Did High-Yield States Elect More PLC

Published on: 15:08PM Jun 18, 2015

The FSA released information on Monday that showed the amount of farms and acres electing ARC and PLC on both a national and state basis for each covered crop. I was curious if those states with very high yields (such as Missouri and Illinois) in 2014 would elect more PLC than other states since they would not get an ARC payment for 2014 and might get a small PLC payment.

The answer is a little bit of a mixed bag. Missouri corn growers elected PLC on 42% of their corn base acres and ARC on the rest. Kansas elected PLC on 13% of their acres. Illinois and Indiana each elected PLC on only 2% of their corn acres.

Iowa and Michigan farmers were guaranteed a much larger ARC payment than Illinois and Indiana, so your assumption would be that these farmers would elect even more ARC. However, both Iowa and Michigan corn farmers elected ARC on only 97% of their acres which is 1% lower than Illinois and Indiana.

I think the key reason for these farmers electing ARC versus PLC is the high Olympic Average price for the 2015 crop. We know that this price will be at least equal to the $5.29 price for 2014 (due to the 2009 price of $3.70 dropping off the average and the 2014 crop MYA price cannot be lower than $3.70 reference price). This implies a revenue guarantee for ARC of $4.55 which is much higher than the current FSA 2015 MYA price of $3.50. Therefore, in most cases, the actual MYA price for 2015 would have to drop under $3 for PLC to pay more than ARC.