What is a Marketing Year Average Price?

Producers are calling asking about the FSA signup decision they have to make by March 15^th.   Even though commodity programs have used marketing year average prices to trigger payments for decades, there still seems to be some uncertainty among producers. 

A quick look at nearby futures would indicate that neither agriculture risk coverage (ARC) nor price loss coverage (PLC) will likely trigger a payment for the 2022 crop.  While it makes some sense to look at nearby (old crop) and harvest time (new crop) futures to help decide what to plant, futures prices may or may not be a very good guide for program signup decisions. 

Why?  Because marketing year average prices start being calculated at harvest of this year’s crop ending prior to the next year’s harvest (Figure 1).  At the end of the marketing year, USDA will multiply each monthly price for the commodity by the percent of the crop marketed that month to arrive at a marketing year average price that weights the monthly prices with higher marketings greater than those months (like right now) with very little marketings occurring. 

While most would agree that the current futures outlook would indicate no ARC or PLC payments, trying to guess at weather, geopolitical and trade conditions around the world 18 months in advance can be daunting.

Figure 1.  Marketing Years and Expected Date Final Price will be Reported by Commodity.

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Outlaw, Joe. “What is a Marketing Year Average Price?” Southern Ag Today 2(10.4). March 3, 2022. Permalink