Some Thoughts On PLC
It is estimated that the final corn PLC payment will be 14 cents per bushel, but in fact the actual amount for a typical farmer will be closer to 8.8 cents. How can this be.
First, PLC (and ACR-CO) only pay based on 85% of base acres. Second, the PLC yield is based upon 90% of the average 2008-2012 actual farm yields. Farmers did have the option to update to the average of 2013-2017 yields, however, these yields were “de-trended” to be more comparable to the 2008-2012 yields by applying a 90% factor to the average 2013-17 yields.
This, instead of getting 14 cents for all of your 2019 bushels you will get less than 9 cents. And on top of it you have an overall payment cap of $125,000 and sequestering reductions will apply.
Now, the good news is that for calendar year 2020, a typical corn farmer in the Midwest with APH yields of 220 bushels will get around $50 from CFAP#2 plus about $25 from PLC for a total payment of $75 plus any CFAP#1 for bushels on hand as of January, 15, 2020. This may not create a profit for the farmer, but is better than getting nothing.
PLC yields can either be much better or much worse for some farmers compared to ARC-CO. Let’s look at a wheat farmer in the county where I grew up – Walla Walla, Washington. Farmers near the Blue Mountains may easily have an average yield for wheat of over 125 bushels (we had some approaching 170 this year for dryland wheat). Farmers near the Snake River may be lucky to get 30 bushels per acre. The average ARC-CO yield could be close to 85 in a good year. Thus the farmer with a yield of 30 bushels per acre is more likely to elect ARC-CO since their yield is now approaching 85 bushels for a payment versus their current 30 bushel yield. Conversely a farmer with 125 bushel average may be “penalized” by electing ARC-CO since their yield is reduced from 125 to 85.
As with most farm programs, there are always winners and losers and ARC-CO and PLC are no different.
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.
Comments are closed.