Minding Ag's Business

FSA Fixes ARC Payment Glitch

Nearly $4 billion in Agriculture Risk Coverage-County checks were deposited in farmers accounts by early November, but the Farm Service Agency announced late last week it will recalculate payments for growers who farm in multiple counties and who may have been underpaid in 2014. (See DTN's related news story on the Ag Policy page).

The retroactive decision clears the way for growers to correctly match payments to the county where their land is physically located, rather than the original rule of basing payment rates where FSA administrative records were housed.

While that sounds like a bureaucratic technicality, the new farm bill is the first to rely on county yields to formulate program payments. That meant 2014 corn payment rates in some Texas neighboring counties varied by as much as $100/acre. States like Iowa, Minnesota, Ohio and Nebraska also discovered big disparities between next-door neighbors.

Take Nebraska farmer John Oehlerking, whose farms straddle Otoe and Cass Counties, and who had first alerted DTN to the problem. He had chosen Otoe as his administrative county, but its final corn payment rate was only $16.77/base acre in 2014, versus $57.96 for Cass. His county office phoned him Nov. 10 to alert him he would be eligible for another $41.19/base acre, thanks to the change. (Growers must file the paperwork by Feb. 1, 2016.)

In contrast, Oehlerking has a friend who farms in multiple counties, but who received a windfall by choosing a higher paying administrative county. Luckily, FSA won't demand a refund from those growers.

"This is what you'd call a farmer-friendly decision," says Brad Lubben, a University of Nebraska economist and farm policy specialist. But Lubben adds that farm program payments are no small deal, since they've already added $865 million to the Iowa economy, $602 million to Minnesota and $552 million to Nebraska.

Retroactively correcting payment formulas for 2014 and 2015 ARC-CO is particularly important for corn growers, since much of the benefit of that program is front loaded, Lubben added.

Corn growers in counties with near average yields are still expected to receive very large ARC-CO payments in 2015 because of the formula's high price guarantee. "But by 2016, that payment could be less than half and by 2017 and 2018, it could all but disappear" if long-term price forecasts materialize.

"By 2018, our estimates show the only ARC-CO payments would be due to a yield disaster, not a price disaster," Lubben says.

A spokesman for the National Corn Growers Association, which had pressed for the administrative county change since last winter, said it was appreciative of FSA's decision.

Oehlerking's payment will cover only about 3% of his total production cost, so it won't totally erase 2014's price collapse. But he knows many other farmers were in his situation, so he is grateful for the fix.

Find ARC-CO and PLC payment rates for every crop and every county at the FSA website http://www.fsa.usda.gov/…

Find Nebraska payment rates at http://farmbill.unl.edu/…

Follow Marcia Taylor on Twitter@MarciaZTaylor

Comments

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Bonnie Dukowitz
11/15/2015 | 7:06 AM CST
Your articles raise an interesting sequence of events. Nov. 6 Land Investors in the Wings Nov. 10 FSA fixes ARC Payment Glitch Today I read- Largest Land Deal in Illinois
Raymond Simpkins
11/11/2015 | 11:24 AM CST
So why wouldn't he have to pay back the over payment? Sounds like another gov. screw job. Government should just get out of the farm business. If they are going to pay more to the guy that picked the wrong county then they need to collect from the over paid.
MARCIA TAYLOR
11/11/2015 | 9:57 AM CST
Unknown, you may be asking a bigger question about government support in general. I will let the farm audience defend that system. But on the narrow question of ARC-CO, it's to be fair to farmers who (for the convenience of FSA and themselves) simply chose a single county as their administrative office. Some were being penalized to the tune of $20 to $100/acre.
Unknown
11/10/2015 | 9:47 PM CST
Tell me again, what is the reason taxpayers should be funding this nonsense?