Ranking States By ARC/PLC Payments
Brent Gloy and David Widmar write a blog called Agricultural Economic Insights and they recently did a post on “How Has your State Fared Under the 2014 Farm Bill?”. In the post, they provide data on a state-by-state basis showing the average amount of payments each state has received for ARC/PLC during 2015/16 (2014 and 2015 crop year) versus the average direct payment paid during 2010-2013.
“Fixed direct payments were by far the largest portion of farm program payments under the 2008 farm bill. These payments were made on a fixed price and yield for most commodities. For example, corn producers received $.28 per bushel on the farm’s direct payment yield on 83 to 85% of base acres. The direct payments were reduced by 20% for farms that chose to participate in the ACRE program.”
We know that a substantial majority of corn and soybean farmers elected ARC-CO under the 2014 farm bill. Wheat growers were about 58% ARC and 42% PLC. The original CBO estimates for the repeal of Direct, Counter Cyclical, and ACRE payments called for about $6 billion in program savings. In its place, the CBO expected an average of about $3.5 billion of ARC/PLC payments.
We know for the 2014 crop (paid in 2015) and 2015 crop (paid in 2016) that total ARC/PLC payments were about $5.2 and $7.8 billion respectively. The Economic Research Service (ERS) estimates 2016 crop payments this year may exceed $8.5 billion. This cumulative amount will exceed the CBO estimates by about $10 billion and be about $3.5 billion higher than the 2008 farm program payments.
The large increase in 2017 payments (2016 crop year) primarily relate to wheat PLC payments. Most wheat growers that elected PLC will likely only need about 2,000 acres to hit the maximum $125,000 payment limit.
The blog post has a nice US map showing how these average 2014 Farm Bill payments compare to 2008 Farm Bill Direct Payments. The corn belt appears to have fared fairly well under the new Farm Bill with Nebraska and Wisconsin each showing over 200% of 2008 payments. However, most of the mountain and southern states appear slightly worse. But these are the states most likely to get a large wheat PLC payment for this year.
Once the 2017 payments are factored in, it is likely that almost all states will be better off under the 2014 Farm Bill than the 2008 Farm Bill. Notice that we say states and not counties. There are many states that show large increases, however, several counties in those states received little or no ARC payments while their neighboring counties may have received payments each year in excess of $70 per acre. The new Farm Bill will should address those issues.
It appears that 2014 Farm Bill has been better than 2008, however, remember we still have two years to go and it is likely that ARC payments will be substantially reduced for both 2017 and 2018 and wheat PLC is likely much lower this year. If that holds true, the final numbers for 2014-2018 may not be much different from the old Farm Bill. We shall see.
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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