Wheat base farm bill payments substantial for N.D.

Farm Forum

The national average wheat price for the 2015 marketing year was $4.89 per bushel, compared with $5.99 in 2014. This is well below the reference price of $5.50, which was set in the 2014 farm bill and will trigger a $0.61 per bushel Price Loss Coverage (PLC) payment rate.

Under the farm bill, producers could choose either the PLC or the Agricultural Risk Coverage – County (ARC-CO) program for each crop on a farm.

About one-fourth of North Dakota’s 9.6 million wheat base acres are enrolled in the PLC program. Those acres will generate payments of $0.61 per bushel multiplied by a farm’s wheat PLC payment yield multiplied by 85 percent.

For example, the PLC payment calculation for a farm with 100 acres of wheat base and a 50 bushel PLC payment yield would be $2,592.50 ($0.61 payment rate x 50 bushel payment yield x 85 percent x 100 base acres). Actual payments will be somewhat less. The Budget Control Act of 2011 required the U.S. Department of Agriculture to reduce payments by 6.8 percent last year, and a similar sequestration of around 7 percent is likely this year.

About three-fourths of North Dakota wheat base acres are enrolled in the ARC-CO program, not the PLC program. Whereas the PLC program considers only price, the ARC-CO program protects against revenue shortfall at the county level. Both prices and county yields are considered to determine the safety net and whether a payment is triggered.

The final 2015 average yield for all wheat grown in each county has not yet been released by the Farm Service Agency; however, there is preliminary information available for most of the counties.

Based on this information, Andrew Swenson, NDSU Extension Service farm management specialist, estimates that producers in about one-third of North Dakota counties will receive the maximum ARC-CO payment.

“Depending on the county, the payment could range between $18 and $36 per wheat base acre,” says Swenson. “The maximum payment per acre under ARC-CO varies by crop, county and year.”

About one-third of North Dakota counties will not receive a wheat ARC-CO payment because high yields in 2015 offset the low price and provided revenue above the revenue guarantee. However, the high 2015 yields should increase revenue guarantees and the likelihood of payments in future years.

Lastly, about one-third of North Dakota counties should receive some ARC-CO payments on wheat base acres but less than the maximum payment.

Swenson adds, “I expect total farm bill payments on North Dakota wheat base acres to be in the area of $150 million, after the assumed 7 percent payment reduction due to sequestration, compared with $7 million paid last year. These payments, based on the 2015 crop year, will be made sometime after October 1, 2016.”

“It is important to note that the increase in payments on wheat base acres only represents a partial safety net and is a fraction of the revenue lost in the marketplace due to low wheat prices,” says Swenson.