Farmers' choice for farm programs

Farm operators in Minnesota, Iowa, and other Midwestern states overwhelmingly selected the Agricultural Risk Coverage-County (ARC-CO) farm program choice for corn and soybeans for the 2014-2018 crop years. The other farm program choices were the Price Loss Coverage (PLC), or Agricultural Risk Coverage-Individual Coverage (ARC-IC) programs. USDA recently released the results of farm program sign-up, which ended on 3-31-15. It appears that the higher likelihood of corn and soybean ARC-CO payments for the 2014 and 2015 crop years in many States probably leaned the choice toward the ARC-CO program.

The potential ARC-CO program payments are based on a combination of the 12-month national market year average (MYA) prices for a crop and the average county yields for a given crop for that year. The ARC-IC program payments are calculated in the same manner, except utilizing farm-level annual crop yields. The PLC program payments are based on only the MYA price, compared to crop reference prices. PLC payments occur in any year that the MYA price for corn is lower than $3.70 per bushel, and $8.40 per bushel for soybeans.

The MYA marketing year for corn and soybeans runs from September 1 in the year of harvest until August 31 the following year. Any farm program payments occur in October of the year following harvest. (For example --- 2014 farm program payments would occur in October, 2015.) Farm program payments are paid on 85 percent of crop base acres for the ARC-CO and PLC program, but only on 65 percent of base acres for the ARC-IC program. This probably accounted for the low enrollment in the ARC-IC program.

Following are the results of the new farm program sign-up for the entire United States, listing the total number farms enrolled, total base acres enrolled, and percentage of crop base acres enrolled in each farm program option :

  • Corn --- 1,363,342 farms; 96,768,447 base acres; 93% ARC-CO; 7% PLC; <1% ARC-IC
  • Soybeans --- 1,062,142 farms; 54,514,972 base acres; 97% ARC-CO; 3% PLC; <1% ARC-IC
  • Wheat --- 802,482 farms; 63,699,144 base acres; 56% ARC-CO; 42% PLC;  2% ARC-IC
  • Barley --- 111,277 farms; 5,185,717 base acres; 22% ARC-CO; 75% PLC; 4% ARC-IC
  • Oats --- 49,356 farms; 2,020,243 base acres; 32% ARC-CO, 67% PLC; 1% ARC-IC

Complete farm program enrollment data for all crops and all States can be found on the USDA website.

The current USDA estimate for the 2014 MYA price estimate for corn is $3.70 per bushel, and $10.05 per bushel for soybeans. Based on these estimates, there would be no PLC payment for 2014 on either corn or soybeans. There could be a small corn payment if the final 2014 MYA price drops below $3.70 per bushel. 2014 ARC-CO payments for corn in most Southern Minnesota counties will be $70.00-$80.00 per corn base acre. The estimated 2014 ARC-CO payment for soybeans in Southern Minnesota ranges from zero to $50.00 per soybean base acre, depending on the 2014 average county soybean yield compared to the 5-year average yield.

USDA has a preliminary MYA estimate of $3.45-$4.05 per bushel for the 2015 crop year, or an average of $3.75 per bushel. At that MYA price level, the potential for receiving a partial or maximum ARC-CO payment for 2015 would again be quite high, depending on county average corn yields for 2015. There would be no PLC payment for corn in 2015, unless the 2015 MYA price drops below $3.70 per bushel. USDA has a preliminary soybean MYA estimate of $8.50-$10.00 per bushel for the 2015 crop year, or an average of $9.25 per bushel. At that MYA price level, the potential for receiving a partial or maximum ARC-CO payment for 2015 would be quite high; however, the MYA price would need to drop below $8.40 per bushel before any 2015 PLC payments would be earned.

Most farm operators in Minnesota, Iowa, and other major corn and soybean producing states opted for the “most sure thing” with the new farm program choices. For many producers that included fairly substantial 2014 ARC-CO payments for corn, as well as 2014 ARC-CO soybean payments for some producers, together with a high likelihood of substantial ARC-CO corn and soybean payments again for the 2015 crop year. The high level of statewide enrollment in the ARC-CO program for corn and soybeans in the new farm program (2014-2018) also suggests that cash flow levels in corn and soybean production are very tight in many areas. It appears that the likelihood of fairly substantial ARC-CO payments in 2015 (2014 crop year) and 2016 (2015 crop year) looked very attractive to reduce the financial risk. 

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