The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Updated Average Marketing Prices 2013/14
Apr 30, 2014
The USDA releases updated prices on almost all major (and many minor) commodity crops at the end of each month. The latest report was released today. Since ARC will be based upon the average price received by farmers for their crop for the marketing year, we can take these monthly reports and obtain an average price for each crop by marketing year. For example, the corn and soybean marketing year ends on August 31 of each year. Taking the monthly price received by farmers for September 2013 until April 2014, for corn, we arrive at an estimated average price of $4.60 to date. The April estimated price is $4.73 and will be updated to the final number next month, however, it should not vary by much more than a penny or so.
For soybeans, the average price is $13.23 and for wheat, the average to-date price is $6.85. On Monday of this week, I posted my ARC and PLC analysis. The average prices I used for that analysis was (1) corn $4.65, (2) soybeans $13.25 and (3) wheat $6.50. As you can see, I am within 5 cents on corn, 2 cents on soybeans, but off by 35 cents on wheat. The wheat marketing year will end on May 31, 2014, so there is only one more month to report, therefore, the final wheat number should be between $6.85 and $6.90. Prices have rallied, but it would take an average price over $7.50 for May to get the overall average above $6.90.
Also, the final average marketing price is based upon a weighted monthly price, therefore, there could be a slight difference between simply taking an average of the 12 month prices versus the final price. For example, taking the twelve month prices for the 2012 corn corp year resulted in a monthly average of $6.8825 and the final number used was $6.89. As you can see, not too much of a difference.
If you sign up for ARC, it will be fairly easy for you to plug in these monthly prices into a spreadsheet and therefore, estimate how much of an ARC payment may be due based strictly on price. The final payment will incorporate county yields (in most cases), so if yields are higher than normal, your payment would be less and vice versus.
Remember, this does not start until the 2014 crop year begins and any payment to be received will not be paid until after October 1, 2015. I will keep you posted on final average marketing prices.