ARC-CO and PLC Payment Indicator for 2014 Crop Year: December 2014 WASDE U.S. Yield and Price

Click here for PDF Version of article (with Tables & Figures)

by: Carl Zulauf, Professor, Ohio State University, and Gary Schnitkey, Professor, University of Illinois at Urbana-Champaign

This article provides payment indicators for ARC-CO and PLC based on the December 10, 2014 WASDE U.S. yield and U.S. price projections for barley, corn, oats, long grain rice, medium (and short) grain rice, sorghum, soybeans, and wheat.  Previous estimates were made using the August, September, and October WASDEs (World Agricultural Supply and Demand Estimates).  Peanuts is added in this article.  The term, payment indicator, is used because the estimates use U.S. yield not the county yield used by ARC-CO or farm payment yield used by PLC.  Thus, the indicators are not estimates of payments an individual FSA farm will receive.  Nevertheless, they should help frame perspectives and questions regarding crop program choices.

Calculation of Estimated Payment Indicators: ARC-CO makes a payment if county revenue is below 86% of the county’s benchmark revenue.  Benchmark revenue is obtained by multiplying 5-year Olympic moving averages (removes high and low values) of county yield and U.S. crop year price.  ARC-CO payments are capped at 10% of the benchmark revenue.  PLC makes payments when U.S. crop year average price is less than the crop’s reference price.  Congress specified the reference price in the 2014 farm bill.

This article adds payment indicators for peanuts.  Peanuts are not reported in WASDE.  The U.S. yield estimate for peanuts is from the U.S. Department of Agriculture’s November Crop Production report.  Estimates for 2014 crop year low, mid, and high prices are obtained using the average of the prices reported by the National Agricultural Statistics Service for the first 4 months of the peanut crop year, which begins August 1; the crop year average price reported for peanuts, and regression analysis.  The period of analysis is the 2004 – 2013 crop years.  The regression equation is used to estimate a projected 2014 crop year price.  The low and high price is minus and plus one standard error of the regression equation.  Explanatory power of the regression equation is 83%.

Last, the estimated per acre payment are adjusted for the program parameter that ARC-CO and PLC payments are made on 85%, not 100%, of program base acres (ARC-IC pays on 65% of base acres).  Please note, this adjustment is new to the December estimates and was not made in the August, September, and October estimates.

U.S. per acre Payment Indicator for 2014 Crop Year – December WASDE Mid-Price:  Table 1 contains the December 2014 WASDE price projections for the 2014 crop year.  The mid-price projections indicate payments by ARC-CO for corn, sorghum, and wheat and by PLC for corn, long grain rice, and sorghum (see Figure 1). PLC payment is also indicated for peanuts, which has the highest indicated payment at $125 per acre.  The next two highest are PLC for long rice at $76 per acre and ARC-CO for corn at $67 per acre.  In general, payment indicators have changed relatively little since the September estimates.  Remember, actual payments depend upon county yield for ARC-CO and FSA payment yield for PLC.

U.S. per acre Payment Indicator for 2014 Crop Year – December WASDE Low Price:  In addition to the payments indicated at the December WASDE mid-price, payments are indicated for barley (both programs) and soybeans (ARC-CO) at the WASDE low price projections (see Figure 2).  Also, ARC-CO is estimated to make payments for peanuts.  They only crops with no payment indicated are oats and medium / short grain rice.

At a $3.20 crop year price (low price estimate), payment for corn from ARC-CO and PLC are reasonably close.  They equal if price is $3.10.  Similar payments using U.S. yield means relative payments by ARC-CO and PLC will depend importantly on the relationship between the yields that affect payment:  farm program yield for PLC and actual and benchmark county yield for ARC-CO.  Moreover, as crop year price increases above (decreases below) $3.10 for corn, the higher paying program for 2014 will tend toward ARC-CO (PLC), especially as price moves further from $3.10.

Note, payment per acre by ACR-CO for corn is $67 per acre for both the WASDE low price and mid-price.  The reason is that, even though price is lower, ARC-CO’s payment is capped at 10% of ARC benchmark revenue.  In contrast, PLC has a much higher cap, which is determined by the difference between the reference price and loan rate.  Again, remember, actual payments depend upon county yield for ARC-CO and FSA farm payment yield for PLC, and payment is made on only 85% of base acres (65% for ARC-IC).

U.S. per acre Payment Indicator for 2014 Crop Year – December WASDE High Price:  Payments are indicated for only 4 crop-program combinations:  corn – ARC-CO; long grain rice, peanuts, and sorghum – PLC (see Figure 3).  Because payment is indicated at the WASDE high price, likelihood of payment for these crop-program combinations is higher.  However, payment is not 100% certain as U.S. crop year price can end up higher and, for ARC-CO, high county yields can offset low prices.

Potential Total 2014 Crop Year Payments:  In policy it is important to think at both the micro (individual farm or acre) level and macro (national) level.  However, given the uncertainty surrounding 2014 crop year price (and to some degree yield) and the critical unknown issue of which program farms will choose, we think it is too early to provide estimates of total farm program payments.  However, simple sensitivity assessments suggest total payments could exceed or be less than the $4 billion plus in direct payments that farmers gave up in the 2014 farm bill.  Based on current information, corn is likely to account for the bulk of payments due to its large program base acres and a 2014 mid-price estimate that is 36% below the Olympic average price for the 2009-2013 crop years.

Summary Observations

►  Whether or not ARC-CO or PLC is likely to make a payment for the 2014 crop year varies by crop.

►  As of December 10, 2014, the crops most likely to receive a payment by either ARC-CO or PLC are corn, peanuts, long grain rice, and sorghum.

►  Lower prices increase the probability and size of payments; however, because of the 10% cap on ARC-CO’s payment, lower prices will increase payments by ARC-CO for corn only slightly.

►  Sizeable differences in estimated indicator payments at the low and high WASDE price projections needs to be underscored.  The current range on U.S. crop year price projections bracket both high payments and no payments.  Simply put, it is too early in the 2014 crop year to talk with much certainty about the size of payments.  It is reasonable to say that 2014 crop year payments may occur, that they may be large if the right combination of price and yield materializes, that they will likely vary by crop, and that they will likely vary by program for a given crop.

►  Sizeable differences in estimated indicator payments at low and high WASDE prices mean that yield will be an important factor impacting 2014 payments.  County yield is a factor in determining 2014 payments by ARC-CO while payment yield is a factor in determining 2014 payments by PLC.

►  Comparison of payments under the current low, mid, and high prices in the December 2014 WASDE illustrate two of the important tradeoffs that need to be considered when choosing between ARC-CO and PLC.  PLC pays if price is below the reference price.  ARC-CO pays on price and yield declines relative to a benchmark revenue that can occur from any level of revenue.  Thus, for PLC to pay more than ARC-CO, U.S. crop year price must be below the reference price.  Moreover, U.S. crop year price will have to be below the reference price for more than one year and likely more than two years because of the high revenues of the last 5 years, which means that the ARC benchmark revenue starts from a relatively high level.  The second tradeoff is that the cap on payments is smaller for ARC-CO than for PLC.  Thus, potential payment by PLC is higher, although actual payment may be smaller because crop year average price is not below or only slightly below the reference price.  Preferences among these two tradeoffs are important considerations in determining which program to choose.

This publication is also available at



Table 1. Crop Year Price Estimates in December 2014 WASDE




















Long grain rice

price/100 pounds




Short/Medium grain rice

price/100 pounds



















Peanuts (estimated – see text)

$ / pound



















Making the Base Acre Reallocation Decision

By: Chris Bruynis, Assistant Professor and Extension Educator

Questions have been asked if there is any way to determine which base acres are the most valuable under the 2014 Farm Bill.  Historically direct payments were greatest for corn, followed by wheat, and then soybeans. But with direct payments eliminated with the current farm bill, farmers are looking for guidance in making the decision between retaining their existing base acres or reallocating them to reflect the 2009-2012 actual planting acres. This article will attempt to provide some guidance based on potential Agriculture Risk Coverage – County (ARC-CO) and Price Loss Coverage (PLC) payments.  The Agricultural Risk Coverage – Individual will not be discussed, but maximum program payments would be similar to the ARC-CO since it follows the same 10% revenue cap rules. Click to download Making the Base Ace Reallocation Decision article

Cropland Value, Cash Rent and Crop Input Outlook 2015

By: Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental and Development Economics

Cropland values in Ohio have increased again in 2014. Data from the Oho National Ag Statistics Service (NASS) shows an increase of 8.9% for bare cropland in Ohio for 2014. According to NASS data, bare cropland averages $5650/acre, up from $5190/acre the previous year.

The Western Ohio Cropland Values and Cash Rents Survey (AEDE) conducted in January 2014 found that the value of average western Ohio cropland in 2014 would be $7142 per acre. Other data from this survey can be found at:

The Chicago Federal Reserve Bank and Purdue University both conducted land value surveys in 2014. The Chicago Fed survey (October 1) of bankers found Indiana land values of “good” farmland increased by 3% year-over-year (the entire 7th Fed District decreased 2%) while Purdue (June 30) found that the Indiana statewide annual increase in cropland values ranged from 6.4 to 7.1% depending on the productivity of the farmland.

Crop profit margins were low to negative in 2014 as lower crop prices coupled with sticky input costs to create a low margin environment. This past eight year period (2006 through 2013) has been one of the most profitable periods in the last 50 years of crop production. These profit streams and healthier balance sheets have led many farmers to seek an investment option for these profits and many have chosen to invest in land.

So all of this begs the question, “Where are land prices headed in 2015?” Low crop profit margins will put downward pressure on farmland prices. Still healthy equity positions and stable interest rates will lend positive support for farmland values in 2015. Financial health in the sector may counter-balance the effects of lower profits to underpin land values. Which of these opposing fundamentals is the strongest will determine which direction land values move in 2015. At present, these competing fundamentals suggest relatively flat cropland values in 2015.

Variable costs for Ohio’s major field crops for 2015 will be similar to 2014. Variable costs for corn for 2015 are projected to be $376 to $460 per acre. Variable costs for 2015 Ohio soybeans are projected to range from $209 to $229 per acre. Wheat variable expenses for 2015 are projected to range from $188 to $232 per acre.

Returns to land for Ohio corn (Gross Revenue minus all costs except land cost) are projected to be -$43 to $124/acre for Ohio Corn in 2015 depending on the land production capabilities. Budget projections for 2015 soybeans show returns to land to be $10 to $168. Wheat budget projections for 2014 find returns to land to be between $25 and $159 per acre. This is assuming current prices of inputs and present December, November and September 2015 futures prices (less basis), respectively. These projections are based on OSU Extension Ohio Crop Enterprise Budgets available online at:

Similar fundamentals are at play for cash rental rates. Limited profitability will pressure rental rates to move lower however strong equity positions will continue to support rental rates. As with land values, these competing fundamentals will likely cause rental rates to remain relatively flat compared to last year.

Crop input costs offer a mixed bag of change. Energy costs are predicted to be lower. Seed costs will range from modestly lower to modestly higher depending on seed company, genetic package and newness of hybrid or variety. Crop protection chemicals will likely follow the same pattern as most products will increase in price while some (generic glyphosate in particular) will decrease.

Fertilizer continues to be the most volatile of the crop input costs. Most fertilizer products are at slightly higher prices compared to last year at this time. Production issues, short gas supplies, plant turnarounds and political unrest have lent support to higher prices. Lower profit margins will compete with logistical concerns and strong equity positions to create the potential for relatively flat fertilizer markets in 2015.

At this point there is little evidence to suggest that “normal” winter to spring price patterns will not occur. This would suggest reasonably flat market prices then increasing as demand ramps up into late winter/early spring. Even with this potential scenario likely, low projected crop profit margins will likely restrain demand and restrict fertilizer price increases to relatively small percentage increases.

Weaker than expected demand as a result of low projected crop profit margins could change this scenario if this weaker than expected demand pressures sellers to lower prices to stimulate demand.

Outlook information presented here was developed with data from AEDE research, the Energy Information Administration, USDA, other Land Grant research, futures markets and retail sector surveys. While gauged to the best of this author’s capabilities, forward looking statements contained in this article may prove to be incorrect due to changes in supply and demand and other political and economic related events.

Natural Resources Program Sign-up Now Available for Ohio Farmers and Forest Land Owners

COLUMBUS, OH, Dec. 9, 2014 – The U.S. Department of Agriculture’s Natural Resources Conservation Service (NRCS) is accepting new applications for the Environmental Quality Incentives Program (EQIP) from Ohio farmers and non-industrial private forest land owners who want to improve the natural resources on their land.  Applications received by Friday, January 16, 2015, will be considered for funding this fiscal year.

A conservation plan created by the NRCS local conservationist and the EQIP applicant provides a foundation for the EQIP application.  The conservation plan includes the natural resource concerns on the land under consideration, the conservation practices that will improve or enhance natural resources on that land, the schedule for carrying out the conservation practices in the plan, and the cost of the conservation practices.

For example, soil erosion caused by water leaving a bare field may negatively impact both soil and water quality.  A conservation plan addressing these natural resource concerns documents the location and extent of this concern and the conservation practice or practices the farmer choses to put in place to improve soil and water quality.  Several conservation practices used together as a management system provide more environmental benefits than a single conservation practice.  In this example, the farmer may elect to use a no-till planting system to minimize soil erosion, plant a cover crop to improve soil quality, and use drainage water management structures to control sub-surface drainage and improve water quality.

Ohio NRCS received reduced funding for EQIP this year which will intensify the competition for application selection. Since EQIP is a voluntary program, an applicant may select to do as much or as little as they chose to address their natural resource issues.  However, applications with multiple conservation practices provide a greater environmental benefit, increasing an application’s chance for selection.  EQIP applications with conservation plans containing multiple conservation practices used in a system will outcompete applications without robust conservation plans.

Applications for EQIP submitted by entities, such as farmers applying as a corporation, must register with the Central Contractor Registration (CCR), a process that can take up to three weeks.  Information about CCR requirements, including obtaining a Data Universal Number System (DUNS) number, is posted on the NRCS website at

For more information about EQIP or other technical or financial assistance programs offered by NRCS, please contact your local service center:


Christina Coulon

Public Affairs Specialist – Columbus, Ohio

Natural Resources Conservation Service

United States Department of Agriculture

Tel: 614-255-2471



Good News for Ohio Farmers! Tax Extender Bill Passes

By David Marrison. OSU Extension Educator

The United States Senate passed the Tax Extenders Bill (HR 5771: Tax Increase Prevention Act of 2014) by a vote of 76-16 on Tuesday, December 16 and was signed into law by President Obama on December 19, 2014.  This bill was previously passed by the House of Representatives by a vote of 378-46 on December 3, 2014. This bill “extended” a number of key tax relief provisions that expired either at the end of calendar year 2013 or during 2014. In total the bill includes 72 individual, business and energy tax extenders.  It should be noted the extenders are only good for 2014.  Congress will have to go back to the drawing board in 2015 to see if they wish to extend any of the tax extender provisions for 2015 and beyond.

The two major portions of this legislation which farmers, and other business owners, were waiting anxiously for include the extension of bonus depreciation and Section 179 Expensing.  This legislation includes a one-year retroactive extension of the 50 percent bonus depreciation for new property acquired and placed in service during 2014 (2015 for certain property with a longer production period).  The legislation also extended the Section 179 Expensing.  Many farmers have been using Section 179 expensing to depreciate new and used equipment in the year of purchase.  However, in 2014, this deduction was set to drop to $25,000 with phase-out provisions kicking in for any dollars spent over $200,000.  The tax extender legislation returns the Section 179 Expensing level to $500,000 with the phase-out provisions not kicking in until $2 million.  The special rules that allow expensing for computer software, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property also were also extended through 2014.

Some additional tax extenders which have an agricultural interest include:

  • Extension of special rule for contributions of capital gain real property made for conservation purposes. The provision would extend through 2014 an enhanced deduction for contributions of capital gain real property for conservation purposes. This provision also would extend the enhanced deduction for certain individual and corporate farmers and ranchers. A qualified conservation contribution is a contribution of a real property interest to a qualified organization, exclusively for conservation purposes.
  • Extension of incentives for biodiesel and renewable diesel. The provision would extend through 2014 the $1.00 per gallon production tax credit for biodiesel, and the small agri-biodiesel producer credit of 10 cents per gallon. The provision also extends through 2014 the $1.00 per gallon production tax credit for diesel fuel created from biomass.
  • Extension of special allowance for second generation biofuel plant property. The provision would extend through 2014 50 percent bonus depreciation for cellulosic biofuel facilities.

Some of the most popular tax extenders important to the American taxpayer include:

  • Extension of above-the-line deduction for qualified tuition and related expenses. The provision would extend through 2014 the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
  • Extension of deduction for certain expenses of elementary and secondary school teachers. The provision would extend through 2014 the above-the-line deduction for the eligible expenses of elementary and secondary school teachers. The deduction is capped at $250 and covers expenses that otherwise would have to be itemized.
  • Extension of tax-free distributions from individual retirement plans for charitable purposes. The provision would extend through 2014 the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from Individual Retirement Accounts (IRAs. The exclusion may not exceed $100,000 per taxpayer in any tax year.
  • Extension of credit for energy-efficient new homes. The provision would extend through 2014 the tax credit for manufacturers of energy-efficient residential homes. An eligible contractor may claim a tax credit of $1,000 or $2,000 for the construction or manufacture of a new energy efficient home that meets qualifying criteria.

Details about the legislation can be found at:

New Program to Manage Financial Risk Available to Farmers

By: Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics and Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics

Was 2014 a profitable year for your farm? Which enterprises were profitable?  Which were not?  How does your farm compare to similar farms in efficiency?  In profitability?  What does the competition look like?   Recent volatile feed, grain, milk, land and rental markets have created uncertain profit margins and financial security concerns.

Completing a farm financial analysis is an effective way for farms to know their costs of production, profitability, and financial ratios. Farms can track year-to-year changes, identify problems early, and benchmark against peer farms as well as control information critical to effective participation in risk management programs.

The Ohio Farm Business Analysis and Benchmarking Program can help farms answer these questions by completing a financial analysis of the whole farm and each enterprise.  An analysis will provide a farm with:


Year’s Beginning Balance Sheet

Income and Cash Flow Statements

Year’s Ending Balance Sheet

Financial Standards Measures

Enterprise Analysis including:

-Cost of Production

-Benchmarking Reports

Can’t go back and find the information needed to analyze 2014?  Through the Ready, Set, Go program, you will learn what financial and production information to keep and how to collect it in real time.   By the end of 2015 you will have everything needed to analyze how your farm business performed and will learn how to use your analysis to manage your farm and your farm’s risk.

Choose from classes, on-line webinars or videos along with personal assistance to guide you through the year from start to finish with a Farm Business Analysis.   Cost for the program is $100 per farm which will include up to 3 on-farm consultations.

For more information, contact Dianne Shoemaker at or Christina Benton at 330.533.5538




Ohio Field Crop Enterprise Budgets – 2015 Projections

By: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics

Preliminary Enterprise Budgets for 2015 Ohio field crops have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics.

Yield projections are based on the Ohio trend line yield using USDA National Ag Statistic Service (NASS) yield estimates for the period 1970 through 2014. This yield projection is used as the average (middle column) yield in budget projections (Ohio corn yields are projected to be 163.1 bu/acre using this data). Low and high yield scenarios are located in columns to the left and right of the average column and are set at 20% lower and 20% higher than the calculated Ohio average trend yield.

Updated Enterprise Budgets can be viewed and downloaded from the following website:

Enterprise Budget projections updated for 2015 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); Wheat-Conservation Tillage, (Grain & Straw).

Our enterprise budgets are compiled on downloadable Excel Spreadsheets that contain macros for ease of use. Users can input their own production and price levels to calculate their own numbers. These Enterprise Budgets have color coded cells that allow users to plug in numbers to easily calculate bottoms lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers. Budgets include a date in the upper right hand corner of the front page indicating when the last update occurred.

Grain Marketing in Challenging Times Webinar Series Offered

Grain marketing will be increasingly more important to future success of the farm business in the next few years due to tighter profit margins associated with lower grain prices. Ohio State University Extension and the OSU Department of Agricultural, Environmental and Developmental Economics are offering a grain marketing series titled Grain Marketing in Challenging Times. This series, offered through a weekly webinar for five weeks, will allow farmers to learn how to set critical grain pricing targets and strategies from the comfort of their home. The series of classes will focus on using futures and options; making a marketing plan to fit your farm business; utilizing crop insurance as a grain marketing tool; and financial statement analysis in relationship to your grain marketing plan.

The series will kick off on Tuesday, February 3 starting at 11:30 am and running through 1:30 pm and will cost $69.00. The class will meet virtually on five consecutive Tuesdays (February 10, 17, 24 and March 3) and will host three follow-up programs on grain market outlook: one after planting, one pre-harvest and one post-harvest (dates TBA during the class).  Each webinar will be recorded and made available to class participants to review either as make-up for missed classes or to listen again to capture the more important concepts discussed. Chris Bruynis, Assistant Professor and OSU Extension Educator will be the host for the class and Matt Roberts, Associate Professor, OSU Department of Department of Agricultural, Environmental and Developmental Economics will be the instructor. To register for the class, go to  Registration will close on January 28, 2015. For more information go to and look under agriculture and natural resources for the flyer or email Chris Bruynis at  Click to access the Grain Marketing Flyer.