Approaching the ARC-CO Payment Cliff?

ARC-CO Payment Cliff

by Brent Gloy

At the end of October the USDA provided a Halloween treat by making ARC-CO payments for several 2014 crops. In fact, USDA reported that 800,000 farms received ARC-CO payments.  The 2014 ARC-CO payments totaled $3.9 billion with the vast majority ($3.3 billion) paid on corn base. This wasn’t surprising as the ARC-CO program was very popular with corn and soybean farmers, with over 90% of farms and base acres enrolled in the program.

As we discussed in an earlier post, government support has played a key role in moderating the impact of farm income downturns. However, the payments provided under this farm bill will almost certainly be less than that in previous periods of low income. Further, given the structure of the ARC-CO program it is quite likely that program payments for corn will begin to fall after the 2015 payments. Continue reading

Input Prices, Corn Prices, and Farmland Values

Corn

By Brent Gloy

The value of farmland is dependent upon expectations of the future revenue and the costs associated with the land. Expected earnings are difficult to accurately predict. For example, the income generated by farmers started rising well before farmland values shot up. As market participants began to realize that farm incomes might remain at elevated levels for some time, land values increased rapidly. Now, farm incomes are falling and one is left to wonder what the implications of these lower incomes are for farmland values. The answer will likely depend upon how market participants expect revenues and costs to adjust going forward.  Continue reading