Farm Management Minute: PLC/ ARC decisions

Uncertain times have led to difficult decisions for agriculture producers. Grain prices continue to fall, livestock prices continue to rise, and the 2014 Farm Bill has many twists and turns to it. I wish I had a crystal ball to forecast the future of agriculture prices, weather, and when this roller coaster ride will end. Lacking a crystal ball, I can only share information that I know for certain.

One thing I know for certain, when it comes to the new PLC/ARC programs they are complex; we cannot let that complexity freeze the decision making process. I have attended a number of meetings about PLC/ARC and I know one thing-doing nothing will hurt your operation! Why will it hurt? The farm/ranch will be locked into base acres that may not fit what is being planted today, and the yield will be locked in at 2008 levels, the last time producers could update. If yield averages were not updated in 2008, the averages from 1996 will be used. I think every farm has made progress on yields/acre since 1996, so it is in a producer’s best interest to update production.

The second thing I know for certain is by doing nothing the farm will automatically be enrolled in the PLC program. That doesn’t sound so bad, does it? The operation that chooses to do nothing will come in with the base acres from 2008, the production from 2008, and, if there is a payout for 2014, the operation is ineligible. Payment would not start for the operation until the 2015 crop year. At this point in time, there is a good chance corn would payout on PLC for 2014; by making no choice, the producer just lost income to offset the low commodity prices.

What is the last thing I know for certain? There are two options when deciding how to use PLC and ARC for the operation. The first option is to enroll in the programs as a safety net for the farm. The second option is to enroll in the programs to receive the maximum payments. With either decision, there are a number of online resources to help with the decision. Farm Service Agency has a calculator at www.fsa.usda.gov. Click on the Agricultural Risk Coverage link under Hot Topics. Farm Credit Services of America has a number of links at www.fcsamerica.com. Click on the 2014 Farm Bill link.

Again, I have no cut and dried answers, just some areas a farmer may want to evaluate. If any producer would like more information on how the S.D. Center of Farm and Ranch Management can help your operation, contact the SDCFRM office or any of our instructors, call 1-605-995-3098 or email us at sdcfrm@mitchelltech.edu.