Minding Ag's Business

The latest forecasts for 2015 farm safety net payments are in. Just like 2014, there will be "haves" and "have nots" when Agricultural Risk Coverage checks are delivered this fall. The size of your payout will depend on your county's average yield, with $100/acre Corn Belt payments possible in areas with below-average yields and nothing in areas with above average results.

Despite cries of foul, Congress designed the formula so taxpayers wouldn't overpay farmers who had bountiful yields and little farm income damage.

Kansas State Economist Art Barnaby now forecasts a potential for sizable corn payments for the 2015 crop. See his post at http://www.agmanager.info/…

For example, corn growers in Clinton County, Iowa could collect $93.75/acre, while next door Jackson County gets $44.65, according to Kansas State University's calculator. (Assuming payments on 85% base, no adjustments for sequester). In contrast, Henry and Pottawattamie Counties would be eligible for $0 as prices stand now.

Most Kansas wheat growers by contrast will collect roughly $30/acre in ARC county payments for 2015, Barnaby estimates.

That pattern is the reason neither lenders nor landlords should assume extra cash for 2015 losses will moderate 2016 shortfalls. In 2014, ARC payments were an "all or nothing" arrangement, a recent bulletin by the Food and Agricultural Policy Research Institute reminds producers. (For more details go to http://www.fapri.missouri.edu/…).

In 35% of the counties counted, no ARC-county 2014 payments were made for the 2014 crop, because average yields were well above the Olympic average of the previous five years. The share of counties receiving no payments ranged from 1% in Minnesota to 91% in Missouri, FAPRI notes. It expects that pattern to shift again in 2015, however.

In contrast 2014 corn payments hit their maximum in 39% of counties. Participating producers received the maximum feasible pay rate in virtually all Minnesota counties, and a majority of counties in Iowa and Nebraska.

For wheat and soybeans, the most common 2014 ARC-County payment rates across the country were zero, FAPRI notes.

INCREDIBLE SHRINKING SUPPORT

Another factor to consider is that ARC payments are front loaded, so whatever benefit you get early in this farm bill will be downsized over the next few years, if corn and other crops stay on their current price trajectory.

By the end of this farm bill, USDA could be spending less on corn payments than the entire peanut program, points out Mississippi State University Economist Keith Coble.

ARC-County's reference price will likely average $5.29 per bu. for 2014- and 2015-crops. But based on the Olympic-average formula, that should fall about 50 cents for 2016, 84 cents in 2017 and 25 cents in 2018. All totalled, that puts the trigger at $3.15 by marketing year 2018, Kansas State University's Barnaby points out. That means if a county's corn yield equals its 5-year Olympic average for the 2018 season, it will require a marketing year corn price below $3.15 to jump start ARC payments. See his essay at http://www.agmanager.info/…

The bottom line is ARC is buying some time for farmers in those counties with losses in the first few years of the farm bill. In effect, Congress is saying use this window to realign your costs. And woe to those who don't try to become more self-sufficient. When the next farm bill is written, budget watchers expect the farm safety net to be leaner and meaner.

Follow Marcia Taylor on Twitter @MarciaZTaylor

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