August 29, 2016
2015 CORN ARC-CO PAYMENTS LIKELY IN MANY COUNTIES
Most crop producers in the Upper Midwest are enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program choice on their corn and soybean base acres for the 2014 to 2018 crop years. Given the current decrease in the corn and soybean market prices in the past couple of months, many farm operators and ag lenders are now wondering what impact that may have on potential 2015 ARC-CO payments, which are scheduled to be paid in October, 2016.
For the 2015 corn and soybean crop, producers that had very high corn and soybean yields in 2015, relative to their benchmark yields, were likely already projected to get zero or very little 2015 ARC-CO payment. Producers that had 2015 corn or soybean yields that were very near or below the 2015 benchmark yields will still likely get the maximum, or close to the maximum, 2015 ARC-CO payment. However, producers that had 2015 corn and soybean yields higher than the benchmark yields, but were still scheduled to receive a 2015 ARC-CO payment, will likely see their ARC-CO payments increased from estimates earlier this Summer.
Based on the August 1, 2016 estimates, many counties in Southern and Western Minnesota, as well as in Northern Iowa and the Eastern Dakota’s, are likely to receive an estimated 2015 corn ARC-CO payment of $20 to $80 per base acre. Some counties that were originally scheduled to receive a zero 2015 ARC-CO payment, as of June 1, will now receive an estimated payment of less than $20 per base acre. There are still several counties scattered across the Upper Midwest that will likely receive zero 2015 ARC-CO payment, due to a very high 2015 corn yield, relative to the 2015 county benchmark yield.
Only a small percentage of counties in the Upper Midwest are scheduled to receive a 2015 soybean ARC-CO payment, based on the August 1 estimates, due to the very strong actual soybean yields in 2015 in many areas. For the counties that are scheduled to receive a 2015 soybean payment, the 2015 ARC-CO payment estimates have been increased by a few dollars per base acre in most counties, due to projected decrease in the MYA price since the June 1 estimate.
The 2015 Market Year Average (MYA) prices for corn and soybeans are the U.S. average prices from September 1, 2015 to August 31, 2016, with the MYA prices being finalized on September 30, 2016. As of August 1, 2016, the estimated 2015 MYA prices are $3.60 per bushel for corn, and $8.95 per bushel for soybeans, which represents a decrease of $.10 per bushel for both corn and soybeans from the MYA estimates on June 1, 2016. This adjustment in the projected MYA prices will positively affect the estimated 2015 corn and soybean ARC-CO payments in many counties across the U.S. The lower corn MYA price also means that there could potentially be a small payment in October for producers that have their corn base acres enrolled in the “Price Loss Coverage”(PLC) farm program option for the 2014-2018 crop years.
USDA updates the average MYA price estimates for a given marketing year on a monthly basis in the USDA Supply and Demand (WADSE) Report, which is usually released around the middle of each month, and provides a pretty good price estimate for potential ARC-CO payments. USDA also publishes monthly and season-average estimated market prices for various commodities, which are available on the FSA farm program web site at : http://www.ers.usda.gov/data-products/season-average-price-forecasts.aspx. Some Universities also update projected MYA prices on a monthly basis for selected crops. Kansas State University offers one of the best monthly updates of MYA prices for corn, soybeans, and wheat. The web site is at : www.agmanager.info/crops/insurance/risk_mgt
The County benchmark (BM) revenue for a given crop is the County BM yield times the BM price for the year, which is the same BM price that is used throughout the U.S. The benchmark (BM) prices for corn and soybeans for the 2015 crop year remained the same as 2014 BM prices, which are $5.29 per bushel for corn and $12.27 per bushel for soybeans. The BM prices are adjusted each year, using the USDA market-year average (MYA) price for the preceding five years, then dropping the high and low MYA price, and averaging the other three MYA prices.
The 2015 benchmark (BM) County yield for a given crop was calculated by taking the average County yields for the previous five years (2010-2014), dropping the high and low yield, and the averaging the other three yields. The BM corn yields in most Minnesota counties declined in 2015, with many counties in South Central, Southwest, and Central Minnesota having declines of 8-12 bushels per acre from 2014 to 2015. The relationship between the final 2015 County yield and the 2015 County benchmark (BM) yields is extremely important in calculating potential 2015 ARC-CO payments for corn and soybeans.
The USDA National Agricultural Statistics Service (NASS) released the 2015 estimated average County yields for corn, soybeans, and other crops in late Winter, which can be used to estimate potential 2015 ARC-CO payments. The NASS yields may be adjusted slightly downward by USDA to arrive at the final 2015 BM yields and County FSA yields, which are used to calculate the 2015 ARC-CO payments. The 2015 NASS County yields are available on the NASS web site at : http://www.nass.usda.gov/.
There will likely be a large difference in the 2015 corn ARC-CO payments from County-to-County, depending on the final 2015 County yields. It appears that most Counties in Southern and Western Minnesota, will get a partial 2015 corn ARC-CO payment; with a few counties that will get the maximum payment. Several counties in Central Minnesota, as well as a few selected Counties in other areas, will likely receive no 2015 corn ARC-CO payment. Expect for a few Counties in Southeast and Northwest Minnesota, there will be little or no 2015 soybean ARC-CO payments. Counties in many portions of Illinois, Indiana, and other States in the Eastern Corn Belt will likely receive the maximum, or close to the maximum, 2015 ARC-CO payments for corn and soybeans, due to much lower yield levels in 2015.
Remember that the 2015 corn and soybean ARC-CO payment levels are still estimates, which are based on the 2015 NASS County yields and the current MYA price estimates. The final ARC-CO payments could vary, based on any changes in the MYA price levels by August 31, 2016, or any adjustments made by USDA in the announced NASS yields to arrive at the final 2015 FSA County yields, which will be used to calculate 2015 ARC-CO payments. There will likely be a 6.8 percent Federal sequestration reduction on all 2015 ARC-CO payments that paid in October, 2016, similar to the 2014 ARC-CO payments that were paid in 2015.
Previous county yields for corn, soybeans, and other crops, benchmark yields and revenues, 2014 FSA yields, 2014 ARC-CO payment levels, and other farm program information are available on the FSA ARC-PLC web site, which is at: www.fsa.usda.gov/arc-plc. Kent Thiesse has prepared an Information Sheet titled: “Estimating 2015 Corn and Soybean ARC-CO Payments”, along with “2015 ARC-CO Payment Estimate Tables” for most counties in Minnesota and Northern Iowa, as well as in Eastern North and South Dakota. To receive a free copy of the Information Sheet and Tables, send an e-mail to: firstname.lastname@example.org
Note — For additional information contact Kent Thiesse, Farm Management Analyst and
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — email@example.com)