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BA Deere
Honored Advisor

Freedom to Fail- ARC payments

I betcha didn`t know that one purpose of the ARC payments ($80/acre for some of us) was a "Transition payment" to either start a new more profitable crop or as severance pay as we exit farming. 

 

First of all I`m not whinning, I`m just saying when we went to the meetings of "PLC or ARC" conventional wisdom at that time was there was a new plateau of $4 corn..well we blew though that.   That fat ARC payment was thought of as a transition payment to help us through $4 period until we got back to the $5 corn that we all know that we deserve   🙂

 

I knew that the ARC payment is like a "pro-rated battery" guarantee where the longer the lower prices last, the expotentially lower your ARC payment will be in future years, but I did not know ARC was looked at as a exit program out of farming for some.

 

I guess I`ve always deep down figured that the government wanted smaller farmers to quit and just have a few, more "compliant" mega-farms.  This article sort of confirms that thought for me.

 

http://www.agweek.com/news/nation-and-world/3909233-column-transition-assistance-freedom-fail

 

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16 Replies
clayton58
Veteran Advisor

Re: Freedom to Fail- ARC payments

Someone please correct me if i'm wrong, but my understanding is that PLC payments will increase as prices go lower, below the reference price.  While ARC payments will decrease.  Is that correct?

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mzeiler72709
Contributor

Re: Freedom to Fail- ARC payments

If you received $80 an acre be happy! I received  $9.41 here in Nebraska! It wasn't worth my effort to drive to town to fill out the bs paperwork that my local FSA office lost!

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BA Deere
Honored Advisor

Re: Freedom to Fail- ARC payments

I don`t know much about the PLC, but as I understand it, yes the cheaper grain gets the smarter those that signed up for PLC are.  But, being a government program it isn`t that simple either, I think there`s limits on that downside too. 

 

The ARC should have another somewhat good pay out in 2016..maybe half what it was in 2015.  so assuming grain prices will be in the tank for the remaining 5 yrs of the program, those with ARC-co banked 2 good years with the last 3 being bupkes.

 

Alot of us signed up for ARC relatively sure knowing there`d be "2 birds in the hand" at least.  It seems when times are good we never think they`ll end and when things are bad we think they`ll never end.  But in both cases they do end at some point.

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BA Deere
Honored Advisor

Re: Freedom to Fail- ARC payments

Yes, I am happy about it, but the basis and market conditions that created gave some $80 and others $10 and still others $0 was just making up for the marketing inequities.  I know that`s tough to swallow sometimes but that`s the formula that they used. 

 

But I`ve never seen such a complicated program and they say that is the program that we wanted...supposedly.  I don`t think there`s enough dollars at stake that it`s going to save anyone one way or another. 

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r3020
Senior Advisor

Re: Freedom to Fail- ARC payments

Here in east central IN, we got zero.

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BA Deere
Honored Advisor

Re: Freedom to Fail- ARC payments

3020, around here we have a negative 29¢ corn basis.  I did a quick basis search of central Indiana and you guys have either no basis or a positive nickel basis.  So, you guys get a good soild $60/acre more market revenue on a 200 bu crop.  Also our 2015 payment was based on the 2014 crop and around here we had a mediocre crop,as i recall Illinois and Indiana had the best 2014 crop ever.  That had something to do with the formula giving NCIA huge ARC payments.  Truth be told, I`d rather had a huge 2014 crop (when it was still worth something) and a positive corn basis and then got a Zero ARC-co payment in 2015   🙂

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hardnox
Advisor

Re: Freedom to Fail- ARC payments

Reading between the lines, I guess you're miffed because you got maybe $30K and some of your neighbors got $125K per "entity".

 

I don't recall a single buyer when I floated the notion of placing strict payment limits on both supplemental payments and crop insurance subsidies. As I do recall, you responded with a typically hybrid free market/agrarian-populist rationalization.

 

Be happy- you're the owner of a government farming franchise and even if it is no longer economical for you to farm it you can collect government payments through whatever BTO you choose as the pass through entity. you can move to somewhere semi-nice, live semi-well and never work another day in your life if you choose.

 

BTW, I hadn't noticed the adjacent thread about biotech and Chipotle. As I said there, I haven't any idea but unfortunately the behavior of those companies makes it seem possible. That's one face of the rough beast that we've created and now call "agriculture."

 

 

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WCMO
Senior Advisor

Re: Freedom to Fail- ARC payments

Zero ARC & PLC here also.  Most guys around here signed up for PLC on corn since no prospects for ARC payments.  Still, we had extraordinary yields in 2014, so not complaining yet.

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BA Deere
Honored Advisor

Re: Freedom to Fail- ARC payments

Nox, my Senator Grassley the only farmer in the senate voted against the farm bill mostly because it didn`t have payment limits.  Grassley fought for years many times against groups like the National Corn Growers, Pork Producers, National Cattlemans Beef Industry...emphasis on "industry" they want cheap corn for feed.

 

But what do you do? As farmers we are low man on the totem pole, we damned well better take any crumb that might roll off the elite`s plate and eat it before someone else rolls us for it.

 

If prices continue low and lower, there is no bailout function in this present farm bill, it may get so that I actually feel sorry for a Bigshot.   That $80 payment was a one time money shot, next year it might be $40 then quickly go to 0, 0 and 0 for the last 3 years, never enough to have ever covered the seed costs on a acre of corn.

 

I just thought it was interesting that after the first year of the new program, now it`s being promoted as some sort of severance payment to transition out of farming if we now feel that we can no longer hack it.

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