The 2014 Farm Bill is very complex and producers will have multiple decisions to make. It is imperative that you familiarize yourself with the available options. Please make plans to attend one of the local area producer meetings that are being presented by UNL Extension and FSA. Gage County’s meeting will be held on Thursday, Dec. 11 from 9 a.m. to noon at 4-H Inc. on the Gage County Fairgrounds.
Over the next few weeks I would like to give you a high level overview of each program, starting with the Price Loss Coverage Program, or PLC. The key word here is price, as this program offers protection against fluctuations in price. This is also the default program. If you fail to make a program election, you will automatically be enrolled in the PLC program, however you will be required to sit out for the 2014 crop year and will not be eligible for program benefits until the 2015 crop year.
Under the PLC program, payments are issued when prices for covered commodities fall below the reference prices. This is similar to the old Counter Cyclical payments that were in effect during the last Farm Bill. The reference price for corn is $3.70, $8.40 for soybeans, and $5.50 for wheat. These prices are set for the life of the Farm Bill.
These reference prices will be compared against either the higher of the 12-month national Marketing Year Average (MYA) or the loan rate. The payment rate will be the difference between the reference price and the effective price. We then take the payment rate times the payment yield, times 85% of the base acres on the farm to calculate the total payment.
The PLC program pays on base acres, therefore your actual planted acres are irrelevant. Let’s look at a simplified example. John Farmer has 100 acres of wheat base on his farm and he plants it all to corn. His PLC yield for wheat is 30 bushels per acre. The Marketing Year Average for wheat ended up at $5.00.
The reference price for wheat is $5.50, making the difference $0.50. We take $0.50 x 30 bu/acre PLC yield x 85 percent of 100 acres for a total payment of $1,275. What makes this example so interesting? John Farmer collected a payment on wheat even though he planted his entire farm to corn.
Under the PLC program, you also have the option to take a Supplemental Coverage Option (SCO) through RMA so be sure to visit with your Crop Insurance Agent if you feel that PLC is an option for you.