Gary Schnitkey of the University of Illinois just released an excellent analysis of the projected crop payments under the old ACRE program or the proposed Senate ARC or House RLC or House PLC programs. As most know, under the old Farm Bill, a farmer could elect to participate in the ACRE program in return for giving up 20% of their direct payments. With the new Farm Bill (either Senate or House), the ACRE program goes away. We had many wheat farmers in our area get almost a $100 per acre payment about three years ago from this program.
Under the new Farm Bill proposals, the farmer can elect either a revenue option (Senate ARC or House RLC) or a price option (House PLC) that will kick in if prices get low enough. Gary ran some numbers for an Illinois sample farmer with an average yield of 182 bushels per acre. Gary assumed a long-term trend price of $4.50, $4.00 and $3.50 for each year from 2013 to 2016 and then crunched the numbers to determine respective payment amounts.
At the $4.50 level, the only program that made any payments was ACRE. Over the 4 year period, $117 of total per acre payments would be collected by the farmer over the four years. None of the other programs made any payments.
At the $4.00 level, ACRE would pay out $289, ARC $110, RLC $50 and PLC zero.
At the $3.50 level, ACRE would pay out $498, ARC $291, RLC $248 and PLC $100.
As you can see for corn farmers, the old ACRE program is much better than any of the new programs offered. For other farmers, such as peanut and rice farmers, the difference may be much smaller or even tilt toward the new programs, but for corn, bean and wheat farmers, it appears the new programs will pay-out much lower than the old ACRE program and in many cases, there will be no pay-out, even with lower prices.
Paul Neiffer, CPA
Tags: farm payment options