Farm Bill ARC and PLC Payout Projections Greg Halich 311 CE Barnhart Dept. Agricultural Economics University of Kentucky Lexington, KY 40546

Agricultural Economics Corn and Soybean Prices Price Scenario:CornBeansWheat Low$3.00$7.75$4.25 Med$4.00$10.00$5.75 High$5.00$12.25$7.25

Agricultural Economics Corn and Soybean Prices Price Scenario:CornBeansWheat Low$3.00$7.75$4.25 Low-Med$3.50$8.88$5.00 Med$4.00$10.00$5.75

Agricultural Economics PLC Corn $3.70 Soybeans$8.40 Wheat$ % base acres 90% payment yield (for updated yields) → 76.5% multiplier

Example Corn 150 bu production history $3.00/bu avg. marketing year price $3.70 – $3.00 = $.70/bu margin $.70/bu margin x 150 bu x.765 = $80/base acre PLC payout

Agricultural Economics Three Farm Level Yields Corn Yield Soybean Yield Wheat Yield 125 bu39.0 bu60 bu 150 bu45.5 bu70 bu 175 bu51.5 bu80 bu Note: Farm level avg. yields before 90% payment adjustment.

Baseline Scenario 2014 (per acre) $10.00 Soybeans $3.50 Corn $6.00 Wheat Estimated PLC Payment Corn Payment Soybeans Payment Wheat Payment 125 bu corn $19$0 150 bu corn $23$0 175 bu corn $27$0 Note: per base acre

Baseline Scenario (per acre) $10.00 Soybeans $4.00 Corn $5.75 Wheat Estimated PLC Payment Corn Payment Soybeans Payment Wheat Payment 125 bu corn $0 150 bu corn $0 175 bu corn $0 Note: per base acre

Low Price Scenario (per acre) $7.75 Soybeans $3.00 Corn $4.25 Wheat Estimated PLC Payment Corn Payment Soybeans Payment Wheat Payment 125 bu corn $67$19$ bu corn $80$23$ bu corn $94$26$77 Note: per base acre

Low-Med Price (per acre) $8.88 Soybeans $3.50 Corn $5.00 Wheat Estimated PLC Payment Corn Payment Soybeans Payment Wheat Payment 125 bu corn $19$0$ bu corn $23$0$ bu corn $27$0$31 Note: per base acre

Agricultural Economics ARC (County) 85% base acres 86% program crop revenue benchmark 10% payment range → 76 – 86% coverage

Estimated ARC Coverage Larue County 2014 CornSoybeansWheat Olympic Avg Yield Olympic Avg Price$5.29$12.27$6.39 Olympic Avg Revenue$793$581$405 Revenue Guarantee (start)$682$499$348 Revenue Guarantee (end)$603$441$308

Baseline Scenario 2014 (per acre) $10.00 Soybeans $3.50 Corn $6.00 Wheat ARC Payout Corn Payment Soybeans Payment Wheat Payment 125 bu corn $67$25$0 150 bu corn $67$25$0 175 bu corn $67$25$0 Note: Assumed 143 bu corn, 47 bu soybeans, 74 bu wheat 2014; per base acre

Estimated ARC Coverage Larue County 2015 CornSoybeansWheat Olympic Avg Yield Olympic Avg Price$5.29$12.27$6.56 Olympic Avg Revenue$740$568$444 Revenue Guarantee (start)$637$489$382 Revenue Guarantee (end)$563$432$337

Baseline Scenario 2015 (per acre) $10.00 Soybeans $4.00 Corn $5.75 Wheat ARC Payout Corn Payment Soybeans Payment Wheat Payment 125 bu corn $48$7$2 150 bu corn $48$7$2 175 bu corn $48$7$2 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat 2015

Med-Low Price 2015 (per acre) $8.88 Soybeans $3.50 Corn $5.00 Wheat ARC Payout Corn Payment Soybeans Payment Wheat Payment 125 bu corn $63$48$ bu corn $63$48$ bu corn $63$48$38 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat 2015

Low Price Scenario 2015 (per acre) $7.75 Soybeans $3.00 Corn $4.25 Wheat ARC Payout Corn Payment Soybeans Payment Wheat Payment 125 bu corn $63$48$ bu corn $63$48$ bu corn $63$48$38 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat 2015

ARC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat CornSoybeansWheat 2014 $67$25$ $48$7$ $15$22$ $ $0 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat

PLC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat CornSoybeansWheat 2014 $23$ $ $ $ $0

ARC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat Yields Drop 20% in 2017 CornSoybeansWheat 2014 $67$25$ $48$7$ $15$22$ $44$47$ $0 Note: Assumed 145/48/66 bu corn/beans/wheat 2015,16,18; 116/38/53 bu corn/beans/wheat 2017

PLC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat Yields Drop 20% in 2017 CornSoybeansWheat 2014 $23$ $ $ $ $0

ARC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat Low Price Scenario 2017 CornSoybeansWheat 2014 $67$25$ $48$7$ $15$22$ $51$47$ $0 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat

PLC Payout (per acre) $4.00 Corn $10.00 Soybeans $5.75 Wheat Low Price Scenario 2017 CornSoybeansWheat 2014 $23$ $ $ $80$23$ $0

Sharp Increase and then Decrease in Prices CornSoybeansWheat 2014 $3.50$10.00$ $4.00$10.00$ $5.00$12.25$ $4.00$10.00$ $3.50$8.88$5.00

ARC Payout (per acre) Sharp Increase then Decrease in Prices CornSoybeansWheat 2014 $67$25$ $48$7$ $ $0$21$ $9$15$31 Average $25$14$9 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat

PLC Payout (per acre) Sharp Increase then Decrease in Prices CornSoybeansWheat 2014 $23$ $ $ $ $23$0$27 Average $9$0$5

Major Drop in Prices CornSoybeansWheat 2014 $3.50$10.00$ $4.00$10.00$ $3.50$8.88$ $3.00$7.75$ $3.00$7.75$4.25

ARC Payout (per acre) Major Drop in Prices CornSoybeansWheat 2014 $67$25$ $48$7$ $59$50$ $50$47$ $33$22$34 Average $51$30$22 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat

PLC Payout (per acre) Major Drop in Prices CornSoybeansWheat 2014 $23$ $ $23$0$ $80$23$ $80$23$67 Average $41$9$32

Even Worse Prices CornSoybeansWheat 2014 $3.50$10.00$ $3.50$8.88$ $3.00$7.75$ $2.50$6.62$ $3.00$7.75$4.25

ARC Payout (per acre) Even Worse Prices CornSoybeansWheat 2014 $67$25$ $63$48$ $58$50$ $49$45$ $22$3$33 Average $52$34$29 Note: Assumed 143/47/74 bu corn/beans/wheat 2014; 145/48/66 bu corn/beans/wheat

PLC Payout (per acre) Even Worse Prices CornSoybeansWheat 2014 $23$ $23$ $80$23$ $138$62$ $80$23$67 Average $69$21$48

Agricultural Economics Discussion ARC vs PLC ARC vs PLC → Corn → Corn → Soybeans → Soybeans → Wheat → Wheat PLC better with pessimistic prices. PLC better with pessimistic prices. PLC + SCO may be better overall PLC + SCO may be better overall Low base acre % favors PLC + SCO Low base acre % favors PLC + SCO