A single visit to the Farm Service Agency office to select and sign up for one of the new USDA commodity programs won't be enough. It takes information and patience to understand and navigate the farm program options created by the 2014 Farm Bill. The new program options are more complex than those of the past. And when you choose a program, it's a one-time decision that lasts for five years.
Pressure to make good decisions intensifies when crop margins are tight. Enrolling in the right program could be the difference between black and red ink. "It likely means at least three trips to the FSA office just to sign the appropriate documents," says Steve Johnson, an Iowa State University Extension farm management specialist. Thinking through the farm program decision and making the best choices for your farming operation involves three key steps, he explains.
• Until Feb. 27, 2015: Farmland owners have a one-time opportunity to reallocate base acres and update APH yields on each farm to reflect current crop production. The process began last October and those decisions are due at the county FSA office by Feb. 27.
• By March 31, 2015: Once a landowner makes the base and yield decision, the current producer on the farm will decide by FSA farm number whether to elect either the new Agricultural Risk Coverage program or the Price Loss Coverage program for the 2014 through 2018 crop years. That election decision is due March 31. ARC has two options, ARC-county and ARC-individual coverage.
• From mid-April 2015 through summer 2015: The third decision is to actually enroll in the program you've chosen. You still have to enroll each year. When producers first enroll they must sign contracts for both the 2014 and 2015 crop years, as the first two of the 5 years will run concurrently.
Updating and reallocating, decision is made by FSA farm number
The decision to either retain or reallocate base acres is made by Farm Service Agency farm number. Last August Farm Service Agency sent all landowners and operators a Summary Acreage History Report for each farm. It lists crop acreage bases, planting history for 2008-12 and Counter-Cyclical yields. Some farmers noticed that the FSA numbers on the report may not match their old base acres listed as 2014 base acres, or the planted acres on the farm from 2008 through 2012 or the CC yield created from the 2002 farm bill. If they don't match, that data needs to be corrected; contact Farm Service Agency immediately.
Most Iowa farms were in a corn-soybean rotation in 2008 to 2012, so decisions to retain or reallocate base acres depend on whether the farm can create a larger corn base than the reported 2014 base. "Potential ARC or PLC payments for the corn base tend to be larger with payments made more often than for soybeans," says Johnson. "If you can create a larger corn base by reallocating, then do it."
How about updating yields? To update a farm's yields, you need to determine if you can create a larger yield than the old CC yield listed in the Farm Service Agency report received in August 2014. If you have access to actual yields by crop for 2008-12, you can update and create a new PLC yield for each commodity crop on that farm. To help decide whether to update base acres and yields, use the FSA web tools at www.fsa.usda.gov/FSA.
The tougher question is should you choose ARC or PLC?
The more difficult question is the next step in the process—deciding whether to elect ARC or PLC. ARC offers revenue protection at either the county or individual farm level while PLC offers price protection. ARC resembles the Average Crop Revenue Election or ACRE program in the 2008 Farm Bill.
Most farmers Johnson has talked to are leaning toward ARC-CO. Since mid-November he and his ISU colleagues have presented information at over 100 meetings in Iowa and surrounding states discussing the new farm programs. "I think ARC-CO will be the most popular choice in the Corn Belt," he says. "ARC-CO will trigger larger payments to participating farmers, especially in the first two years of the program, 2014 and 2015."
Choosing between ARC and PLC will also depend on national average cash price expectations over the next 5 years. ARC will make payments based on revenue (calculated as price times yield) of each covered crop on the farm. PLC will make payments based on the market price of each covered crop on the farm.
Indications are PLC won't be a popular choice in Corn Belt
While corn payments will likely be fairly large for ARC-CO, especially on corn base acres for 2014 and 2015, for PLC the payments will not be as much, says Johnson, "unless we end up getting prices significantly below the reference prices of $3.70 per bu. corn and $8.40 per bu. soybeans, respectively. I don't think PLC will be a popular choice in the Corn Belt. That is, unless you see value in the new Supplemental Coverage Option or SCO."
SCO is a new crop-insurance supplement product that uses county yields and is only available to farmers who elect and enroll in PLC.
Start now and avoid lines at FSA office in February and March
Johnson is afraid farmers will back these decisions up against FSA's deadlines. FSA county offices will be really busy in February and March. "I'm advising farmers to make these decisions now, in January," he says. The farm program meetings ISU and FSA have held for farmers across the state are well-attended. The meetings, which continue in January and into February, are helping remove a good share of the confusion and provide helpful information on program options.
Summarizing, what you need to do now is update your base acres—if you can create more corn base. And update APH yields, because you can do it. FSA may not provide this opportunity again for a long time; the last time farmers were allowed to do this was 2002. Also, when making your decision on farm program choice, keep in mind most farmers will likely choose ARC-CO as they may collect payments ranging from $40 to $80 per corn base acre in in 2014 and likely again in 2015.
Easy-to-understand YouTube videos from ISU are helpful
"You make your own decision as to what's best for your farming operation," notes Johnson. "ARC-CO is the high-risk, high reward strategy. Farmers used that strategy for years when the USDA program offered LDP or Loan Deficiency Payments. I see ARC-CO as the likely choice in most of the analysis I have run."
He adds, "The northern three-fourths of Iowa is going to have maximum county ARC payments for 2014 and the potential is there for 2015 as well. The corn base acres are where it's at in terms of these potential payments."
For more information go to ISU's Ag Decision Maker website and click on "2014 Farm Bill Information." Also, Johnson has a series of YouTube videos available for viewing that are titled "Finalizing ARC-PLC Decisions" on this same website. The videos are 8 to 10 minutes each and are easy to understand. It's another way to help provide background information so you can make a decision that's best for your farm.
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.