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Purdue experts detail crop coverage options
 


By EMMA HOPKINS
Farm World Intern-Indiana

WEST LAFAYETTE, Ind. — As the deadline to choose a farm bill crop coverage option is imminent, Purdue University’s Center for Commercial Agriculture (CCA) offered a webinar last week to address coverage option decisions and demonstrate the University of Illinois-UC Online Decision Aid spreadsheet.
Of primary concern for most farmers is whether to reallocate base acres and update yield payment before the Feb. 27 deadline.
“Payments per acre in the central Corn Belt for corn are likely to be higher than soybeans and wheat, so we recommend reallocating to corn for those producers,” said webinar panelist Jim Mintert, CCA director. “For other crops, if your historic base is large, you should really compare potential payments across all three crops.”
The panelists, which also included Michael Langemeier, associate director of the CCA and Roman Keeney, a Purdue associate professor in ag economics, recommended that producers who do not primarily produce corn should use the University of Illinois-UC Online Decision Aid spreadsheet to make their decision according to their specific crops and locations using the decision aid spreadsheet.
Panelists also recommended that yields are updated. Payment yields under the new bill are determined by a formula set in the farm bill legislation, in which yield equals 90 percent of the average yield per planted acre from 2008 to 2012.
On selecting a coverage plan, which needs to be decided by March 31, the panelists highlighted each option briefly.
The coverage options for this bill are the Agricultural Risk Coverage-County (ARC-C), the Agricultural Risk Coverage-Individual (ARC-I) and the Price Loss Coverage (PLC) option. The webinar focused the ARC-C and PLC options, as those are the ones applicable to most farmers.
The coverage guarantee for the ARC-C and PLC options are both 85 percent while the ARC-I option guarantees 65 percent. The guarantee is based on average yield, which is calculated differently in each option. The ARC-C guarantee is equal to the sum of the average county yields for the year multiplied by the Marketing Year Average, multiplied by .85.
“The ARC-C option kicks in quickly, but is capped at 10 percent,” said Keeney. “Maximum payment occurs when actual county revenue equals 76 percent of the ARC county benchmark.”
In the PLC option, payment is determined by the price of a commodity falling below a reference point specific to each crop which are $3.70 for corn, $8.40 for soybeans and $5.50 for wheat.
The panelists said that both options, in general, favor corn according to future yield predictions. However, to get the best idea of which plan is right for a specific operation, they said farmers should use the University of Illinois-UC Online Decision Aid spreadsheet or other decision aid calculators by plugging different yields into the spread sheet and selecting particular crops.
For both options, coverage will take place on a five-year term and the choice of crop to cover, even if replanting occurs, is irrevocable.
When considering specialty crops such as popcorn and seed corn, the panelists said commercial yields could be used to determine payment, if the producer has an equivalent commercial yield. Otherwise, Langemeier pointed out, plugging possible yields into the spreadsheet would assist in that decision.
At the conclusion of the webinar, the economists urged producers to contact their Farm Services Agency office as soon as possible to assist in making decisions.
2/27/2015