Ep. 64 Estimating County-Level Farm Program Payments in the One Big Beautiful Bill Act

00;00;00;07 – 00;00;33;28
Dr. Ryan Loy
The One Big Beautiful Bill strengthens the farm safety net. Price Loss Coverage, or PLC, comes with higher reference prices, which amounts to an increasing average to all counties. Agricultural risk coverage, or ARC, brings greater revenue guarantees, again increasing the expected payouts across the board. That and so much more on this episode of Morning Coffee and Ag Markets.

00;00;34;01 – 00;00;46;17
Dr. Ryan Loy
In the studio today with me is Dr. Hunter Biram, and my name is Ryan Loy. We’re going to be talking about some county level farm program payments across the country, actually, that come from The One Big Beautiful Bill Act. Hunter, how are you doing today?

00;00;46;19 – 00;00;49;14
Dr. Hunter Biram
I’m doing good. Living the dream. How are you?

00;00;49;17 – 00;00;59;12
Dr. Ryan Loy
Oh, right about the same, man. It’s a Monday and it certainly feels that way, that’s for sure. I feel like we’ve had a lot of Mondays as of late. No matter what the day of the week is. Yes.

00;00;59;14 – 00;01;10;07
Dr. Hunter Biram
Yeah. Especially given the fact that this is the Monday after we should have already had this done just because last week was just crazy busy. But, I’m glad that we’re still getting it done.

00;01;10;09 – 00;01;28;26
Dr. Ryan Loy
Oh. Me too. I think this is great. And this is a very timely issue to talk about. I know we’ve already had some feedback from the newsletter of this that was sent out today. And, like you said, we just did not have enough time to record an episode last week. It’s one of those things where, where you’re just a team of three folks, really, or four folks, and it’s sometimes if we’re all busy, sometimes you just can’t get it out.

00;01;28;26 – 00;01;50;10
Dr. Ryan Loy
But I know we’re in for a great discussion today, and if you haven’t already, I definitely recommend going to the newsletter from this week and being able to follow along a little bit. Before we kind of get into this, Hunter, and I’m sure you have a lot to say on this topic. You know, one of the things that you talk about in here is how The One Big Beautiful Bill Act, which was signed in July of 2025, significantly strengthens the farm safety net.

00;01;50;11 – 00;01;57;17
Dr. Ryan Loy
Can you walk us through, you know, what motivated Congress to include such a substantial increase in programs like ARC and PLC?

00;01;57;17 – 00;02;16;04
Dr. Hunter Biram
Yes. I think this is something that, you know, you are very well acquainted with as well. You being our farm finance, farm management guy, and that is, you know, we’ve got low prices. Low prices for crops, high prices for inputs, and so low prices received for crops, you know, paired with elevated input prices are really what’s driving a lot of this.

00;02;16;04 – 00;02;32;20
Dr. Hunter Biram
You know, prices pay for fertilizer, pesticides, fuel, interest. You know, those are 47% higher than the prices received for crops sold, which is, again, this is something that you’re very well acquainted with. And you have a nice article in the Wall Street Journal that I pulled from. And, so I think that’s a, that’s a big driver of it.

00;02;32;20 – 00;02;41;11
Dr. Hunter Biram
I mean, this gap actually is the largest gap between revenue and expenses in the last 25 years. And the only reason that I say that’s because that’s as far back as we’ve gone with the data, right?

00;02;41;12 – 00;02;56;02
Dr. Ryan Loy
That’s right. And I’ve be really curious to see, you know, the more we go back, to see if this is just something, you know, completely out of the ordinary. Or perhaps this has happened before, like with the bankruptcy numbers that I’m tracking. You look at those just by themselves. They look staggering and they are staggering. Even one is too many.

00;02;56;02 – 00;03;12;02
Dr. Ryan Loy
But when you compare that to pre-COVID numbers, you’re like, oh, okay, well, we’re on that trajectory, but we haven’t hit that high part yet. So that may be a case here, but that certainly makes sense as to why Congress, you know, acted so quickly in wanting to increase these, these prices and these revenue guarantees. On that topic,

00;03;12;02 – 00;03;22;21
Dr. Ryan Loy
can you go in and just maybe talk about really quickly, what are some of those big changes that you can maybe think of off top of your head? You know, not everything, but some of those significant changes for each program.

00;03;22;23 – 00;03;42;11
Dr. Hunter Biram
Yeah. So for PLC, as you mentioned, Price Loss Coverage. The statutory reference price is increasing from about 10 to 21% by crop. And so what that statutory reference price does is effectively provides a safety net. If the market price falls below a certain amount, there’ll be a payment that triggers that is the difference between those two prices.

00;03;42;11 – 00;04;02;04
Dr. Hunter Biram
And so to put that in more layman’s terms, if you’re literally thinking about going to the circus and you’re thinking about the trapeze artist, right? And they’re swinging from swing to swing, and then maybe one of them, they didn’t quite get a good grip on the swing, and they slipped and fell. And, fortunately there was a net at the bottom, you know, waiting to catch them before they hit the ground.

00;04;02;05 – 00;04;22;07
Dr. Hunter Biram
Well, just imagine the market price is that trapeze artist and the safety net is this farm policy that we’re talking about right now. So in order to stabilize income and, for a farmer to continue to farm, there will be a difference between those two prices, which, there’s another effective reference price that’s kind of a modification of the statutory reference price.

00;04;22;07 – 00;04;46;18
Dr. Hunter Biram
But really the main takeaway is that there’s this target price and once the market price falls below that safety net, there’ll be a payment that’s the difference between those two different prices. And so yeah 10 to 20% increases in the price. And so for ARC then, Agricultural Risk Coverage, provides county level revenue guarantees. And so the maximum guarantee was increased from 86% to I believe 90%.

00;04;46;18 – 00;05;00;27
Dr. Hunter Biram
So a four percentage point increase. On top of that, the maximum payment rate was increased from 10% of expected revenue to 12% of expected revenue. So you have a higher guarantee and a wider band of coverage for that maximum payment rate for ARC.

00;05;01;05 – 00;05;18;11
Dr. Ryan Loy
Oh, that’s interesting. I’m glad that this was enacted. You know, you describing it as that kind the trapeze, safety net is exactly what I think of in my mind when I’m thinking about these programs. And before this update, it seemed like, well, there was a net there, but they never put it above the ground. You know, it’s just kind of laying on the ground, which doesn’t do a whole lot.

00;05;18;11 – 00;05;40;28
Dr. Ryan Loy
And especially if you’re falling from a pretty significant, you know, drop. That doesn’t help really much of anybody, right? So it’s good to see this. In the article this week, you really do a deep dive, which I know that our listeners and even myself very much appreciate, kind of going into how you estimated these payments. And within those county level estimations, you, mentioned using data from 2014 to 2024.

00;05;41;00 – 00;05;53;02
Dr. Ryan Loy
So could you explain the backward looking, or so to speak, approach that you use to model these, expected payments and why that method provides valuable insights for this marketing year? So the 25-26 marketing year?

00;05;53;05 – 00;06;17;01
Dr. Hunter Biram
Yeah. So what I did was I looked back at participation in ARC and PLC from 2014 through 2024. That data is available on the USDA Farm Service Agency website, so you’ll know how many base acres were enrolled in ARC and PLC. For those who don’t know what a base acre is, I’m not talking about baseball. And you know, I’m not talking about like a base on a field.

00;06;17;01 – 00;06;40;15
Dr. Hunter Biram
What I’m talking about is, it’s pretty much the acres upon which program payments are made. And in most cases, they will differ from planted acres. And they are a historical average of plantings for an FSA farm number. Okay. So you can look at how the program acres are distributed over time. You can also see how, based on participation at the county level, for ARC.

00;06;40;15 – 00;07;10;01
Dr. Hunter Biram
And you can look at this, in terms of participation at the county level for PLC, you can look back at how ARC was triggered in a given year for a given crop. You can look at how PLC was triggered for a given year in a given crop. And the reason that I went […] that I did this analysis was to say, okay, if we had The One Big Beautiful Bill, the the language that was outlined in there, instead of having the old 2014/2018 Farm Bill, instead of us having that.

00;07;10;01 – 00;07;25;06
Dr. Hunter Biram
If we had the One Big Beautiful Bill, what would the payments have looked like? Okay. So it’s like we’re comparing between two states of the world. We’ve got status quo, what we already had before the OB3, which is One Big Beautiful Bill for short. And then we have OB3. So I’m comparing between those two states of the world.

00;07;25;06 – 00;07;46;15
Dr. Hunter Biram
So I take the OB3 number and then essentially would subtract it from the status quo number just to show just how much stronger this safety net is compared to the status quo. So you take the payments. Then under both scenarios, both states of the world by crop using old reference prices and new reference prices, comparing those, do it by crop, by county.

00;07;46;15 – 00;08;05;20
Dr. Hunter Biram
And then you’ll sum up all those payments for PLC for a county. And then you’ll set up all those payments for Arc for a county in a given year. Then just take the average across time. And that’ll give you the quote unquote, the expected payment per year. Over that time frame. And so what that tells us is it doesn’t tell us what 2025 is going to be.

00;08;05;20 – 00;08;16;11
Dr. Hunter Biram
It just says that on the average at the county level, this is about how much a county should expect to receive in terms of ARC and PLC payments. That’s just an expectation. It’s not a guarantee, but it’s just an expectation.

00;08;16;11 – 00;08;39;11
Dr. Ryan Loy
An expectation based off of what has been written in for the new bill. And just comparing that to what it would have been under a no bill scenario, essentially, which definitely makes sense. Two states of the world comparing those and seeing the differences in. That’s extremely helpful, not only extremely helpful in understanding these estimates, but extremely helpful in terms of folks if they have questions on terms of what this actually means.

00;08;39;11 – 00;09;05;21
Dr. Ryan Loy
Right. So again, if you’re a if you’re a listener, I definitely encourage you to go and read, this section on our newsletter this week and kind of get an idea of exactly how Dr. Biram had put these together, because it’s very interesting, very mathematical and very methodical. One of the things that you mentioned in your, in the newsletter this week, is that PLC payments across all counties in the nation are expected to increase to $2.6 billion increase.

00;09;05;21 – 00;09;27;07
Dr. Ryan Loy
And for ARC across all counties in the nation. Looking at a $9.77 billion increase. However, within these findings, you show distinct regional differences. You know, such as Mid-South counties seeing the largest increase in PLC payments, while the Upper Midwest are seeing the largest gains in ARC payments. So what underlying factors are really driving those regional patterns?

00;09;27;07 – 00;09;43;16
Dr. Hunter Biram
Yeah, I think yield risk is going to be the easiest way to answer that. Yield risk in terms of, you know, all the different possible yields a farmer could get. The risk being you just, you know, you don’t know what yield you might end up getting at the end of the year. And that yield is your quantity.

00;09;43;16 – 00;10;07;17
Dr. Hunter Biram
And you multiply that times your price. And you’re going to get your income or your revenue stream for that year, okay. So why yield risk and not price risk? Well, think about the Mid-South. So in the newsletter I highlight in the Boot Heel of Missouri, I believe East Arkansas, the Mississippi Delta region, Louisiana, south east Texas. I’ve got a visual on my head… along the eastern coast in Georgia, Alabama, the Carolinas, even parts of Florida.

00;10;07;17 – 00;10;27;17
Dr. Hunter Biram
That’s where a lot of rice, cotton and peanut base is going to be, or where a lot of producers of these crops and have a lot of base acres in these crops, they’re going to enroll most of their crops in PLC, and they face less yield risk and more price risk. These are more globally oriented crops in terms of their markets.

00;10;27;17 – 00;10;47;23
Dr. Hunter Biram
I’m not saying corn, soybeans, is not. It totally is. But I think even more so, most of the demand is going to be driven by the global market for these crops that I just mentioned. And on top of that, if these crops are going to be enrolling in a price risk protection product because they don’t really need that much, you know, yield risk protection, they also saw a 10 to 21% increase in the statutory reference prices.

00;10;47;23 – 00;11;06;23
Dr. Hunter Biram
So saw some pretty significant increases there. So yeah, I think it’s just, you know, yield risk. And then you have this global risk in those markets. I think that’s what’s going to drive some of that. In the Midwest, you know, now you’re looking more at yield risk. I mean when you think back to even crop insurance and how that that was even within the first all risk crop insurance was in Minnesota in 1899.

00;11;06;23 – 00;11;29;26
Dr. Hunter Biram
So like, crop insurance comes from the Midwest to help manage yield risk. So a lot of yield risk to manage up in the, again, so, Minnesota looking at even I think Nebraska and the Dakotas, Kansas, Indiana, Iowa, Illinois, even into Ohio. And that’s the area that if you look in the newsletter that’s going to have more Deep Purple in terms of what those ARC payments look like.

00;11;29;26 – 00;11;35;08
Dr. Hunter Biram
So they have more yield risk to contend with. And so they tend to put more of their base in ARC versus PLC.

00;11;35;11 – 00;11;55;16
Dr. Ryan Loy
So Hunter, are you also mentioned that the U.S. crop sector, which is something we’ve talked about several times on here before, the U.S. crop sector net farm income is projected to remain negative in 2025. So how might this enhance safety net payments from both Ark and PLC help farmers stay financially viable? And what limitations should the farmers be aware of?

00;11;55;20 – 00;12;20;13
Dr. Hunter Biram
Yeah, well, as you mentioned, I believe with PLC, there’s $2.6 billion, I think was the number that is the expected amount per year to go to farms. ARC is about 9.7 billion. And so like per year, you’re looking at roughly 12-13 billion dollars a year over the next, roughly five years just for ARC and PLC. And you know, that would line up with what the CBO score would tell you, too, with that.

00;12;20;13 – 00;12;38;02
Dr. Hunter Biram
And then, of course, crop insurance and BMC. So then I’d be a little bit higher than what the CBO would put out. But this is about what you would expect. And so when you’re looking at losses, I mean, I want to say that we’ve got well over $10 billion in losses across the US. Also, I actually want to say it’s closer to about $56 billion in losses across the whole United States.

00;12;38;02 – 00;12;42;27
Dr. Hunter Biram
When, you know, when it comes to the crops, at least in the in the crop sector.

00;12;42;27 – 00;12;48;14
Dr. Ryan Loy
For 2025, the losses you have reported in the newsletter are $64 billion.

00;12;48;14 – 00;13;07;12
Dr. Hunter Biram
$64 billion. There you go. See, you know better than I do. And I wrote it, but, got a lot of stuff floating around my head, up there. But yeah. So I mean, you’re looking at well over $60 billion worth of losses. And so this is, I think, it’s something that comes at a, at a crucial time for, farmers to be able to repay their loans and to ultimately stay in business.

00;13;07;12 – 00;13;29;26
Dr. Hunter Biram
Now, yes, there’s going to be this around 12 to $13 billion a year that, you know, could be coming down the line. But what I worry about is when it comes down to payment limits, and I’m not going to go into great detail today because we’ll look at in a future newsletter. But, you know, just from a preliminary analysis and, you know, gave a presentation last week at the Southern Extension, the Economics committee, outlook conference.

00;13;29;26 – 00;13;45;07
Dr. Hunter Biram
I mean, I know we’re going to need a lot more payment limits, per form, so to speak, for farmers to be able to fully realize, what these, what these payments can actually do for them to help keep them in business. And it’s not just in the South. It’s all over the U.S., not just in Arkansas.

00;13;45;07 – 00;14;06;26
Dr. Hunter Biram
It’s all over the U.S.. And so, per county, I’ve already seen that we’re going to need at least 4 or 5 entities per county, and we’ll go into more detail next time. I think it could be of 10 or 12 more entities per county or more payment limits per county. And so I think that’s one thing farmers are going to start run into is there’s an issue with payment limits, which, you know, is going to be particularly troublesome in ‘25 because you can’t change.

00;14;06;26 – 00;14;21;01
Dr. Hunter Biram
You can’t you can’t change any kind of your business structure to be able to adjust for these payments right now. And so I think, people are going to hit that ceiling pretty quickly. And, we’ll take a look at, I guess, how quickly and how soon they’ll hit that, in the next newsletter.

00;14;21;01 – 00;14;41;16
Dr. Ryan Loy
That’s great. And thank you for giving that context. One last question for you, Hunter. And just to kind of make it aware for our listeners when we’re talking about a limitation with these programs, I think one of them, and correct me if I’m wrong, is the timing of these payments, and especially right now with the government shutdown, can you maybe go into how does that look under a government shutdown and what the issue is right now?

00;14;41;16 – 00;14;47;17
Dr. Ryan Loy
And when these payments, let’s say that they trigger for this year, when would a farmer expect to receive these payments?

00;14;47;17 – 00;15;05;04
Dr. Hunter Biram
Yeah. So I’ll, I’ll provide some commentary on the shutdown. I’ve been getting a lot of questions about it. I mean, right now, this is October the 6th is the recording of this podcast and still government shutdown. So USDA cannot issue any new marketing loans right now. They’re not taking any more signups for the Supplemental Disaster Relief Program, or the SDRP.

00;15;05;05 – 00;15;23;08
Dr. Hunter Biram
Any additional payments from the Emergency Commodity Assistance Program, or ECAP, that should have already gone out has not gone out. There’s still about $30 million worth of ECAP money that needs to be sent to farmers in Arkansas. This is just Arkansas. There’s probably still close to about $100 million worth of SDRP that needs to go to Arkansas crop farmers. So you’ve got Market Assistance Loans, SDRP, ECAP…

00;15;23;08 – 00;15;40;04
Dr. Hunter Biram
Okay. What about, farm programs that were triggered in 2024 and they should have been paid on October 1st, essentially, of this year? Also not getting that cash either. We’re looking at around $31 million worth of ARC and PLC from ‘24 that should be paid out. They should have already been paid out and started to pay out right now.

00;15;40;04 – 00;15;57;17
Dr. Hunter Biram
So when you take all that into account, I mean, you’re looking at, I think, close to about $100 million worth of government assistance that should have already gone out with the shutdown. Okay. So I already kind of alluded to it, but what does that mean for this new, OB3 and the new safety net? Okay, so you might have already heard me say, the payments in ‘24 should have been paid out October 1st of 2025.

00;15;57;19 – 00;16;13;06
Dr. Hunter Biram
You’re like, well, doesn’t make any sense. Well, I would probably agree with you, but that’s just how these things work. And we can talk more about that later. Okay. So the current OB3 farm safety net is in effect for 2025. And farmers are going to get the automatic higher of the two, either ARC or PLC payments in terms of payments per acre.

00;16;13;07 – 00;16;34;24
Dr. Hunter Biram
Now they won’t receive that cash though until October 1st of 2026. So we’re looking at about a year from now whenever farmers would be getting that assistance. Now, why does that create problems? Well, Ryan, you know this probably more than I do, when farmers go to the bank and they need to get a loan for next year, the bank is going to say, okay, I need cash from the last crop, though, and you’ll need to be able to pay that before I give you any more money.

00;16;34;24 – 00;16;48;28
Dr. Hunter Biram
I mean, makes sense, right? Because, I mean, they’re taking a risk on that farmer, who they love, I’m sure, but they still. I mean, the bank still needs to make money, too. I mean, they’re literally handing out money, but they still got to make money, and it’s still it’s own kind of business. So loan renewal, it’s something that’s going to be.

00;16;48;28 – 00;16;58;22
Dr. Hunter Biram
I really don’t even know. I mean, it’s just really hard to say how things are going to look if there is no money that’s coming in until October of next year.

00;16;58;25 – 00;17;19;20
Dr. Ryan Loy
That’s right. And with no money coming right now, right? Well, what we assumed was kind of sewed up shut in terms of being able to count on it. We can’t right now. And so it’s extremely stressful times. And Hunter, I just really appreciate you coming into the studio today to talk about this and really providing our farmers with very good, timely information so they know how to act and know how to prepare for next growing season.

00;17;19;20 – 00;17;26;19
Dr. Hunter Biram
Well, I appreciate you, kind of taking the reins on the podcast the past few weeks, it’s been a it’s been a brute, the past few weeks.

00;17;26;19 – 00;17;42;05
Dr. Ryan Loy
Oh, it takes a team, it takes a team. I couldn’t do it without you. And, you know, same thing. And Evan, I couldn’t do it without her, right? And Scott and everybody in between. So it’s a good team effort. Well, with that I think that kind of wraps up our episode for today. Thank you all so much for tuning in.

00;17;42;08 – 00;17;44;01
Dr. Ryan Loy
Have a great week. Bye bye now.

00;17;44;08 – 00;18;09;29
Dr. Hunter Biram
If you would like to learn more about the Fryar Price Risk Management Center of Excellence, we encourage you to go to fryar-risk-center.uada.edu. If you want to check out the newsletter that is associated with this podcast, we encourage you to visit the website and check out podcast newsletters. When you go to podcast newsletters, you should be able to see the most recent newsletters that we published, and within each one of those newsletters, you should be able to the click on a link to subscribe.

00;18;09;29 – 00;18;13;05
Dr. Hunter Biram
If you haven’t susbribed already. Thank you for tuning in and we’ll catch you next time.

00;18;13;05 – 00;18;17;22
Dr. Hunter Biram
Bye bye now.