PLC Payments for Wheat and Soybeans Highly Unlikely for 2014
Art Barnaby of Kansas State University prepares a monthly update of where he estimates the MYA price will be on corn, soybeans, wheat and sorghum. KSU just released yesterday an updated report based on price information just released on that day.
Wheat would need to have an average price of lower than $2.70 for the remainder of the marketing year (ending May 31, 2015) in order to trigger a PLC payment. Soybeans would need to average less than $4.20 for the remainder of the marketing year (ending August 31, 2015) to trigger a PLC payment. The chance of this happening is the same as my Washington Huskies winning the NCAA football championship next year (there is a chance but is less than slim or none).
Art estimates the corn MYA price at $3.78 which is 8 cents above a trigger point. There is still a chance for a payment and we will likely get more clarity after today’s planting intentions report. That report will also be important for Sorghum since its estimated MYA price is just above the reference price at $3.96 (reference price is $3.90). If the planting intentions report shows sorghum acreage in excess of 9 million acres, that could drop the price a bit. However, China is still aggressively buying sorghum.
Art does a good job of analyzing the choices regarding ARC and PLC for these four crops. Again, the major choice for most corn and wheat growers is whether you will receive a maximum ARC-CO payment for the 2014. If you will, then you will likely lean toward ARC-CO. If you don’t then the choice is much tougher to make.
Based on KSU’s estimate for corn MYA price for 2014, those counties that are currently showing maximum corn payments for ARC-CO should get those payments based on KSU’s estimate. The breakeven point if your 2014 county yield is equal to (or less than) the Olympic average is $4.02. This means that corn prices can rally from KSU’s estimated $3.78 by 24 cents and it will not reduce the ARC-CO and in most cases, the price can rally even more since many of these counties had yields less than the Olympic average.
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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