Minding Ag's Business

The National Agricultural Statistics Service released 2015 county yields last week, prompting speculation that much of the Corn Belt will receive sizable ARC payments next October. What's missing in action, however, is yield data on large swaths of the country outside the Grain Belt (see map). Such blanks on the national map for the 2014 crop had prompted threats of legal action by farmers from North Dakota and elsewhere over disputed USDA's statistics, as DTN's Chris Clayton reported earlier this month.

In an online webinar at farmdoc daily this week, University of Illinois economist Nick Paulson forecast 2015 ARC-county payments for corn would trigger in more than 70% of the counties where National Agricultural Statistics Service (NASS) yields are available, and over 40% of those counties hitting maximum payment levels allowed by law.

Payments from the so called Agricultural Risk Coverage (ARC) program activate when county revenue falls below a formula guaranteed by historic prices and county yields. The prospective 2015 payments are largely due to anemic season average corn prices which USDA currently estimates at $3.60/bu. (but which could vary significantly when the marketing year ends next August). That estimated price is so low (compared to the price benchmark guarantee of $5.29) that a county would need yields at least 26% above its long-term average before payments would disappear, Paulson calculated.

Paulson expects 2015 ARC payments to trigger in 98% of Ohio counties where NASS data is available, 94% of Indiana and Illinois, 85% of Nebraska, 84% Iowa, 79% of South Dakota, 76%of Wisconsin, 71% of Minnesota but only 23% of Kansas. The average payment rate in Illinois would be $65/base acre.

For soybeans, Paulson estimates 2015 ARC-county payments will trigger in over 60% of the counties with a NASS soybean yield. More than 30% of counties will trigger the maximum payment on soybean base acres, he said.

In its dismal February farm income forecast for 2016, USDA expected a surge in ARC and Price Loss Coverage (PLC) payments to offset much of the revenue fallout for crop producers hurt by losses on last year's crops. By its calculations ARC payments for eligible producers should jump by about 70% when paid in late 2016, to $7.2 billion. Corn base acres are expected to receive about two-thirds of ARC payments in 2016, with soybeans and wheat combined receiving the balance. PLC, which will primarily benefit rice, peanuts and wheat, should grow to about $1.9 billion in 2016, or more than 100% from year earlier payouts, USDA said.

Yet lack of reliable yield data continues to plague the new farm bill's reliance on county-based revenue triggers for ARC, particularly in growing areas outside the core the Corn Belt and in relatively new growing regions. For example, NASS provides county yield data on 97% of Iowa counties, but only 49% in Kansas and 61% in South Dakota. In the past, the agency has reported that it lacked enough statistically valid farmer surveys to compile such data. In addition, some regions of the country graze wheat or harvest corn for silage, making yield estimates challenging. In many of those MIA counties, USDA must supplement NASS data with crop insurance records from the Risk Management Agency. That data won't be available for several more months, so if you're in the "gray" zone, stay tuned.

For Paulson's report go to http://farmdocdaily.illinois.edu/…

Follow Marcia Taylor on Twitter@MarciaZTaylor

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