Market year average prices affect farm program decisions

One of the key components for farm operators to understand as they evaluate the new farm program options is the concept of Market Year Average (MYA) price. The MYA price for a given crop year is used to calculate any potential payments for all three farm program options: Price Loss Coverage (PLC), Ag Risk Coverage-County (ARC-CO), and Ag Risk Coverage-Individual (ARC-IC). The historical MYA prices are also used to determine the benchmark revenues for both the ARC-CO and ARC-IC program options.

The MYA price for a given commodity is not based on the Chicago Board of Trade (CBOT) commodity prices, is not based on any specific local or terminal grain prices, and is not calculated the same as the crop insurance base prices or harvest prices. The MYA price is the 12-month national average price for a commodity, based on the average market price received at the first point of sale by farm operators across the United States. The USDA National Agricultural Statistics Service (NASS) collects grain sales data on a monthly basis. The goal of the MYA price is to compute the total revenues received from selling a given crop divided by the total bushels sold during the year. The MYA price includes all grades and quality level of a crop, and does not include any marketing charges. 

The 12-month marketing year for corn and soybeans begins on Sept. 1 in the year that a crop is harvested, and continues until Aug. 31 the following year. The 12-month MYA price for that crop year is then finalized by Sept. 30 the following year. For wheat, oats, barley, and small grain crops, the 12-month marketing year begins on June 1 in the year of harvest, and continues until May 31 the following year, with the MYA price finalized by June 30. USDA publishes monthly and season-average estimated market prices for various commodities. These average prices are updated each month in the USDA Supply and Demand Report, which is usually released around the middle of each month. Some Universities also update projected MYA prices on a monthly basis for selected crops.

The grain sales data collected by NASS includes all types of sales. Forward contract sales data are recorded in the month in which the grain is actually delivered, and not in the month that the contract is established. The sales data for each month is then computed on a statewide basis, in order to arrive at a state-level monthly average price. The monthly average prices are then aggregated, based on the estimated grain marketed in each State, to create an estimated monthly national average price. The monthly average prices are then compared to the 5-year rolling average weightings for the percentage of bushels sold in each month, in order to arrive at an estimated MYA price each month. Once the 12-month marketing year is completed, the actual weightings of monthly grain sales percentages are used to calculate the final MYA price for a year. Typically, about 53-56% of the corn and 60-70% of the soybeans are sold during the first five months of the marketing year, which is Sept. 1 to Jan. 31 for corn and soybeans.  

The MYA prices affect potential farm program payments for all of the new farm program options that are available to farm operators for the 2014 to 2018 crop years for corn, soybeans, wheat and several other crops. The MYA prices for a crop are the same everywhere in the United States. Producers have until March 31, 2015 to finalize the 5-year (2014-2018) farm program decision at local Farm Service Agency (FSA) offices. Decisions on reallocating crop base acres up to existing total crop base acres, and whether or not to update program yields, must be made by landowners, by Feb. 27, 2015 at FSA offices. All farm program decisions will be made on the basis of eligible FSA farm units.

TAGS: Soybeans Corn
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