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Who will get an ARC check?

Ag Marketing IQ: Initial 2023 data for some 3,000 counties forecasts payments going to corn and soybean farmers in 250 counties. How USDA calculates the loss greatly impacts which grain farmers get paid.

Bryce Knorr, Contributing market analyst

October 28, 2024

4 Min Read
Drought affected field of corn
Getty Images/JENS SCHLUETER/AFP

USDA didn’t proclaim “The check’s in the mail” last week when it announced 2023 Agriculture Risk Coverage payments. Most bills get paid these days by digital transfer and stamps are more collectible than necessary.

But, as I wrote last week, growers face losses on 2024 crop corn and soybeans. Program payouts on last year’s crops won’t offset that red ink much, according to county-by-county ARC details.

New crop county yields won’t come out for months. Statewide Nov. 9 production estimates aren’t likely to show much change from October, though surprises can’t be ruled out after the agency’s most recent estimates were larger than expected in some areas with pockets of poor stands. The latest Drought Monitor showed 93% of U.S. corn fields are experiencing “abnormally dry” conditions, and only 8% escaped any shortages. Soybeans fared only marginally better, with 14% having no drought and 87% at least “abnormally dry”.

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Where’s the check?

USDA has yet to publish county-level maps of the 2023 payments, but areas with low yields likely will look pretty much like results from 2022, when losses from long-term drought in the western U.S. spread to parts of the eastern Midwest and Southeast. The first round of 2023 payment data for some 3,000 counties forecasts payments going to 250 counties nationwide for both crops, with payments averaging a little more than $40 per acre. That’s clearly a drop in the bucket to those with losses of $100 per acre or more.

USDA’s breakout of 2023 payments showed why relatively few corn farmers were in the money – and why that could continue when all is said and done for the 2024 marketing year, essentially after the summer of 2025. The nationwide average corn yield in 2023 was close to normal – and so was USDA’s September 2024 estimate.

Soybean history over the past decade is more erratic. In 2019, the average yield was below normal by 5.4%. A wet spring, planting delays, and slow development that delayed maturity allowed frosts to nip production enough to trigger more widespread compensation, especially east of the Mississippi River. Low prices lingering from the U.S.-China trade war didn’t help matters, either.

The multi-step process of the current ARC iteration bases payments on a comparison of “benchmark” revenues to ARC guarantees. Benchmark is a function of average “Olympic” prices times yields for 2017-2021. The Olympic system takes out high and low numbers and averages the rest.

ARC received tweaks over the years following fairly widespread complaints that payment formulas didn’t treat all counties the same. But 2023 shows how some farmers in neighboring counties still fared differently when they went to their virtual mailboxes.

Tale of two counties

Take results from two counties on Iowa’s western edge, Woodbury and Crawford. USDA county estimates in Crawford County fell 12.5%, from 216.4 to 187.9 bushels per acre from 2022 to 2023. The payment system boosted the county’s number to 189.27 bpa for 2023, 21.2% below its “Olympic” average of 240.26 bpa from 2017-2021.

Corn yields in Woodbuy for 2023 were off 15.9% in the original county estimates, falling to 168.3 bpa. But the ARC program broke out both irrigated and nonirrigated results for Woodbury. Farms pumping water on crops got nothing from ARC, because yields were close to average. But nonirrigated Woodbury County fields harvested yields of just 149.13 bpa yield. Not only was that off 25.5% from 2022, but it also was 31.9% lower than its Olympic average of 218.85 bpa, triggering a payment of $70.54.

How can USDA claim different yields for the same year? One answer may lie in where the data comes from. County yields put out in February the winter following harvest, which come from the National Agricultural Statistics Agency, don’t break out irrigated versus nonirrigated fields. But the ARC program, administered by the Farm Service Agency, uses more granular data, from results farmers file for crop insurance with the Risk Management Agency. Not all farms participate in government programs, but the vast majority do, while NASS surveys only a modest fraction of U.S. farms: “Approximately 7,500 producers were interviewed during the survey period and asked questions about probable yield,” according to the NASS October Crop Production report.

Nearly 2.7 million farms were counted by the FSA in its Oct. 11 report.

Hold your breath?

Any farmer will gather plenty of cobwebs waiting by the mailbox for 2024 program year checks, which won’t come out for a year. By then, the landscape for yields and prices could change substantially, especially at the local level.

But nationally, at least, payments may be “lost in the mail.” The Oct. 11 production report listed corn yields up 3.7% from last year, with soybeans rising 4.9%. As always, the devil will be in the details.

About the Author

Bryce Knorr

Contributing market analyst, Farm Futures

Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and Commodity Trading Advisor. A journalist with more than 45 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.

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