Farm operators are encouraged to enroll on the 2019 and 2020 farm program at local FSA offices as soon as they have reached their final farm program decision. Failure to enroll in the farm program for 2019 and to make a farm program choice for 2019 and 2020 will result in no payment eligibility for the 2019 crop year, which could be quite costly in some areas. The initial farm program choice is only for the 2019 and 2020 crop years.
Most producers seem to have a pretty good understanding of the price-only price loss coverage (PLC) and the county-yield revenue based ag risk coverage (ARC-CO) farm program choices, especially since the USDA National Ag Statistics (NASS) county yield estimates were released in late February. However, there is a much more limited understanding regarding the ag risk coverage program that is based on farm-level yields (ARC-IC) as a 2019 and 2020 farm program choice. Following are some key questions that have been raised frequently, with brief answers, regarding the ARC-IC farm program option:
What farm program flexibility options does a producer have with the ARC-IC program?
The ARC-IC program must be applied to all covered commodities on a given FSA farm unit number, unlike PLC or ARC-CO where the farm program choice can vary from commodity to commodity on the same farm unit. In addition, all FSA farm units in the same state that are enrolled in ARC-IC must be considered together in one ARC-IC calculation. This can limit situations where ARC-IC is a favorable farm program option.
How is the calculation formula for the ARC-IC programs different from the ARC-CO program?
Calculations for both the ARC-IC and ARC-CO programs use the same national annual benchmark prices to calculate benchmark revenues. However, ARC-IC uses farm-level yield data from 2013 to 2017 to calculate 2019 benchmark revenues, rather than the county average yields used for ARC-CO. All program crops on a FSA farm unit are calculated together, based on the percentage of crops that were planted in a given year, to arrive at an ARC-IC benchmark revenue for the year on that farm unit.
How do 2019 planting decisions affect benchmark revenue for the ARC-IC program?
Unlike the PLC and ARC-CO program options, the ARC-IC program is based on the crops that were raised on a FSA farm unit in a given year. The ARC-IC benchmark revenue is calculated based on the mix of farm program crops that were raised in a year. For example, a farm unit with 100 crop acres that was planted to half corn and half soybeans would use half of the revenue of each crop for benchmark revenue calculations. If the farm unit was planted all to corn in 2019, only the corn data would be used in calculations and vice versa if only soybeans were planted. If multiple farm units in a state is enrolled into ARC-IC, all farm units must be factored together for benchmark revenue calculations.
How is the ARC-IC revenue guarantee and maximum ARC-IC payment calculated?
The ARC-IC revenue guarantee for a year is calculated by taking the blended benchmark revenue on a farm unit or group of farm units times 86 percent (.86). The maximum ARC-IC payment per acre is 10 percent (.10) of the blended benchmark revenue.
How are final ARC-IC revenues calculated and payments determined for a given year?
The final ARC-IC revenue for 2019 or any other year is based on the final revenue for each program crop that was raised in a year, which is again factored by the percentage of each crop that was raised that year. The final ARC-IC revenue is based on the actual farm-level yield for the year times the national market-year average (MYA) price for the crop. The MYA price for ARC-IC is the same as for ARC-CO and PLC calculations. If the final ARC-IC revenue for the FSA farm unit or a group of farm units is lower than the ARC-IC revenue guarantee, an ARC-IC payment would be paid for the year.
How do crop base acres on a farm unit affect ARC-IC payments?
Calculated per-acre ARC-IC payments are applied to all crop base acres on a FSA farm unit, regardless of the type of base acre. ARC-IC payments are paid on only 65 percent (.65) of base acres, which can be a deterring factor for ARC-IC. By comparison, PLC and ARC-CO payments are specific to the type of crop base acres on a farm unit and are paid on 85 percent (.85) of base acres.
What is the impact of 2019 prevent planted acres on the ARC-IC farm program decision?
Farm units with 100 percent prevent plant acres in 2019 are likely to receive the maximum eligible ARC-IC payment for 2019, due to the fact that actual revenue on the farm unit would be zero. However, on farm units with partial prevent plant acres and some acres planted to farm program crops in 2019, only the crops produced are considered in the ARC-IC calculation (prevent plant acres are not considered). If the final revenue on the planted acres is too high, there would not be an ARC-IC payment on any base acres. Alfalfa and other non-program crops are not considered in this calculation.
Are there situations besides 2019 prevent plant acres that may favor ARC-IC?
ARC-IC may be a viable farm program option in more situations than expected across Minnesota. FSA farm units that had very low crop yields in 2019 could also be likely to qualify for partial or maximum 2019 ARC-IC payments. This could especially be an option in situations with localized very low farm-level yields in 2019, which are located in counties that are not likely to receive 2019 ARC-CO payments. At this point, it does not appear likely that there will be any 2019 PLC payments for either corn or soybeans.
What about combining multiple FSA fam units together for ARC-IC calculations?
The ARC-IC program calculations are easiest to figure on individual FSA farm units; however, there may be situations where farm units can be combined together to earn ARC-IC payments on a larger number of crop base acres. If eligible, this can amount to several thousand dollars. It is important for producers to understand the ARC-IC calculations before finalizing this decision. North Dakota State University (NDSU) has a very good ARC-IC calculator that allows calculation of multiple farm units together.
What are some precautions to keep in mind regarding ARC-IC as a farm program choice?
Due to the fact that ARC-IC payments are paid on only 65% of crop base acres, as compared to 85% with ARC-CO, it’s possible that ARC-CO payments in a county with very low 2019 yields may be higher than maximum ARC-IC payments, especially for corn. However, based on current estimates for Minnesota, this is likely to only affect some counties in in southwest Minnesota for 2019. It is also important to remember that FSA farm units will need to remain in the ARC-IC program for both 2019 and 2020, and that the program choice cannot be switched to PLC or ARC-CO until 2021.
Farm operators are encouraged to take to time to get informed about the various 2019 and 2020 farm program choices and to analyze which program choices are best for their FSA farm units by the March 16 deadline. Remember, the best farm program choice in another county or another area of the country may not necessarily be the best program choice in your county. In addition, your neighbor’s farm program choice may not be the best program choice on your farm units, especially in the case of considering ARC-IC as a program choice.
Please send an e-mail to firstname.lastname@example.org to receive a free copy of information sheets on 2019-20 farm program decisions prepared by Kent Thiesse, farm management analyst, including estimated 2019 ARC-CO payments based on the recently released 2019 NASS county corn and soybean yield estimates. For more information on farm program enrollment, farm operators should contact their local FSA office, or go to the USDA Farm Bill website.