Most crop producers in the Upper Midwest are enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program choice on their corn and soybean base acres for the 2014 to 2018 crop years. Many producers in the region earned a significant 2014 corn ARC-CO payment, while farm operators in some counties also earned ARC-CO payments on their corn base acres in 2015 and 2016. There were some ARC-CO payments for soybeans in 2014; however, payments were quite widespread for the 2015 and 2016 crop years, due to above-average soybean yields in most areas.
The corn benchmark price for the 2017 crop year is $3.95 per bushel, which is down from $4.79 per bushel in 2016, and $5.29 per bushel in both 2014 and 2015. The 2017 benchmark price for soybeans is $10.86 per bushel, which is well below $11.87 per bushel in 2016, or $12.27 per bushel in both 2014 and 2015.The benchmark prices are adjusted each year, using the USDA market-year average (MYA) price for the preceding five years, then dropping the high and low MYA price, and averaging the other three MYA prices.
The benchmark county yield for 2017 is calculated by taking the average county yields for the previous five years (2012-2016), dropping the high and low yield, and averaging the other three yields. The 2017 county benchmark revenue for a given crop is the county benchmark yield times the 2017 benchmark price, which is then multiplied by 86 percent (.86) to calculate the county revenue guarantee. Most county revenue guarantees for corn and soybeans have declined considerably for 2017, due to the sharp drop in the benchmark prices for both crops.
The county benchmark corn yields in most Minnesota counties for 2017 increased significantly from 2016 yields, due to fairly strong average county yields in both 2015 and 2016. The 2011 year was dropped for the 2017 benchmark yield calculation, which was a lower corn yield year in most counties. The increased county benchmark corn yield for 2017 increases the potential for ARC-CO payments; however, that gain is more than offset by the large reduction in the benchmark price for 2017. Most 2017 county soybean benchmark yields also increased slightly, compared to 2015 to 2016 benchmark yields. After another fairly solid yield year in 2017 in many areas of the Upper Midwest, many counties should have further increases in county corn and soybean benchmark yields for the 2018 crop year.
2017 ARC-CO payments for a given crop are paid when the actual 2017 county revenue for the crop falls below the 2017 county benchmark revenue guarantee. The actual county revenue is the final 2017 county FSA yield times the final MYA price for 2017. The 2017 MYA price is the national average corn or soybean price from September 1, 2017 to August 31, 2018, which will be finalized on September 30, 2018. The MYA price is the 12-month national average price for a commodity, based on the average market price received by farm operators across the United States, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month.
As of March 1, 2018, USDA is estimating the 2017 MYA prices at $3.35 per bushel for corn, and $9.30 per bushel for soybeans. The USDA price estimates are updated on a monthly basis in the USDA World Agricultural Supply and Demand Estimates (WASDE) report, which is usually released around the middle of each month.
The USDA National Agricultural Statistics Service (NASS) recently released the 2017 estimated average county yields for corn, soybeans and other crops. The 2017 NASS county yields offer a good estimate of where final 2017 ARC-CO farm program payments are likely to end up, depending on the final 2017 MYA price level. The NASS yields may be adjusted slightly by USDA to arrive at the final 2017 county FSA yields, which are used to calculate the 2017 ARC-CO payments. However, any adjustments in the final 2017 county yields will likely be lower than the 2017 NASS yield estimates, which could potentially increase the likelihood or payment level for 2017 ARC-CO payments. The 2017 NASS county yields are available on the NASS website.
Overall, 2017 ARC-CO payments for corn are not likely in most portions of the Upper Midwest, due to above-average 2017 corn yields in many areas, together with the lower with the much lower 2017 corn BM price of $3.95 per bushel. There are a few counties in northwest Minnesota, as well as some counties in both North and South Dakota, that were impacted by drought conditions and are likely to receive a 2017 corn ARC-CO payment. Most counties in the rest of Minnesota and much of Iowa will not receive a 2017 corn payment. Several of these counties in the Upper Midwest have received corn ARC-CO payments in 2014 and 2015, as well as some counties in 2016.
There is actually more potential for 2017 soybean ARC-CO payments than for corn payments in some locations, due to the increased county benchmark yields in 2017, and more moderate 2017 soybean yield levels. Potential 2017 soybean ARC-CO payments exist for some counties in west-central and northwest Minnesota, as well as several counties in North and South Dakota. Very few counties in southern Minnesota and northern Iowa will receive a 2017 soybean payment, due to stronger 2017 soybean yield levels.
The bottom line is that most counties in the southern two-thirds of Minnesota and northern half of Iowa will not receive any corn or soybean ARC-CO payments for 2017. A select few counties in the northern portion of Minnesota, as well as some drought-stricken counties in portions of North and South Dakota, could potentially receive partial 2017 ARC-CO payments for corn, soybeans and wheat in October 2018. This news will certainly not help aid the very tight 2018 crop profit margins, or the very low farm income levels that currently exist in most counties across the Upper Midwest.
Previous county yields for corn, soybeans and other crops, benchmark yields and revenues, FSA yields, 2014 and 2015 ARC-CO payment levels, and other farm program information are available on the FSA ARC-PLC website.
Kent Thiesse has an Information Sheet, “Estimating 2017 Corn and Soybean ARC-CO Payments,” which contains several tables relating to 2017 ARC-CO payments. He has also prepared 2017 ARC-CO Payment Estimate Tables for most counties in Minnesota and mnorthern Iowa, as well as potions of North and South Dakota. To receive a free copy of the information sheet and the payment tables, please send an e-mail to: [email protected].
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