Higher grain prices likely mean no government program payment availability, Kansas State University Research and Extension says.
Ascending grain prices are helpful to High Plains producers but the flip side is they may not be able to depend on government risk management programs as part of the their marketing plan.
A March 11 K-State Department of Agricultural Economics Extension publication noted the latest K-State marketing year average price estimates by K-State. The Feb. 28 Agricultural Prices report from the U.S. Department of Agriculture was four days after the invasion of Russia into the Ukraine. The high prices impact Agriculture Risk Coverage and Price Loss Coverage programs that producers use to help with their marketing plans and reduce risk.
The report, “MYA Price Estimates Updated for ARC and PLC Commodity Programs,” was prepared by Rich Llewelyn, Extension assistant, and G.A. (Art) Barnaby Jr., an emeritus professor of the Department of Agricultural Economics, K-State Research and Extension.
Despite the rapid and large increase in grain prices following the invasion, the increase in marketing year average prices might not have been as large as some producers expected, the report said. The marketing year for wheat is nearly completed as it began in June 2021 and goes to May 31, 2022.
In most years a larger portion of sales takes place in the first few months of the marketing year, the report indicated. This is also true of summer crops, which have a marketing year that began Sept. 1, 2021, which means nearly half of the marketing is completed for those crops. Using updated cash prices from the Feb. 28 report and futures prices throughout the upcoming marketing year allowed the department to estimate marketing year average prices for wheat, corn, grain sorghum and soybeans for the crops harvested in 2021. The department also made advance estimates for the 2022-2023 marketing year as producers completed their Agriculture Risk Coverage and Price Loss Coverage analysis that were due March 15.
K-State’s estimated 2021-2022 marketing year wheat price is $7.59 a bushel, which was up 10 cents from its most recent report. The department believes it is becoming a more reliable estimate with two-thirds of the marketing year completed. Monthly prices are weighted by monthly sales to determine the final marketing year average price and since more than 75% of the crop is usually marketed by now in most years, it is possible to view the estimate with increasing confidence. It should be noted that historical patterns do not always hold in the current year, the report indicated.
No PLC payment is likely to occur for the 2021-2022 wheat crop, with the marketing year average price well above the reference price of $5.50 a bushel.
K-State estimated marketing year average prices for the 2021-2022 marketing year for the fall-harvest crops are $5.56 a bushel for corn, $5.88 for grain sorghum and $12.93 for soybeans. The estimates, with now five confirmed months of pricing for the marketing year, should be getting more reliable and the changes were not too large from the previous month’s estimate.
Based on the estimated 2021-2022 marketing year average prices, there will be no PLC payment for any of the crops because prices are far above their respective effective reference prices for $3.70 a bushel for corn, $3.95 a bushel for grain sorghum and $8.40 a bushel for soybeans.
Farmers will need to multiply the payment rate times their farm-level approved Farm Service Agency yield times 85% times their base acres to generate their expected PLC payment for their farm. The PLC payment is subject to payment limits and sequestration cuts, as are ARC payments. The current estimates indicate there will be no PLC payments for the crops harvested in 2021. Similar results are forecast for producers who are in counties that have an average yield and use the five-year Olympic average. K-State’s price estimates would generate no ARC payments for the crops in counties with a 2021 “average” county yield for which payments would be made this October.
The estimated 2022-2023 price for what is $8.84 a bushel, and corn is $5.40 a bushel.
The report noted grain sorghum is $5.86 a bushel and soybeans are $12.96 a bushel. At those prices, K-State is not projecting PLC payments for those commodities in October 2023 or for ARC payments with those prices, unless yields were significantly below average next year.
The report notes futures prices continue to be high for the future and assumptions are being made about the sales weight and basis. Much of the ARC or PLC decision depends on the county yield, which help determine Agriculture Risk Coverage. ARC gives more of a revenue-type protection but with a county-level yield trigger that is not based on an individual farm. Each producer needs to evaluate what he wants to try to accomplish with any program, the report noted.
Dave Bergmeier can be reached at 620-227-1822 or [email protected].
