Oct. 22, 2018
VERY FEW PRODUCERS RECEIVING 2017 ARC-CO PAYMENTS
A limited number of farm operators in the Upper Midwest have received any 2017 farm program payments during October from the USDA Farm Service Agency (FSA). Most crop producers in Minnesota and surrounding States are enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program choice on their corn and soybean base acres , which is based on both crop yields and prices. The Price Loss Coverage (PLC) farm program option is a “price-only” program that is based on national crop prices, which is more popular for wheat and other small grain crops.
The “market year average” (MYA) price for a given crop year is used to calculate any potential payments for the PLC and ARC-CO programs. The historical MYA prices are also used to determine the “benchmark revenues” for the ARC-CO program option. The MYA price for a given commodity is not based on the Chicago Board of Trade (CBOT) commodity prices, or any specific local or terminal grain 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, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month.
The 12-month marketing year for corn and soybeans begins on September 1 in the year that a crop is harvested, continuing through August 31 the following year, with MYA price being finalized on September 30. For the 2017 crop year, the 12-month marketing period to determine the final MYA price was from September 1, 2017 through August 31, 2018, with the MYA price being finalized on September 30, 2018. The MYA marketing period for wheat and other small grain crops is from June 1 in the year of harvest to May 31 the following year. The final 2017-18 MYA prices that were used for 2017 farm program payment calculations were $3.36 per bushel for corn, $9.33 per bushel for soybeans, and $4.72 per bushel for wheat.
USDA is estimating that approximately $3 billion will be paid in total 2017 farm program payments for all crops to farm operators for the ARC-CO and PLC programs during the month of October. This compares to $6.8 billion in total ARC-CO and PLC payments for all crops just two years ago in 2015. The 2017 payments are based on lower MYA prices for many commodities, compared to ARC-CO benchmark prices and PLC target prices, as well as lower 2017 county average yields in some areas of the U.S., which enhanced the ARC-CO payments. Final 2017 corn and soybean yield levels in most areas of the Upper Midwest were too high to earn any 2017 ARC-CO payment.
PLC payments were made on any crops that had a final 2017-18 MYA price lower than the established reference price for that crop. This included corn with a final MYA price of $3.36 per bushel, compared to a reference price of $3.70 per bushel, resulting in a PLC payment rate of $.34 per bushel. Wheat had a final MYA price of $4.72 per bushel, compared to a reference price of $5.50 per bushel, resulting in a 2017 PLC payment of $.78 per bushel.
There were no 2017 soybean PLC payments, due to the final 2017-18 soybean MYA price being $9.33 per bushel, compared to a reference price of $8.40 per bushel. PLC payments are made on 85 percent of FSA crop base acres for a crop times the established FSA yield on a particular farm. In most Upper Midwest States, less than 10 percent of the corn and soybean producers are enrolled in the PLC program. Approximately half of the wheat producers are in the PLC program.
Only five counties in Minnesota received 2017 ARC-CO payments for corn, which included Cass, Lake of the Woods, Marshall, Pennington, and Roseau. Most counties in the western two-thirds of North and South Dakota, as well as counties in portions of the other Plains States, received 2017 corn ARC-CO payments, due to yield reductions from the drought in 2017. A limited number of counties in Southern Iowa and Northern Wisconsin also received 2017 corn ARC-CO payments.
Significant 2017 soybean ARC-CO payments were again limited to counties in the Plains States, as well as few isolated counties in the Upper Midwest, such as in Michigan and in Northern Illinois, Indiana and Ohio. Approximately 30 counties in Northern, Central and Southeast Minnesota received 2017 soybean ARC-CO payments. However, except for a few counties in Northwest Minnesota, the soybean payments were quite small, with about one-third of the counties getting a payment less than $1.00 per acre. 2017 wheat ARC-CO payments were quite prevalent in counties across the Midwest.
Producers should be aware that most quoted ARC-CO and PLC payment rates per acre for corn, soybeans, and other crops are on a per acre basis, and need to be factored by 85 percent (.85), in order to arrive at an ARC-CO payment rate per crop base acre. The 2017 ARC-CO and PLC payments are also subject to the required Federal sequestration reduction of 6.8 percent, which will affect the final total payment received by farm operators.
Resources available on Estimating 2017 ARC-CO Payments :
- Kent Thiesse has developed an information sheet titled: “Estimating Final 2017 Corn and Soybean ARC-CO Payments”, which looks at the final 2017-18 MYA prices and ARC-CO payments for corn and soybeans, as well as a look ahead to 2018 ARC-CO payments. To receive a copy of this information sheet send an e-mail to: email@example.com
- The USDA FSA ARC/PLC web site contains 2014-2017 ARC-CO payment maps, as well as a variety of other farm program data and information. The web site can be found at: http://www.fsa.usda.gov/programs-and-services/arcplc_program/
Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — firstname.lastname@example.org)