USDA announced in early October that roughly $8 billion will be paid to farmers nationwide this month under the Agricultural Risk Coverage and Price Loss Coverage programs. These payments are for 2016 crop and use the 2016-17 marketing year national cash prices.

USDA also released details on final county yields so that ARC-CO (County) and PLC payments for major crops, such as corn or soybeans, could be determined. Iowa farmers can expect to receive a much smaller portion of these total federal dollars as compared to payments made in 2014 and 2015 for the ARC-CO program.

Iowa farmers reflected the national trend with record corn and soybean yields and production in 2016. As a result, the final Marketing Year Average (MYA) national cash prices released on Sept. 29 by the USDA National Ag Statistics Service were $3.36 per bushel for corn and $9.47 per bushel for soybeans.

Expect limited ARC-CO payments for 2016
Because of these low national cash prices, it will require a county yield determined by the Farm Service Agency that is smaller than the five-year Olympic average county yield to trigger the ARC-CO payment. Thus, Iowa farmers should expect limited ARC-CO payments for 2016, as most Iowa counties had record yields. Statewide, NASS estimated in February that final 2016 yields would average 203 bushels per acre for corn and 60.5 bushels per acre for soybeans.

Farms that have 2016 payments triggered can expect their ARC or PLC payment deposits about mid-October. In 2015, farmers were required to elect either ARC or PLC programs for their farms that could not be changed through the five-year life of the farm program, or the 2014 through 2018 crop years.

There are more than 22 million crop base acres in Iowa. Corn accounts for 69% of the state’s total base acres and soybeans 30%. Note that farmers elected ARC-CO on over 97% of these base acres, thus potential annual payments can vary by county.

 

Sources: ISU

Iowa State University Extension provides projections for ARC-CO payments using NASS final county yields and the midpoint of USDA’s monthly World Agriculture Supply and Demand (WASDE) estimates.

The latest September numbers were for ARC-CO projected payments to be made on corn base acres in about 61 counties for 2016, but only three counties for soybeans. Those payments would average $12.70 per base acre for corn and 33 cents per base acre for soybeans statewide.

Note that the NASS final yields can differ slightly from those used by FSA. NASS uses harvested acres and FSA uses planted acres in calculating their final county yields. Thus, any ARC-CO payments are projected prior to the actual final payments made by FSA in mid-October.

Calculating ARC, PLC payments                
Final payments are calculated using 85% of the farm’s base acres. Each county has a county crop revenue predetermined, and then each October FSA subtracts the actual revenue (county yield times the MYA national cash price) to determine the final county payment. In addition, there’s an annual 6.8% sequestration adjustment that was enacted by Congress in 2013.

The guaranteed price for these 2016 payments was calculated using the most recent five-year Olympic average marketing year national cash prices. For the 2016 payment, those years are 2011 through 2015. The low price was in 2015 and the high price was in 2012, which are then both removed. The Olympic cash price average was $4.79 per bushel of corn and $11.87 per bushel of soybeans.

The ARC-CO guarantee revenue was calculated as 86% of the product of the guaranteed price and the five-year Olympic average of the final county yields in 2011 through 2015. Thus, county yield differences are reflected in the final ARC-CO payments received.

PLC program payments for corn only
The PLC program was offered as an alternative to the ARC-CO program should a farmer choose to elect and enroll that farm. Farmers elected PLC on only about 3% of Iowa’s base acres, almost exclusively in corn. It too provided a safety net should the MYA national cash prices fall below the set reference prices of $3.70 for corn and $8.40 for soybeans. The ARC-CO or PLC election was made once and would last during the five-year life of the farm program.

No PLC payments were received in Iowa for 2014, but a small payment of about 7 cents per bushel was made in 2015 on those corn base acres enrolled in PLC. Expect the PLC payment to be about 30 cents per bushel (after the 6.8% sequestration) in 2016 and based on yield information at the farm level.

Farmers were given the option to update their farm’s yield information during program election and sign-up in 2015. However, most farms elected the ARC-CO program, so farm-level yields may not have been updated. Some farms still have corn yields of 120 to 140 bushel per acre that are used to determine the final PLC payments if triggered.

Johnson is an Iowa State University Extension farm management specialist. Contact him at [email protected].