April 22, 2019
VERY FEW COUNTIES TO RECEIVE 2018 ARC-CO PAYMENTS
Most crop producers in the Upper Midwest were 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. Many producers in the region are wondering if there will be any 2018 ARC-CO payments for corn and soybeans in October this year. Producers earned a significant 2014 corn ARC-CO payment, while farm operators in some counties also earned payments on their corn base acres in 2015 and 2016, with very few payments in 2017. ARC-CO payments for soybeans have been quite widespread for 2014-2017 in most areas.
The corn benchmark (BM) price for the 2018 crop year is $3.70 per bushel, which is down from $3.95 per bushel in 2017, $4.79 per bushel in 2016, and $5.29 per bushel in both 2014 and 2015. The 2018 BM price for soybeans is $9.63 per bushel, which is well below $10.86 per bushel in 2017, $11.87 per bushel in 2016, or $12.27 per bushel in both 2014 and 2015.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 lower BM prices reduce the potential for ARC-CO payments.
The benchmark (BM) county yield for 2018 is calculated by taking the average county yields for the previous five years (2013-2017), dropping the high and low yield, and the averaging the other three yields. The 2018 county BM revenue for a given crop is the county BM yield times the 2017 BM price, which is then multiplied by 86 percent (.86) to calculate the “County Revenue Guarantee”. Most county revenue guarantees for corn and soybeans have declined somewhat for 2018, due to the sharp drop in the BM prices for both crops.
The county BM corn and soybean yields for 2018 in many Upper Midwest counties has increased somewhat from 2017 yields, due to fairly strong average county yields in recent years, prior to 2018. The increased county BM yields for 2018 increases the potential for ARC-CO payments; however, that gain is more than offset by the large reduction in the BM corn and soybean price. 2018 was highly variable yield year in many areas of the Upper Midwest, which will likely result in a wide variation of potential 2018 ARC-CO payments.
2018 ARC-CO payments for a given crop are paid when the actual 2018 county revenue for the crop falls below the 2018 county benchmark (BM) revenue guarantee. The 2018 BM revenue guarantee is the 2018 county BM yield times the 2018 BM price times 86 percent (.86). The actual county revenue is the final 2018 county FSA yield times the final market-year average (MYA) price for 2018.
The 2018 MYA price is the national average corn or soybean price from September 1, 2018 to August 31, 2019, which will be finalized on September 30, 2019. The MYA price is the 12-month national average price for a commodity, based on the average market price received by farm operators across the United States, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month. The USDA price estimates are updated on a monthly basis in the USDA World Agricultural Supply and Demand Estimates (WASDE) report, which is usually released around the middle of each month. As of April 1, 2019, USDA is estimating the 2018 MYA prices at $3.55 per bushel for corn, and $8.60 per bushel for soybeans.
The USDA National Agricultural Statistics Service (NASS) recently released the 2018 estimated average county yields for corn, soybeans, and other crops. The 2018 NASS county yields offer a good estimate of where final 2018 ARC-CO farm program payments are likely to end up, depending on the final 2018 MYA price level. The 2018 NASS county yields are available on the NASS web site at: http://www.nass.usda.gov/
The relationship between the final 2018 county yield and the 2018 county benchmark (BM) yields is extremely important in calculating potential 2018 ARC-CO payments for corn and soybeans. Expressing the 2018 county yield as a “% of BM Yield” is actually more important than the final county yield in determining estimated ARC-CO payments. At current MYA price estimates (as of 4-01-19), the threshold for a county to receive 2018 ARC-CO payments is a “% of BM Yield” level of 88% or lower for corn and 95% or lower for soybeans.
Overall, 2018 ARC-CO payments for corn and soybeans are not likely in many portions of the Upper Midwest, due to 2018 crop yields that were close to or slightly above BM yields in many areas. There are a few counties in Southern Minnesota and Northern Iowa, which were impacted by excessive rainfall during the 2018 growing season, that are likely to receive a 2018 corn ARC-CO payment. Most other counties in the rest of Minnesota and Northern Iowa, as well as Eastern North and South Dakota are not likely to receive a 2018 corn payment. There are only a few counties in the four States that are likely to receive a 2018 soybean ARC-CO payment.
Summary on 2018 ARC-CO Payment Estimates:
The current 2018 corn and soybean ARC-CO payments are estimates, which are based on the 2018 NASS county yield data, and the current MYA prices (as of April 1, 2019). Final 2018 ARC-CO payments could vary, based on the following situations:
- Corn and soybean MYA price levels could be adjusted between now and August 31, 2018. If MYA prices decline, the likelihood or the level of ARC-CO payments increases, and vice-versa if the MYA price increases. Based on recent history, any movements in the final MYA corn and soybean prices for the 2018-19 marketing year will likely be quite small following the April 1st estimates.
- USDA could make adjustments to the announced NASS yields to arrive at the final 2018 FSA County yields, which are used to calculate 2018 ARC-CO payments. However, any adjustments in the final 2018 county yields will likely be quite small, and the yields will likely lower than the 2018 NASS yield estimates. This could potentially increase the likelihood for 2018 ARC-CO payments.
- Any 2018 ARC-CO payments will be paid in October, 2019. Producers must be enrolled in the ARC-CO program for 2018 to be eligible for potential 2018 corn and soybean ARC-CO payments.
- There will likely be a 6.8 percent (.068) Federal sequestration reduction on all 2018 ARC-CO payments, similar to previous years.
2018 benchmark (BM) yields and revenues, previous county yields for corn, soybeans, and other crops, 2014, 2015, 2016 and 2017 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 2018 Corn and Soybean ARC-CO Payments”, which contains several tables relating to 2018 ARC-CO payments. He has also prepared 2018 ARC-CO Payment Estimate Tables for most counties in Minnesota and Northern Iowa, as well as potions of Eastern North and South Dakota. To receive a free copy of the Information Sheet and the Payment Tables, please send an e-mail to: email@example.com