Economic Tidbits

Farm Program Payments Lower This Fall

Higher commodity prices mean farm program payments to Nebraska crop producers will be much lower this fall. Payment to farmers made this month reflect 2020 crop production and average prices for the 2020/2021 marketing year and will be made through either the Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) programs. The PLC program offsets price risk while the ARC protects against both price and yield risk or revenue shortfalls. Producers can choose to enroll acres in either program, but not both.

Figures released by the USDA Farm Service Agency (FSA) indicate that corn and soybean acres enrolled in PLC in 2020 will not receive payments because the average prices for both commodities exceeded reference prices. Wheat acres, however, will receive a PLC payment of $0.45 per bushel. The average wheat price ($5.05/bushel) was below the reference price ($5.50/bushel). Farmers in 88 counties enrolled wheat acres in PLC. UNL agricultural economist Brad Lubben estimates these payments could exceed $30 million statewide.

ARC payments will vary across counties and irrigation practice and are a function of the national benchmark prices and county yields. Corn producers in 14 counties will receive ARC payments ranging from $2.40 to $77.48 per acre. Most of these counties are located in the Panhandle or  southwestern regions of the state. Producers in 4 counties will receive ARC payments for soybeans ranging from $22.44 to $45.93 per acre. Wheat producers in 32 counties will receive ARC payments ranging from $2.11 to $38.74 per acre. And producers of sunflowers, oats, dry peas, and grain sorghum in a few counties will also receive ARC payments.

Farm program payments to Nebraska farmers exceeded $600 million just a few years ago. Payments made this fall will be significantly less, a reflection of the much-improved financial and market conditions for farmers in the last 12-18 months. For farmers, deriving their income from the market instead of farm programs is much preferred. Looking ahead to next year, commodity prices are currently projected to remain above levels necessary to trigger payments. Significant yield losses this fall or price declines during the remainder of the marketing year would need to occur to trigger payments. Barring any major unforeseen events, it appears payments on the 2021 crop made next October will be few and far between too.

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