Senators Propose ARC Changes

Ernst, Heitkamp Propose Shifting Yield Calculations in Farmer Safety Net

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Economists at the University of Illinois and Ohio State University released maps earlier this month on ARC payments for major crops from the 2016-17 crop year. (Graphic courtesy of the University of Illinois' farmdoc daily)

OMAHA (DTN) -- While it's widely expected that the House and Senate Agriculture Committees will make several changes to the Agricultural Risk Coverage program in the next farm bill, a pair of senators put down their bipartisan marker for adjusting the way ARC-County calculates county revenue.

Sen. Joni Ernst, R-Iowa, and Sen. Heidi Heitkamp, D-N.D., introduced a bill Tuesday to shift the data used for ARC-County and change how payments are determined based on where a farm is physically located. Along with that, the senators want to give state Farm Service Agency committees more discretion to change county yields as well.

The senators, both members of the Senate Agriculture Committee, stated their bill's goal is to strengthen ARC-County "to better support farmers during tough times like low commodity prices or drought and make sure they get the accurate payments they deserve."

While the bill makes some changes to how yields are plugged into the ARC-County benchmark formula, the proposed changes by the two senators do not address the declining overall revenue protection under ARC-County. Declining market-year average prices over the past four years have eroded ARC-County's revenue protection. Without changes to the reference prices used to calculate ARC-County payments, corn farmers will largely shift base acres from ARC to Price Loss Coverage under the next farm bill, according to a Congressional Budget Office analysis of farm programs.

Commodity payments are being sent out this month for the 2016-17 crops. According to the Farm Service Agency, ARC-County payments total $3.6 billion. Corn accounts for about $2.7 billion of the ARC-County payments and wheat accounts for $633.7 million, while other crops take up the rest of those payments. PLC payments total about $2.3 billion, of which wheat accounts for $1.28 billion and peanuts account for $507.8 million while sorghum farmers collected $329.3 million.

Among the changes in the bill, the senators want to require the Farm Service Agency to use crop-insurance yields reported by farmers and insurers to the Risk Management Agency as the first data used for yield calculations in ARC-County. Currently, FSA uses survey data from farmers reported to the National Agricultural Statistics Service as the first data of choice. NASS, however, has struggled with survey responses in at least some counties. Crop insurance data reported to RMA does provide more data points for calculating the average county yield.

Still, one interesting twist in switching from NASS to RMA data is that it could reduce the likelihood of an ARC-County payment in some instances. Farmers generally report higher yield numbers to crop-insurance companies than farmers report on the NASS surveys. That's because insurance yields are used to determine a farmer's long-term Actual Production History for future crop insurance protection levels.

Despite stating that crop-insurance yields are more accurate at the county level, Ernst and Heitkamp also want to give state Farm Service Agency committees more discretion to adjust yield data on ARC-County. The senators stated that allowing state FSA committees to change yields would "help reduce inexplicable variation between neighboring counties or along boundaries with neighboring states. Adjustments would be made prior to yields being finalized or published."

Another change proposed by the senators would be to calculate ARC-County payments for farmers based on the physical counties where farms are located and not just the single county where a farmer files with FSA. This was an issue raised with FSA in 2015 regarding farmers who farm in multiple counties.

"In Iowa, 97% of our farmers' corn acres and 98% of their soybean acres are enrolled in the ARC-CO program. Unfortunately, some of our farmers have experienced payment discrepancies due to the program's reliance on administrative county lines, rather than a farm's actual physical location," Ernst said.

Following some reporting by DTN/The Progressive Farmer that fall, FSA announced at the time it would recalculate payments for farmers for the 2014 and 2015 ARC payments. Heitkamp cited that she pushed for that change in how payments were calculated in November 2015 as well. While FSA made the change administratively, Heitkamp and Ernst stated they would change the language in their bill to ensure that fix is permanent.

"As I've met with producers across our state over the past few months, they have made clear that improvements are necessary to programs like ARC-CO that help our agriculture community get through challenges like drought and low commodity prices," Heitkamp said. "Two years ago, I successfully pressed USDA to make a fix so farmers who produce in more than one county get the payments they deserve. This bipartisan bill builds on that effort to improve the ARC-CO program to better serve the farmers who need it most. As Congress works on the next Farm Bill, we need to make sure bills like this one that aim to protect and strengthen the farm safety net are included."

The senators noted their bill is backed by several farm and commodity groups, including the American Farm Bureau Federation, National Farmers Union, American Soybean Association, National Association of Wheat Growers, National Barley Growers Association, National Corn Growers Association, National Sunflower Association, USA Dry Pea and Lentil Council, U.S. Canola Association, North Dakota Grain Growers Association, North Dakota Corn Growers Association, and the North Dakota Soybean Growers Association.

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Chris Clayton