Most crop producers in the Upper Midwest were enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program on their corn and soybean acres for the 2014 to 2018 crop years. Now many are wondering if there will be any ARC-CO payments for corn and soybeans in October.
Producers earned a significant 2014 corn ARC-CO payment, and farmers in some counties also earned payments in 2015 and 2016, with very few payments in 2017. ARC-CO payments for soybeans have been quite widespread for 2014-2017 in most areas.
The corn benchmark price for the 2018 is $3.70 per bushel, down from $3.95 in 2017, $4.79 in 2016, and $5.29 in 2014 and 2015. The 2018 benchmark for soybeans is $9.63 per bushel, well below $10.86 in 2017, $11.87 in 2016, or $12.27 in both 2014 and 2015.
The benchmark prices are adjusted each year, using the USDA market-year average price for the preceding five years, then dropping the high and low prices, and averaging the remaining three. The lower prices reduce the potential for ARC-CO payments.
The benchmark county yield for 2018 is calculated by taking the average county yields for the previous five years (2013-2017), dropping the high and low, and the averaging the remaining three.
The 2018 county benchmark revenue for a given crop is the county benchmark yield times the 2017 benchmark price, which is then multiplied by 86 percent to calculate the "county revenue guarantee."
Most county revenue guarantees for corn and soybeans declined for 2018 because of the drop in the benchmark prices.
The county benchmark corn and soybean yields in many Upper Midwest counties increased a bit from 2017 yields. That increases the potential for ARC-CO payments, but the gain is more than offset by the reduction in benchmark prices.
2018 ARC-CO payments for a given crop are paid when the actual 2018 county revenue for the crop falls below the 2018 county benchmark revenue guarantee. The 2018 revenue guarantee is the 2018 county benchmark yield times the 2018 benchmark price times 0.86. The actual county revenue is the final 2018 county FSA yield times the final market-year average price for 2018.
The 2018 MYA price is the national average corn or soybean price from Sept. 1, 2018, to Aug. 31, 2019, which will be finalized on Sept. 30. The MYA price is the 12-month national average price for a commodity. The USDA price estimates are updated on a monthly basis in the USDA World Agricultural Supply and Demand Estimates report, which is usually released around the middle of each month. As of April 1, USDA is estimating the 2018 MYA prices at $3.55 per bushel for corn and $8.60 per bushel for soybeans.
The USDA National Agricultural Statistics Service recently released the 2018 estimated average county yields for corn, soybeans and other crops. Those county yields are available on the NASS web site, www.nass.usda.gov.
The relationship between the final county yield and the county benchmark yields is extremely important in calculating potential ARC-CO payments for corn and soybeans. Expressing the 2018 county yield as a "% of BM Yield" is more important than the final county yield in determining estimated ARC-CO payments. At current MYA price estimates, the threshold for a county to receive 2018 ARC-CO payments is a "% of BM Yield" level of 88 percent or lower for corn and 95 percent or lower for soybeans.
Overall, 2018 ARC-CO payments for corn and soybeans are not likely in many portions of the Upper Midwest because of yields that were close to or slightly above benchmark yields in many areas. There are a few counties in southern Minnesota and northern Iowa that had excessive rainfall last year and they are likely to receive a corn ARC-CO payment. Most other counties in the rest of Minnesota and northern Iowa, as well as eastern North and South Dakota, are not likely to receive a corn payment. There are only a few counties in the four states that are likely to receive a soybean ARC-CO payment.
Last year’s benchmark yields and revenues, previous county yields for corn, soybeans, and other crops, 2014, 2015, 2016 and 2017 ARC-CO payment levels, and other farm program information are available on the FSA ARC-PLC web site, which is at www.fsa.usda.gov/arc-plc.
I have also prepared an information sheet, "Estimating 2018 Corn and Soybean ARC-CO Payments," which contains several tables relating to 2018 ARC-CO payments. To get a copy, send an e-mail to firstname.lastname@example.org.