Wheat and Cotton Seed ARC or PLC
We had some readers ask us to perform the same ARC/PLC calculations on wheat and cotton seed for 2019.
For wheat, we worked up estimated ARC and PLC based upon an average yield of 50 bushels per acre and a PLC yield of 45 bushels (90% of average). This results in an ARC guarantee of $236.50 and there is no ARC payment for wheat assuming an average yield until wheat hits a MYA price of about $4.75 (this year’s MYA price is estimated at $5.15).
If yields drop by 10%, there is a small payment if the MYA price is around $5.00 (payment of $11.5) and if yields drop by 20%, then a MYA price of $5.75 yields a $6.50 payment and a MYA price of $5.00 results in about a $36 payment.
Wheat PLC will start generating a payment once the MYA price drops below $5.50. At $5.25, it will pay $11 and at $5.00 it would pay $23.
Since almost all wheat will be harvested by the September 1 sign-up date, it should be fairly easy to determine what makes the most sense for your particular location. If yields are average to above average and prices are similar to this year, then PLC is certainly the better option. If your county yield is at least 15% below normal and the price is similar, then ARC may make more sense.
For cotton, we worked up numbers based on an average yield of 2,300 pounds per acre. Cotton PLC payment starts at 36.70 cents per pound and for the last several years it has been under this price. The current MYA price for this crop year is right at 34 cents.
Assuming the price is the same as this year, PLC would pay about $55 per acre. If it bumps to 35 cents per pound next crop year, then the payment would be about $35 and at 36 cents per pound you would be getting about $15 per acre.
ARC makes no payment until the price drops to 34 cents and your county yield drops to 2,100 pounds per acre when you would receive $12 per acre.
Cotton seed appears to be an easy choice – PLC.
We will keep you updated.
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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