8.05 which is still 35 cents under the current price. You would need to go out to 2024 to finally go over $8.40 at $8.84 assuming the final MYA price for 2023 crop is $12.40.
As we concluded for corn, the chance of seeing any increase in the wheat or soybean effective reference price is somewhere between slim and none with none in the lead.
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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