Ag Decision Maker • Iowa State University Extension and Outreach

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu

Iowa producers on row crop farms have until March 15 to make a 2-year election and then enroll by commodity crop and USDA Farm Service Agency (FSA) farm number. There really is no reason to delay, as no ARC-CO/PLC payments are projected for the 2019 crops. Besides, many FSA offices could be swamped as the deadline approaches.

Undecided producers should start by understanding the importance of the effective reference prices of $3.70 per bushel for corn and $8.40 per bushel for soybeans. In order to trigger a PLC payment, the final national cash for the entire marketing year must be below these levels. The national cash price projections for the 2019 crop as of January 10, 2020 are $3.85 per bushel for corn and $9.00 per bushel for soybeans, respectively. Thus, no PLC payments are expected for corn and/or soybean base acres that are elected and enrolled in the PLC program.

If there are 2019 ARC-CO or PLC payments, it will likely be in a county with exceptionally low 2019 final yields. These final county yield numbers from the USDA Risk Management Agency (RMA) will not be known until later this year. The 2019 Iowa yields from the USDA National Agricultural Statistics Service (NASS) January report were estimated to be 198 bushels per acre corn and 55 bushels per acre for soybeans. Such levels indicate that most final county yields are likely too high to trigger a 2019 ARC-CO payment.

If there is a 2019 payment, it will likely be under the ARC-Individual (ARC-IC) program. The producer probably has a farm with poor 2019 yields and possibly prevented planting acres. That producer should consider electing and enrolling all crops by FSA farm number in the ARC-Individual (ARC-IC) program if a likely payment will be generated. It will require further examination and production evidence for each commodity crop produced on that farm since the 2013 crop year.

It’s actually for 2020, that an ARC/PLC payment seems more likely. Corn and soybean planted acres are expected to increase by roughly 11 to 12 million total planted acres for both crops as a result of the large prevented planting acres in 2019. Two sources of 2020 price projections released last fall are the USDA Outlook and the Food Agricultural Policy Research Institute (FAPRI) at the University of Missouri. Both sources project an increase in 2020 US corn planted acres by 2.5 to 4.5 million acres and use 30-year trendline yields assuming normal production. Those 2020 crop cash price projections for corn are $3.40 and $3.53 per bushel, respectively. Thus, the likelihood of a 2020 PLC payment for corn that would be received in October 2021, as the final cash price would fall below the reference price of $3.70 per bushel.

Using those same two sources for 2020 soybean cash price projections, US soybean planted acres would increase between 7.5 and 8.5 million acres as compared to 2019. Again, they use 30-year trendline yields and normal production. Those 2020 crop cash price projections for soybeans are $8.54 and $8.85 per bushel, respectively. Thus, no 2020 PLC payment for soybean base acres is expected as the final cash price is not below the effective reference price of $8.40 per bushel. However, the lower national cash price improves the chances of ARC-CO payments for soybean base acres depending on the final county yields.

Producers will also have a one-time chance to update their PLC Farm Yields starting with the 2020 crop. Even if a producer elects the ARC-CO or ARC-IC program option, the PLC yield can be updated and becomes the public record of the farm’s yield. Supporting evidence for the PLC Yield Update will likely come from a producer’s crop insurance records if a program crop was produced in the 2013 thru 2017 crop years. In some cases, the yields for a crop insurance unit might not match with the FSA farm number and will need to be averaged. Note the farmland owner on cash rent farms will need to approve this PLC Yield Update and sign the form CCC-867 unless a power of attorney form is on file.

Use the ISU Ag Decision Maker ARC/PLC Payment Estimator and PLC Yield Update Tools to provide your analysis. More Information on the 2018 Farm Bill, including web casts on various pieces of the program, can be found on the Ag Decision Maker Farm Bill page.

Ag Decision Maker (AgDM)

An agricultural economics and business website.

Alejandro 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.

In 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

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