How Might ARC-CO Payments Look Next Year

• August 12, 2015
• Paul Neiffer

We have final MYA prices for wheat, barley and oats.  Based on those prices, the benchmark price for each of these crops for the 2015 crop is as follows:

• Wheat $6.70 up 10 cents from $6.60
• Barley $5.57 up 12 cents from $5.45
• Oats $3.48 up 23 cents from $3.25

We do not have final yields for any crops in the US yet.  We may not get this information until after September 30, but I thought I would update our estimates for possible wheat ARC-CO prices and used my home state of Washington to see how the 2015 crop will compare to possible 2014 Wheat ARC-CO payments.  We know the final 2014 wheat MYA price was $5.99.  With the WASDE report released today, USDA is estimating a range of prices for wheat from $4.65 to $5.55 with a MYA of $5.10.  This is almost 90 cents lower than the 2014 MYA price.

We have estimated the 2014 ARC-CO payments based on both harvested and planted acres.  The Farm Bill indicates payments are based on planted acres, however, the final FSA numbers usually end up somewhere between harvested and planted.  For purposes of this projection, I have used harvested acres which is more conservative.  I would estimate final numbers would indicate a lower yield and thus possible higher payments.  Here is a chart of the possible 2014/2015 wheat ARC-CO payments based upon counties reported in Washington state by NASS:

As you can see from the chart, all counties shown will have a larger payment for the 2015 crop than 2014.  The yield I used for 2015 was equal to the yield reported for 2014 by NASS.  Based on the high heat and lower moisture that we have had in the state, I would estimate that county yields will not be much higher than those amounts.  Also, with the lower price than last year, even if yields are higher, it likely that many of these counties are already at maximum payment amounts.

Since the $5.10 MYA price is lower than the reference price by 40 cents, PLC will also make a payment.  For example, Walla Walla County farmers may have yields ranging from 20 bushels per acre to about 110.  At 20 bushels, their per acre net PLC payment would be $6.80 and at 110 bpa, their payment would be $37.40.  Based on county average yield of about 68 bpa, the final MYA price would need to be about $4.70 for PLC to pay more than ARC-CO.

When we get final 2014 yields, we will update estimated 2014 ARC-CO payments (although knowing FSA they may not release these numbers until after September 30).

Paul Neiffer, CPA

 

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