Will a Floor on Corn PLC Really Reduce PLC Payments to Farmers

There is an artificial floor on corn PLC payments. Will it matter?

Photo by Stefano Marinelli on Unsplash

The House Ag proposals have an increase in the reference price for corn up to $4.10 from $3.70. This will result in an average effective reference price (EFR) or around $4.30 for a couple of years.

However, for PLC, the maximum that the price of corn can drop to is the loan rate. The loan rate for corn has been raised from $2.20 to $2.42. But for purposes of the corn PLC calculation, there is an artificial floor on the loan rate of $3.30.

This means that if the final corn MYA price drops below $3.30, then the PLC payment for corn will be calculated based on the effective reference price minus $3.30. Let’s look at an example:

For the 2027 crop year, the EFR is $4.30. The final corn MYA price is $3.00. Under normal calculations, the farmer would receive $1.30 per bushel, however, the floor limits the payment to $1.00 per bushel.

The National Corn Growers Association is against this artificial floor, and we can understand why. However, for most farmers who have at least 1,000 base acres of corn it may not really matter much. That is due to the overall payment limit of $155,000 preventing them from taking advantage of the extra price drop. Let’s look at another example: