Focus on Ag: Many farmers will receive 2019 farm program payments

A significant number of farm operators in the upper Midwest will receive 2019 farm program payments during October from the United States Department of Agriculture’s Farm Service Agency (FSA). A large number of crop producers in Minnesota and surrounding states were enrolled in their county’s yield-based Ag Risk Coverage (ARC-CO) program on their soybean base acres for the 2019 crop year, which is based on both crop yields and prices. The Price Loss Coverage (PLC) program option is a “price-only” program that is based on national crop prices, which was the 2019 farm program choice on large majority corn and wheat base acres. All of these program choices are favorable for producers to receive some 2019 farm program payments.

In Minnesota, eligible producers in 60 counties are scheduled to receive 2019 soybean ARC-CO payments on non-irrigated base acres, as well as 17 counties on separate irrigated acres. Producers in 26 counties would be eligible for 2019 corn ARC-CO payments on non-irrigated acres and 7 counties on separate irrigated acres. Nearly every county in Minnesota would be eligible for 2019 ARC-CO payments for wheat, and several counties qualify for ARC-CO payments for barley and oats.

Soybean ARC-CO payments for 2019 in other upper Midwest states include 40 counties in Iowa, 39 counties in Nebraska and South Dakota, 33 counties in North Dakota, and 48 counties in Wisconsin, which includes all base acres. Corn ARC-CO payments on all base acres include 11 counties in Iowa, 14 counties in South Dakota, 13 counties in North Dakota, and 22 counties in Wisconsin. ARC-CO payments on separate irrigated corn base acres included 25 counties in South Dakota, 9 counties in Nebraska, and 7 counties in North Dakota.

The USDA previously announced the final 2019 market year average (MYA) prices for corn, soybeans and wheat, which are used to calculate ARC-CO, PLC, and farm-yield level ARC-IC payments. The 2019 marketing year for corn and soybeans extended from Sept. 1, 2019 to Aug. 31, 2020, with MYA prices finalized on Sept. 30, 2020. The 2019 MYA price for wheat and other small grains is based on the average farm-level prices from June 1, 2019 to May 31, 2020, with the MYA price finalized on June 30, 2020. The final 2019 MYA prices are $3.56 per bushel for corn, $8.57 per bushel for soybeans, and $4.58 per bushel for wheat.

For ARC-CO calculations, the benchmark (BM) revenue for a given crop is the county BM yield times the BM price, which is multiplied by 86% (0.86) to calculate the county revenue guarantee. The county BM yield for 2019 is the average county yield for a five year period (2013-2017), in which the high and low yields are dropped and the remaining three yields are averaged. Many county BM yields for corn and soybeans have increased in recent years due to very good yield averages from 2015-2017. ARC-CO payments for a given crop are paid when the actual county revenue for the crop falls below the county BM revenue guarantee. The actual county revenue is the final FSA county average yield times the final MYA price for the year.

The final 2019 FSA county average yield is based on county-average yield data from the USDA Risk Management Agency (RMA), which was recently released by the USDA. Prior to 2019, USDA utilized yield data from the National Agriculture Statistics Service (NASS) to determine the final FSA county yields that were used to calculate ARC-CO payments. Most final 2019 county FSA yields for corn and soybeans in the upper Midwest appear to be within a few bushels per acre of the 2019 NASS county average yields that were announced earlier this year. ARC-IC payments for 2019 are based on final 2019 farm-level crop yields, which are based on 2019 reported crop insurance yields.

Based on the final 2019 MYA prices and county FSA yields, the following is an overview of 2019 PLC and ARC-CO payments for major crops in the upper Midwest:

Corn

• : A 2019 PLC payment of $0.14 per bushel will be paid ($3.56/Bu. MYA price, compared to a reference price of $3.70 per bushel). 2019 ARC-CO payments are likely being paid if the final RMA 2019 county yield is 10% or more below the BM yield. Maximum ARC-CO payment will likely occur with a 21% or more yield decline in 2019.

Soybeans

• : No 2019 PLC payments will be paid. ($8.57/Bu. MYA price, compared to a reference price of $8.40/Bu.). ARC-CO payments are likely being paid in most instances with a final 2019 RMA county yield decline of 2 bushels per acre below the BM yield. Maximum ARC-CO payment will likely occur with a 15% or more yield decline in 2019.

Wheat

• : A PLC payment of $0.92 per bushel will be paid ($4.60/Bu. MYA price, compared to a reference price of $5.50 per bushel). Near-maximum ARC-CO payments are being paid in many areas.

For 2019 and 2020 crop years, 75% of corn base acres in the U.S. are enrolled in the price-only PLC program and 19% in the ARC-CO program. It is the reverse for the soybean base acres, with 80% enrolled in PLC and only 14% in ARC-CO. For wheat, 93% of the base acres are enrolled in the PLC program and 6% in ARC-CO.

Approximately 6% of corn and soybean base acres were enrolled in the farm yield-based ARC-IC program choice for 2019 and 2020. The ARC-IC acres were primarily in areas of southwest Minnesota, northwest Iowa, and eastern Dakota’s that were impacted by low on-farm crop yields in 2019. Many of the producers that enrolled in this farm program option will likely receive significant 2019 ARC-IC payments.

All PLC payments are paid on FSA yields on a farm unit yield, which are usually significantly lower than normal yields. The FSA yields for the 2019 PLC payments were carried over from the 2014 Farm Bill, while any yield updates under the 2018 Farm Bill will not be used until the 2020 farm program. The ARC-CO and PLC payment rates per acre for corn, soybeans and other crops that are released by USDA are on a gross payment per acre basis. These gross ARC-CO and PLC payments need to be factored by 85% (0.85), in order to arrive at an ARC-CO payment rate per crop base acre. The 2019 ARC-CO and PLC payments are also subject to the required federal sequestration reduction of 6.2% (0.062), which will affect the final total payment received by farm operators.

All 2019 ARC-CO payments and final 2019 FSA yields for all program crops in all counties in the United States are available on the FSA ARC-PLC website. The FSA website also contains previous county yields, benchmark yields and revenues, FSA yields, ARC-CO payment levels and other farm program information. For counties that have program crops with significant irrigated acres, there is separate farm program data for irrigated and non-irrigated crop base acres in a county. The FSA ARC-PLC website is www.fsa.usda.gov/arc-plc.

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