Why it is not OK to use NASS yields to calculate ARC-CO payments

plastina_alejandro_2014Alejandro Plastina, ISU Extension Economist, provides explanation of the yield data used in calculating ARC-CO payments in Iowa.

On February 22 2016, the USDA National Agricultural Statistical Service (NASS) released the final county crop production estimates for 2015: 73 Iowa counties had higher corn yields in 2015 than in 2014, 22 had lower yields, and 2015 corn yields were not reported for Mills, Monroe, Taylor, and Union County; 86 counties had higher soybean yields, 11 had lower yields, and 2015 soybean yields were not reported for Taylor and Mills County.

Knowing that higher county yields reduce the likelihood and the potential amount of ARC-CO payments, the NASS release spurred the interest of producers to recalculate their own projected ARC-CO payments for the 2015/16 crop marketing year. However, two important details often overlooked when calculating projected ARC-CO payments are (1) that county yields are determined on a per planted acre basis, as opposed to a per harvested acre basis; and (2) that the official county yields used in the final calculation of ARC-CO payments are published by USDA Farm Service Agency (FSA), as opposed to NASS.

NASS yields are calculated as production (in bushels) divided by harvested acres. Since they are not determined on a per planted acre basis, they cannot be used to calculate ARC-CO payments.

FSA yields are only available after the end of the crop year and are calculated on a per planted acre basis. Therefore, most of the difference between FSA and NASS yields is explained by failed acres. The average difference between FSA and NASS county corn yields in Iowa for 2014/15 (the only year for which both yields are publicly available), amounts to 4.75 bushels per acre.

arcco3232016In an effort to reflect the impact of failed acres on the yield used to project ARC-CO payments, the ISU Projected ARC-CO Payment Calculator uses “corrected” yields in the calculation of the 2015/16 actual county crop revenue. The “corrected” yields are based on NASS production data and obtained by dividing production (in bushels) by planted acres. For 63 Iowa counties the “corrected” yields in 2014/15 were closer to the official FSA yields than NASS yields were. For example, the corn yield used by FSA to calculate ARC-CO payments for Lyon County in 2014/15 is 149 bushels, while the NASS yield is 172.9 bushels, and the “corrected” yield is 155 bushels. The average difference between FSA and “corrected” corn yields amounted to 0.42 bushels per acre.

Judging by the release date of 2014 county yields by FSA on October 23, 2015, it can be expected that FSA will release final 2015 county yields in October 2016, at about the same time as the 2015 ARC-CO payments. Until then, the ISU ARC-CO Payment Calculator will use a “calculated” yield and projected marketing year price until the price for the marketing year is finalized the end of September.

All ISU Extension and Outreach Farm Bill decision tools are available online at: http://www.extension.iastate.edu/agdm/info/farmbill.html

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

2 thoughts on “Why it is not OK to use NASS yields to calculate ARC-CO payments

  1. The final marketing year average price will be available the end of September. Payments for the 2015 crop will be made after October 1, and when FSA releases final yield information, the materials on Ag Decision Maker will be updated to reflect the final payment information. Program data from FSA can be found at: http://www.fsa.usda.gov/programs-and-services/arcplc_program/arcplc-program-data/index. Spreadsheets projecting payments with current price and yield information, as well as links to county maps for a look at payments can be found here: http://www.extension.iastate.edu/agdm/info/farmbill.html.

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