FOR FARMERS CONSIDERING PAYMENT LIMIT IMPLICATIONS TO FARM PROGRAM DECISIONS

Lindsay Mitchell

Aug, 25, 2014  |  Today's News

A new article published last week by Carl Zulauf, The Ohio State University, and Nick Paulson, Gary Schnitkey, and Jonathan Coppess, The University of Illinois attempts to analyze farm program payment limits and provides some insight to get your thinking started on future farm program elections.

From the article:

  • Payment limits remain a controversial, intensely-debated farm policy issue.
  • From a farm management and ownership perspective, decisions regarding the creation of crop program payment entities needs to be made with due and careful consideration of business and legal implications.  It is not a decision that should be made quickly or lightly and should include discussions with FSA and experts in the legal dimensions of payment limits.
  • Payment limits could be a risk management consideration under the 2014 farm bill because any program that makes payments on yield, price, and revenue declines can make large payments.
  • Because ARC-CO has a 10-percentage-point limit on its payment range (76% to 86%), maximum payment per program acre is notably smaller under ARC-CO than under PLC.
  • Thus, payment limits likely become more of a consideration if PLC is elected.
  • A common argument heard by the authors for electing PLC is that downside price risk protection is larger for PLC than ARC.  Assessment of this advantage needs to consider the impact of payment limits. 
  • Last, from a broader policy perspective, supporters of payment limits have historically focused on tighter payment limits.  An implication of this comparison is that a potentially more important path is to focus on limiting a program's per acre payment by adjusting different payment parameters. 

Farm Doc Daily continues to be an excellent source of information related to farm policy and your upcoming 2014 Farm Bill options. 

We still expect the sign up deadline to be extended until sometime late this fall or into winter so you have time now to read up and begin thinking about the best options for you.