Editor's Note: Steve Johnson and other members of the ISU Extension Farm Management team are holding over 100 meetings with farmers across Iowa this winter, explaining the new USDA farm program and helping farmers make decisions regarding program options. Steve wears an Iowa State jersey with the numbers 14 and 18 on it (front to back, sleeve to sleeve). Enrolling in the new farm program is a 5-year decision, as it begins in 2014 and goes through 2018.
Will you be planting corn this spring or standing in line at the FSA office? On Thursday night this past week in Marshalltown in central Iowa, Steve Johnson wrapped up his string of 30 "GrowingOn 2015" meetings for Farm Credit Services of America. He made the main presentation at these risk management meetings this January. Johnson is an Iowa State University Extension farm management specialist. He spent considerable time at each meeting explaining the new farm program options farmers have, provided by the recently passed 2014 Farm Bill.
At each of the GrowingOn 2015 meetings, Johnson began with a question: "Give me a show of hands. How many of you have been to the FSA office to update your USDA farm program base acres and yields?" Only about 20% of the farmers attending the meeting at Newton on Thursday morning raised their hands. "What are you waiting for?" he asked. "We know the deadline for getting this done isn't until February 27. But to avoid the long lines at the FSA office, you need to arrange a visit now. If you wait until the middle to the end of February, you'll likely be standing in long lines."
Key question, can you increase your corn base acres?
The first thing you need to consider is whether or not you can increase your corn base acres. If you can do that, then go ahead and reallocate them with FSA. "You can't create new base acres on your farm, but you can reallocate bases, using your actual planted commodity crop acres from 2009 to 2012," he notes. "Generally corn payments are larger than soybean payments and occur more often."
The order of projected highest farm program payments by commodity crops are: corn, sorghum, wheat, barley, soybeans and oats. If you can reallocate some of the crops with lower potential payments, and you didn't plant those acres for four years, then the base acres will be eliminated, says Johnson.
What about updating yields? This may not make a huge difference in your farm program payments in the next five years. But "We may never pass this way again," says Johnson. "This may be the last time in your lifetime for you to update your yields for FSA farm programs. Congress doesn't allow this very often. The last time was 2002. So take advantage of this opportunity while you can."
FSA needs you to come in, update base acres and/or yields
The county offices of USDA's Farm Service Agency statewide are in desperate need to see these landowners and producers to come in and update base acres and/or yields, says Johnson. At the same time, the current producer should consider electing ARC-CO, ARC-IC or PLC by FSA farm number by crop.
Base and yield updates for farms in Iowa are pretty much "no brainer" decisions. The next step, deciding whether to elect PLC or ARC, may take more thought. Only five people out of about 100 people had "elected" to enroll in ARC or PLC at the local FSA office. Again, the deadline is March 31.
Most farmers in Iowa will choose to be in ARC-County program
Johnson believes over 80% of the total base acres in Iowa will elect to be in the ARC-CO program. He gives an example of an actual Boone County farm in central Iowa. The difference in payment for 2014 between ARC-county and PLC was about $25 an acre. His ARC-county potential payment for 2014 on the 50/50 corn –soybean farm would be $37 an acre for that farm—based on his county benchmark maximum payment of $87 per acre of corn base. This farmer has elected to get paid on 85% of his corn base.
Johnson says the ARC-Individual election won't be popular because that payment is calculated on only 65% of your base acres versus 85% of you base with ARC-County. In addition, ARC-Individual requires that you combine all commodity crops on the farm to determine the benchmark revenue annually, thus likely smaller potential payments will be made.
What about PLC? Who in Iowa would sign up for PLC and not ARC-County? "Young, beginning farmers who couldn't risk extremely low prices over 5 years," says Johnson. "Those who think corn prices will always be low enough to trigger PLC payments, or those counties with lower benchmark county revenues and large 2014 corn yields resulting in much smaller ARC-County payments." The PLC program tends to be more beneficial for peanut and rice growers, he adds. "You might also see some wheat farmers who want the SCO (supplemental coverage option) on crop insurance that's available only if you elect and enroll in the PLC program."
Here are some common questions farmers are asking. Steve Johnson provides the following answers:
What are the deadlines for ARC and PLC programs?
Answer: February 27 for base and yield update; March 31 for election of programs. The date for enrollment into the contract is "to be determined" but will likely be sometime next summer. Producers should not wait until the last minute on any of these important deadlines. If you haven't done so already, contact your local FSA office and make an appointment as soon as possible.
Remember, landowners must agree to all base and yield updates, and producers make the 5-year program election. Producers who make no program election with FSA will automatically default to PLC starting in 2015, with no payments in 2014.
What happens if the landowner won't sign the FSA's CCC-858 form (base reallocation and yield update) by Feb. 27 deadline?
Answer: The farm automatically retains the old base acres and counter-cyclical (CC) yields as of Sept. 30, 2013. On March 2, current producers on the farm will be able to make an ARC or PLC election. Only producers who have a share in the covered commodity need to agree on the election. If an owner doesn't have a share in the covered commodity then his/her signature on the election is not required.
With the number of farm's eligible for base and yield update in the next few weeks, what would you suggest to farmers?
Answer: Don't delay any longer. Choose the farms to update that you can still get the landowner's signature. While you are in the FSA office and have completed CCC-858 form, go ahead and elect which program you'd prefer for the 5 year life of the farm program. The election is a one-page CCC-857 form. If you change your mind, you can always request a change before the March 31 deadline for election. This frees up more time in the FSA office for those farms that are still struggling in making the update and election decisions.
What did you hear from farmers in the meetings you've completed in January?
Answer: Most of the farms are updating base acres, but only if they can create a larger corn base. Corn is likely the one commodity crop with the larger payments and the payments are made more often over these 5 years. Farmers are updating their farms' yields to reflect the increased production, as many yields have not been updated since the 2002 or the 1985 farm programs. The ARC-County or ARC-CO is being elected on the majority of both corn and soybean base acres. The likelihood of payments on corn base for both 2014 and 2015 statewide that will exceed the total payments of PLC for the entire 5 years seems likely, especially if national average cash prices move higher. ARC-CO is the higher risk strategy, but likely generates the larger total government farm program payments. Each producer should do their homework and decide the program that best fits their risk profile.
For farm management information and analysis visit ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm; ISU farm management specialist Steve Johnson's site is at www.extension.iastate.edu/polk/farm-management.