Ag Policy Blog

The Eroding ARC-County Safety Net

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The rollout of ARC-County payments over the past week is highlighting what economists indicated would happen as the farm bill advanced in time. Lower farm-gate prices for corn and soybeans have drastically eroded the effectiveness of the program in some major growing states for corn, soybeans and wheat.

Some analysis this week basically reflects little to no safety net payments in major growing regions for farmers enrolled in ARC-County. It should raise significant questions about the effectiveness of ARC-County going forward in the next farm bill, though there has been little appetite to consider a major overhaul of the program, other than shifting federal agencies for county yield data.

According to analysis from Iowa State University's Center for Agricultural and Rural Development, the average ARC-County payment for corn is $12.60 an acre. That's a steep decline over the past two years with ARC paying just 26% of the protection level from just two years ago. Payments for the 2014-15 crop were $47.47 an acre. For the 2015-16 crop, the average corn payment in Iowa was $33.85 an acre. Farmers in more than one-third of Iowa counties will not receive a payment, presumably because yield for the 2016-17 crop pushed the county above the ARC-County benchmark guarantee.

For soybeans in Iowa, the Iowa State University analysis shows just six counties in eastern Iowa would receive any ARC payment. The average payment would be 41 cents an acre for the 2016-17 crop. That compares with an average statewide payment of $15.77 an acre for the 2015-16 crop.

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CARD analysis: http://www.card.iastate.edu/…

On top of the lack of payments from ARC-County, it should be noted that farm program payments are also subject to a 6.8% sequester cut.

The Iowa State University analysis was similar to analysis done by the University of Illinois and Ohio State University economists on the farmdocdaily website. Regarding corn, they showed fewer counties would receive payments in Iowa, Illinois, Missouri, Minnesota and Wisconsin. Meanwhile, payments were more prevalent in Nebraska while counties that border the lower Mississippi River and Ohio River basins would receive larger payments.

Much of Ohio and Michigan, as well as parts of Georgia, Arkansas and Louisiana would receive payments of $70 an acre or more.

ARC payments for soybeans were basically limited to the scattered counties in the Southeast and Atlantic seaboard.

And in another surprise, the Great Plains were basically shut out of wheat payments under ARC-County as well. Most of the payments went to western states as well as wheat base east of the Mississippi River from Michigan down to Alabama.

Farmdocdaily: http://farmdocdaily.illinois.edu/…

As of right now, the major change being proposed to ARC-County is changing county yield reports used under the program from National Agricultural Statistics Service data to crop-insurance data collected by the Risk Management Agency. The big question is just how much exactly would that change? The greater expectation is that there will be a wholesale shift in farmer sign up from ARC-County to Price Loss Coverage.

Sen. Charles Grassley, R-Iowa, said he supports the shift in county yield change. Grassley said the discussion about changing ARC is dealing with inequity of payments from county-to-county, not the amount of money going to farmers overall.

"The goal would not to be to make it equitable, but to make the inequity a lot less," Grassley said.

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