SD farmers to get $250 million in federal “safety-net” payments this month

Farm Forum

Farmers across South Dakota and the nation should be federal checks deposited in their bank accounts this week based on relatively new “safety-net” programs aimed at helping make up for lower crop prices for the 2015 crop.

The U.S. Department of Agriculture will be sending out more than $7 billion to America’s farmers, Agriculture Secretary Tom Vilsack announced ton Oct. 4.

“These payments will help provide reassurance to America’s farm families, who are standing strong against low commodity prices compounded by unfavorable growing conditions in many parts of the country,” Vilsack said in a USDA news release.

Paul Hanson, program director for the USDA’s Farm Service Agency in South Dakota, said he estimates about $250 million will be sent to the state’s 35,000 farmers, about the same amount sent out a year ago under new features put into the 2014 Farm Bill.

“This is exactly why this program was put in place,” Scott VanderWal told the Capital Journal on Oct. 6. President of the South Dakota Farm Bureau, VanderWal raises corn and soybeans west of Brookings, much of it fed to the cattle he fattens in feedlots.

“It’s a safety net for agriculture,” he said. “And everyone knows, or should know, that agriculture is going through a tough economic time right now, as hardly any commodities are profitable.”

It means some farmers might not be farming next year, after two years of unprofitable operations after the historic high profits of 2012-2014.

For the first time in 30 years, land prices are slipping down and farmers who rent land are negotiating with landlords to get lower rental rates.

It’s not just hurting the farmers, VanderWal.

“It can be seen on Main Street. Machinery sales are down, and car dealers, pickup sales are down quite a bit, and that’s because of the farm economy. So these payment are coming at a very good time: near the end of the year when farmers need cash flow to square things up at this time of year. So the program is working as intended.”

Two programs were set up in the 2014 Farm Bill, said Hanson: The Agricultural Risk Coverage (ARC) program and the Price Loss Program, or PLC.

The general idea was to fill in the perceived gap between federally subsidized crop insurance, which covers up to 75 percent of crop and revenue loss, up to 86 percent of revenue targets.

The payments under the ARC and PLC programs are the same whether or not a farmer purchased crop insurance, Hanson said.

The payments coming this week and next, based on last year’s crops and markets, should amount to roughly 10 percent of projected net farm income this year, Vilsack said in his announcement.

So it’s no small potatoes.

Net farm income is forecast to be $71.5 billion this year, down 11.5 percent from 2015 to what would be the lowest level since 2009, according to USDA.

Farmers had to sign up by Sept. 30, 2015, for either the ARC or the PLS program for each crop, to receive the payments going out now, via direct deposits, to farmers’ bank accounts,, Hanson said.

The ARC program uses county-wide crop yields, a national market price reference point and a farmer’s own “base acres,” which is a several-year history of planted acres for a certain crop, whether corn, wheat or soybeans, to figure the subsidy payment, Hanson said. So the ARC payments can vary a lot based on each farmer’s operation size as well as the county’s average yields. Some wrinkles found a year ago in the new program’s data gathering have been smoothed over some, Hanson said.

The PLC program is more of a straight per-bushel payment to farmers based on a crop reference price and the farmer’s individual yield history.

Although 15 commodities in the state are covered by the programs, the great majority of the payments – as in 90 percent plus -, goes to corn growers, based on the market, acreage and yield numbers,

The reference price for corn for last year’s crop was $3.70 a bushel, while the national average marketing price received by farmers was $3.61, so the payment is set at 9 cents per bushel for the corn crop payments going out this month, Hanson said. (A couple of deductions are made on the 9 cents.)

The wheat reference price was $5.50 and the “actual,” or market price received for the 2015 crop was figured at $4.89, Hanson said. So the wheat subsidy is pegged at about 61 cents a bushel coming this month based on the 2015 crop.

Soybean growers get zip, since the reference price of $8.50 a bushel was well below the national average marketing price of $8.95 that farmers received for last year’s beans.

However, farmers raising milo, or sorghum harvested for grain, will see pretty nice 64-cents-per-bushel payment (before some deductions), Hanson said.

South Dakota’s 35,000 farmers operate 60,000 farms – as defined under the farm program – which could collect some of the payments, Hanson said.

The payments are based on “base” acres, or the historical level of plantings on farms, not necessarily what was planted last year or this year, Hanson said.

So the state has 6 million base acres of corn – slightly more than was planted this year; and 3.9 million base acres of soybeans, about 1 million less than was planted this year. Meanwhile, there are “just over 3 million wheat base acres,” Hanson said, below the approximately 2.4 million acres of wheat planted this year.

VanderWal said the Farm Bureau, generally conservative and often opposing government spending, is in favor of the new ARC and PLC subsidy programs.

For one thing, unlike the way the farm program operated for decades in pushing farmers to plant certain crops by linking payments to production amounts, this approach “decouples” the payments from such production decisions, he said.

There’s a larger picture, VanderWal said.

“We did favor the Farm Bill supports in the end because agriculture does need a safety net of some sort. It’s been pared back a long way from what it used to be. The point we make . . is the ability of agriculture to thrive and survive financially in our country is a national security issue, because if we compromise our ability to raise our own food and end up importing a lot more food, that is a problem for any country.”