Big Choices Loom for U.S. Farmers: K-State’s Barnaby Answers Questions about New Farm Bill

Farmers have important choices to make in light of the new farm bill. One of the decisions is the choice between two safety net programs, the Agriculture Risk Coverage or Price Loss Coverage. The Agriculture Risk Coverage covers what farmers would have lost before normal crop insurance is added, and offers protection if crop revenue is to fall more than 14 percent an average benchmark. Price Loss Coverage will give farmers payments if their crop prices fall below a predetermined “reference” price. “ARC is effectively a free revenue insurance guarantee and the PLC is a free put, with the government paying the entire premium costs,” said Art Barnaby, who is a risk management specialist with K-State Research and Extension. “At current crop prices, the market is saying the ARC has more value than PLC, but that does not guarantee that ARC will pay more than PLC on corn and soybeans.” He noted that it isn’t clear which is the best plan, because farmers sign up only later this fall. “The program that will pay the most will be determined by price and yield. By sign-up, we will know the wheat yield and half of the marketing year average wheat price on the 2014 crop. We will also have a good estimate of the yields for spring-planted crops, so all this could change.” 

Read more here!

Connect with Us