Final 2014 market year average prices announced

Final 2014 market year average prices announced

Most crop producers in Minnesota and northern Iowa that are enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program choice on their corn base acres will earn a significant farm program payment for the 2014 crop year. In addition, farm operators in some counties will also earn significant ARC-CO payment on soybean base acres for the 2014 crop year. All farm program payments for the 2014 crop year will be paid in October 2015.

All 2014 ARC-CO payments are based on the final national market year average (MYA) price for the 2014 crop year, and MYA prices were finalized on Sept. 30. The final 2014 MYA prices announced by the National Ag Statistics Service (NASS) were $3.70 per bushel for corn, and $10.10 per bushel for soybeans. These are the MYA prices that will be used across the United States on a county basis to determine if corn and soybean producers are eligible for a 2014 ARC-CO payment in October. Based on the final MYA prices, there will no 2014 Price Loss Coverage (PLC) payments for either corn or soybeans.

2014 ARC-CO payments for corn or soybeans are being paid when the actual 2014 county revenue for that crop falls below the 2014 county revenue guarantee for that crop. The actual county revenue is the 2014 NASS County yield for corn or soybeans, which was reported in spring 2015, times the final 2014 MYA price for that crop. If that revenue amount is lower than the revenue guarantee for that crop in a given county, producers in that county who are enrolled in the 2014 ARC-CO farm program would earn a 2014 ARC-CO payment.

The revenue guarantee for a given crop is the benchmark (BM) revenue times 86% (.86). The BM revenue is the 5-year (2009-2013) county average yield (dropping the high and low yield) times the BM price, which is the 5-year (2009-2013) average MYA price (again dropping the high and low price). The 2014 national BM prices were $5.29 per bushel for corn and $12.27 per bushel for soybeans, which will also likely be the BM prices for the 2015 crop year. Since these corn and soybean BM prices were considerably higher than the final 2014 MYA prices, it increases the likelihood of 2014 ARC-CO payments in many counties.

The relationship between the 2014 NASS county yields and the 2014 county benchmark (BM) yields is extremely important in calculating potential 2014 ARC-CO payments for corn and soybeans in a given county. Expressing the 2014 NASS County yield as a “% of BM yield” is more important than the final county yield in determining estimated ARC-CO payments. If the 2014 NASS county yield, expressed as a “% of BM yield” is below 100%, there will likely be a 2014 ARC-CO payment for corn and soybeans. However, as the 2014 “% of BM yield” increases above 100%, the 2014 ARC-CO payment for corn or soybeans is reduced, and if that percentage is high enough, there would be no 2014 ARC-CO payment.

There can be a significant difference in the estimated 2014 ARC-CO payments from county to county, depending on the 2014 county NASS yield, expressed as a “% of BM yield”. The estimated 2014 ARC-CO payment for corn in most southern Minnesota and northern Iowa counties will be at the maximum level, which ranges from $70-80 per corn base acre, with slightly lower payment rates in central and northern Minnesota. The ARC-CO estimates for corn will likely be different in states such as Illinois and Indiana that had much higher county NASS corn yields in 2014, and probably had a much higher 2014 % of BM yield. Approximately 99% of the corn base acres in Minnesota, and 97% in Iowa, are enrolled in the ARC-CO program.

The estimated 2014 ARC-CO payments for soybeans in Minnesota and Northern Iowa is significantly different than corn, and will be totally dependent on the 2014 “% of BM yield” for a given County.  The estimated 2014 ARC-CO payments for soybeans in Southern Minnesota and Northern Iowa are likely to range from zero to just over $50.00 per soybean base acre. About half of the counties in that region would get either a partial or maximum payment, depending on the 2014 County yield, expressed as a “% of BM yield”, compared to the 5-year county average benchmark yield. Over 98% of the soybean base acres in Minnesota and Iowa are enrolled in the ARC-CO program.

There can be a wide variation in 2014 ARC-CO payments from county-to-county, even in neighboring counties. For example, Blue Earth County in south-central Minnesota is likely to receive the maximum 2014 ARC-CO payment for soybeans, due to having a 2014 “% of BM Yield” of only 93%. However, neighboring Watonwan County had a 2014 “% of BM yield” of 110%, and producers will receive no 2014 ARC-CO payments for soybeans. Understanding the “% of BM yield”, and why there is such a wide variation in 2014 ARC-CO payments from county-to-county, can be very difficult for producers to understand.

Sequestration and resources

Farm operators should be aware that the 2014 ARC-CO payments will likely be subject to mandatory sequestration reductions by the Federal government. Sequestration is the reduction, of annual spending for most Federal programs, including USDA farm programs, which was part of the 2011 legislation passed by Congress intended to reduce the Federal budget deficit. It is expected that USDA will be required to reduce 2014 farm program payments by approximately 7%.

Resources available on estimating 2014 ARC-CO Payments

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