Calculating 2015 ARC-County Payments in Iowa

Calculating 2015 ARC-County Payments in Iowa

Payments released by USDA in Oct. 2016 are for crop acres enrolled in Agriculture Risk Coverage program during 2015 crop year.

In early October the USDA Farm Service Agency (FSA) released nearly $650 million in payments to Iowa farmers for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. The average 2015 ARC-County (ARC-CO) payment per base acre in Iowa was $33.51 for corn and $15.68 for soybeans, respectively.

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

SAFETY NET: With over 22 million base acres in the state enrolled in ARC-CO or PLC, estimated total payments for Iowa producers under ARC-CO and PLC for 2015 marketing year is nearly $650 million. Farmers are receiving safety-net payments due to the crop market downturn. Editor’s Note: Steve Johnson is the Iowa State University Extension farm management specialist in central Iowa. Contact him at [email protected]

Final 2015 FSA county level yields were released by the FSA on October 14, which is the final information needed for calculating payment rates under the ARC-CO program. In late September, USDA released the Marketing Year Average (MYA) national cash prices for the marketing year that began September 1, 2015 and ended August 31, 2016. Those final cash prices for the 2015-16 marketing year were $3.61 per bushel for corn and $8.95 per bushel for soybeans, respectively.

The 2015 ARC-CO payments per corn base acre were generally higher in northern counties. The ARC-CO payments were larger in the eastern counties of the state but proved much more variable statewide.

PLC Program Payments for Corn Only
With the 2014 Farm Bill, Iowa farmers had two primary options in which to enroll a farm and associated base acres, ARC-CO or PLC. This decision was a five-year commitment to the program elected. The PLC program was an alternative to the ARC-CO program should a farmer choose. It too provided a safety net for farmers 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. Enrollment annually in the program elected was still required by FSA.

No PLC payments were received in Iowa for 2014, but a small payment will be received for 2015 on those corn base acres enrolled in PLC. A total of $3.5 million in PLC payments were made on corn base acres only for those farmers enrolled. The payment per bushel was adjusted to $0.07 bushel (after the 6.8% sequestration), and based on yield information at the farm level. Farmers were given the option to update their farm’s yield information with FSA during program sign-up in 2014 and 2015.

Calculating ARC-CO Payments
ARC-CO payments totaled $646 million for the 2015 crop. Thus, the drop in 2015 payments was nearly $300 million from those received in 2014, despite a decline in the 2015-16 MYA national cash prices from $3.70 to $3.61 per bushel for corn and from $10.10 to $8.95 per bushel for soybeans, respectively.

The primary reason for the drop in 2015 ARC-CO payments was that many Iowa counties had record 2015 corn and soybean yields. The final National Ag Statistics Service (NASS) state yields were 192 bushels per acre for corn and 56.5 bushels per acre for soybeans, respectively.

Final payments are calculated at 85% of the farm’s base acres. Each county has a county crop revenue predetermined and then each October, the actual revenue (county yield times the MYA national cash price) is subtracted to determine the final county payment. In addition, Congress enacted a 6.8% sequestration adjustment in 2011.

The guaranteed price for these 2015 payments was calculated as the five-year Olympic MYA of the national cash prices for the most recent five years. For the 2015 payment, those years are 2010 through 2014. The low price was in 2014 and the high price was in 2012, which are removed. This cash price average was $5.29 per bushel of corn and $12.27 per bushel for soybeans, the same as was used in determining 2014 payments.

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 2010 thru 2014. Thus, county yield differences are reflected in the final ARC-CO payments received.

Forecasting 2016 ARC-CO Payments
The five-year Olympic average national cash prices will drop slightly for the 2016 ARC-CO payments to $4.79 per bushel corn and $11.87 per bushel for soybeans, respectively. The years used for 2016 payments will be 2011 through 2015. Both 2014 and 2015 are low prices, thus the national cash price to determine the revenue guarantee will decline for calculating these potential payments in subsequent years.

The 2016 final county yields could be even larger than 2015 for many Iowa counties. In October, state record yields of 198 bushels per acre for corn and 58 bushels per acre for soybeans were forecast by USDA. In February, NASS will release their 2016 final county yields. You can use these yields to make estimates of 2016 ARC-CO payments that might be provided in October 2017.

More information on the 2014 Farm Bill, including decision tools to see detailed calculations of payments by county, is available through Ag Decision Maker website. Maps of payments can be found on the Center for Agricultural and Rural Development Farm Bill mapping tool. Projections for 2016/17 payments are updated regularly as information is released by USDA 
TAGS: Soybean USDA
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