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2020 farm program choices natasaadzic/Getty Images Plus

Time to make farm program decisions

Choose from price loss coverage and ag risk coverage options, and note changes from previous farm bill.

The farm program choices that are part of the 2018 Farm Bill have been discussed for a long time, and the time to make the initial farm program decisions for 2019 and 2020 has now arrived. Enrollment for the 2019 and 2020 farm program is from now until March 15, 2020 at local USDA Farm Service Agency (FSA) offices. Producers can sign-up for both years together; however, they have until June 30, 2020 to sign-up for the 2020 program. Farm program sign-up for the 2021-2023 crop years will be from October (the previous year) through March 15 (program year). Eligible program crops include corn, soybeans, wheat, and many other crops.

Eligible Producers will be able to choose between the price-only Price Loss Coverage (PLC) and revenue-based Ag Risk Coverage (ARC) program choices for the 2019 and 2020 crop production years. Beginning with the 2021 crop year, producers will be able to make an annual election between ARC and PLC program choices. The ARC program choice includes both the county-yield based ARC-CO program choice and the ARC-IC program, which is based on farm-level yields. The PLC and ARC-CO farm program choice will be specific to each eligible crop on a FSA farm unit, and the choice can vary from farm unit to farm unit for the same crop. The ARC-IC program must be applied to all covered commodities on a given farm unit, and all farm units in a state that are enrolled in ARC-IC must be considered together in one calculation.

Crop base acres will remain at 2018 FSA levels for all crops on most farms. The only adjustments in base acres will be for crop acres that were added via land purchases or land rental agreements, for unassigned generic base acres from the last farm bill, or for acres that are no longer eligible for farm program payments. Producers will have the opportunity to update their FSA farm program payment yields beginning with the 2020 crop year. Yield updates will be based on the average farm yields for the 2013 to 2017 crop years on planted acres for eligible crops. If the updated yields are lower than current levels, producers can choose to keep their current FSA program yields. The farm program yields are used to calculate PLC payments on FSA farm units.

Risk Management Agency (RMA) yields that are used for crop insurance yield calculations, which will be calculated at the county-level, will now be used for determining ARC-CO benchmark (BM) and actual county yields for ARC-CO payments. The National Ag Statistics Service (NASS) yields, which were the primary yield source in the last farm bill, will now be used as a secondary yield data source. The RMA yields will include trend-adjusted (TA) yields for county BM calculations. Calculations for county BM prices and yields will no longer include the data from the previous year, due to the annual farm program choice. (Example: 2019 BM prices and yields are based on the Olympic average (drop the high and low) for 2013-2017.)

Changes

Beginning in 2019, ARC-CO payments will be based on the county where an FSA farm unit is located, rather than the county of the FSA administrative office of the producer, as existed in the last farm bill. For producers with FSA administrative farm units in multiple counties, ARC-CO revenues will be weighted according to the base acres that are physically located in a county.

The reference prices for PLC and ARC-CO programs will be established at the greater of the minimum (statutory) reference prices or 85 percent (.85) of the market year average (MYA) price for the most recent five years, excluding the high and low years. The increased reference price cannot exceed 115% of the minimum reference price. Due to lower MYA price levels in recent years, the 2019 and 2020 reference prices for corn, soybeans and wheat will be at the minimum levels, which are:

  • Corn: $3.70/bu.      
  • Soybeans: $8.40/bu. 
  • Wheat: $5.50/bu.

Calculation formulas, etc. for the PLC, ARC-CO and ARC-IC programs in 2019-2023 will remain similar to the farm programs in the last farm bill. PLC payments are made when the final market year average (MYA) price falls below the reference price for a crop. ARC-CO payments are made when the final county revenue (county yield x MYA price) falls below the benchmark revenue for a given crop. Calculations for the ARC-IC program are similar to ARC-CO, except ARC-IC uses farm-level yield data and considers all crops on a farm unit together. PLC and ARC-CO payments are paid on 85 percent of crop base acres, and ARC-IC payments are paid on 65 percent of base acres.

I have prepared a series of information sheets to help analyze the 2019 and 2020 farm program decision. To receive a free copy of these information sheets, send an e-mail to kent.thiesse@minnstarbank.com. For more information on the PLC and ARC programs, and other details, go to the FSA farm program website.

Key points to remember about the 2019 and 2020 farm program decision:

  • Producers will have more flexibility by being able to make an initial farm program choice is for 2019 and 2020, followed by making an annual program choice from 2021-2023.
  • Producers can change the farm program choice on different FSA farm units for the same crop.
  • Producers can make a different farm program choice for each crop on a FSA farm unit, if they choose either the PLC or ARC-CO program choice.
  • If ARC-IC is chosen on a FSA farm unit, the benchmark and actual revenue for all crops raised during that year on that farm unit are considered in calculations. If multiple FSA farm units are enrolled in ARC-IC, all farm units in a state are considered in ARC-IC calculations. Farm units with 100 percent prevent plant acres in 2019 are likely to receive a significant ARC-IC payment; however, farm units with partial prevent plant acres are more questionable for ARC-IC payments.
  • The expected ARC-CO and ARC-IC benchmark prices for 2019 and 2020 are:

Corn: $3.70/bu. (2019); $3.70/bu. (2020)

Soybeans: $9.63/bu. (2019); $9.25/bu. (2020)

Wheat: $5.66/bu. (2019); $5.50/bu. (2020)

  • 2019 ARC-CO benchmark yields in counties for some crops may vary significantly from the previous BM yields in 2018, due to the switch to using RMA yield data, rather than NASS yield data. In addition, RMA “trend adjustments” are being used for county BM yield calculations.

Remember: The preferred farm program choice in other states or other counties may not necessarily be the best choice where your FSA farm units are located. In addition, your neighbor’s farm program choice may not be your best choice, especially in the case of the ARC-IC program option. Farm operators are encouraged to take the time to attend informational meetings, to read information sheets, and to fully analyze the farm program options for 2019 and 2020.

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