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Sign-up for the 2019 and 2020 commodity farm program is underway from now until March 15. The farm programs under the 2018 farm bill will function very similarly to the programs for the 2014-18 crop years. However, there are some significant differences in certain aspects. Also, the dynamics of crop prices and yields are different for 2019 and 2020 than they were in 2014 when farm operators made a five-year decision for the last farm bill.

A number of questions often come up regarding the farm program decisions for the 2019 and 2020 crop years.

What are the farm program sign-up dates ?

Enrollment for the 2019 and 2020 farm program is from now until March 15 at local U.S. Department of Agriculture Farm Service Agency offices. Producers actually have until June 30 to sign-up for the 2020 program if there are changes in rented crop acres, etc. Farm program sign-up for the 2021-23 crop years will be announced later.

Can a producer change their farm program choice from year-to-year?  

The initial farm program choice (Price Loss Coverage and revenue-based Ag Risk Coverage) will remain the same for the 2019 and 2020 crop years. Starting with the 2021 crop year and continuing for the 2022 and 2023 crop years, producers can switch their farm program choices on FSA farm units on an annual basis.

What are the 2019 and 2020 farm program choices that are available to producers?

Eligible producers will be able to choose between the price-only “Price Loss Coverage” (PLC) and revenue-based “Ag Risk Coverage” (ARC) program choices. The ARC program choice includes both the county-yield based ARC-CO program choice and the ARC-IC program, which is based on farm-level yields.

Can a producer make a different choice between PLC and ARC-CO for different crops on the same farm unit or for the same crop on different farm units?

The answer to both questions is “YES.” The farm program choice between the PLC and ARC-CO will be specific to each eligible crop and may vary on the same FSA farm unit. (For example, a producer could choose PLC for corn and wheat and ARC-CO for soybeans on the same farm unit.) The farm program choice can vary from farm unit to farm unit for the same crop. (For example, a producer could choose PLC for corn in one county and ARC-CO in another county, if the farms are separate FSA farm units.) The program choice for a crop on the same FSA farm unit must be the same, even if the farm unit includes land in multiple counties.  

Does this same farm program flexibility apply to the ARC-IC program?

The ARC-IC program must be applied to all covered commodities on a given FSA farm unit, and all farm units in a state which are enrolled in ARC-IC must be considered together in one ARC-IC calculation. This may limit situations where ARC-IC is a favorable farm program option.

What is the “default” decision if no farm program choice is made by the sign-up deadline?

If producers do not make a farm program choice for the 2019 crop year by March 15, they are not eligible to receive any 2019 farm program payments. If they do not make a 2020 farm program choice by June 30, they will automatically be enrolled into the same farm program choice that existed for the 2018 farm program. This is an important decision. Don’t miss the deadline!

Will producers be able to update their crop base acres for the 2019 and 2020 farm program?

No. Crop base acres will remain at 2018 levels for all crops on most farms. The only adjustments in base acres will be for crop acres which were added via land purchases or land rental agreements, for unassigned generic base acres from the last farm bill, or for acres that are no longer eligible for farm program payments.

Will producers be able to update their FSA program yields?

Producers will have the opportunity to update their FSA farm program payment yields beginning with the 2020 crop year. (The 2018 FSA program yields will be continued for the 2019 crop year.) Yield updates will be based on the average farm yields for the 2013 to 2017 crop years on planted acres for eligible crops, which will be factored down to 81 percent for corn and soybeans, and 85 percent for wheat. If the updated yields are lower than 2018 yield levels, producers can choose to keep their 2018 FSA program yields. The farm program yields are used to calculate PLC payments on individual FSA farm units.

What are changes in ARC-CO payments for a producer who has land in multiple counties?

Starting with the 2019 crop year, ARC-CO payments will be based on the county where an FSA farm unit is located, rather than the county of the FSA administrative office of the producer (as existed in the last farm bill). For producers with FSA farm units in multiple counties or with land in the same farm unit in multiple counties, ARC-CO revenues will be “weighted” according to the base acres which are physically located in a county – regardless of FSA farm program administration.

How are county benchmark yields and prices calculated and what years are used?

Calculations for county benchmark prices and yields are based on five-year “Olympic average” (drop the high and low years, and average the other three years). The benchmark prices are based on the national market year average prices and benchmark yields are based on county average Risk Management Agency (RMA) yields. The benchmark calculations will no longer include the yield and price data from the previous year, due to the initiation of an annual farm program choice. For example, 2019 benchmark prices and yields are based on data for 2013-2017.

What are the changes for calculating ARC-CO benchmark and actual county yields?

The Risk Management Agency (RMA) yields which are used for crop insurance yield calculations (calculated at the county-level) will now be used for determining benchmark and actual county yields for ARC-CO payments. The National Ag Statistics Service yields, which were the primary yield source in the last farm bill, will now be used as a secondary yield data source. The RMA yields will also include trend-adjusted yields for county benchmark yield calculations. An increasing number of counties now have separate benchmark yields for irrigated crop acres in a given county.

What are “plug yields” and when are they used?

Plug yields are used for ARC-CO benchmark yield calculations in a county that experiences very low average RMA yields for a given year. The county plug yields for the 2019 and 2020 farm programs are set at 80 percent of the county “T-yield” (70 percent in the last farm bill), and will be used when a county average yield for a given year drops below the plug yield level.

Where can I find the 2019 county benchmark yields?

The 2019 county benchmark yields, prices and revenue guarantees for all eligible crops in all counties in the United States (including separated irrigated data), as well as data from the 2014-18 farm programs, are available on the USDA FSA website (www.fsa.usda.gov/programs-and-services/arcplc_program/index).

How are market year average prices calculated?

The market year average price for corn and soybeans is the monthly average U.S. price of corn or soybeans from Sept. 1 (in the year of harvest) until Aug. 31 the following year. The market year average price is finalized on Sept. 30.

The market year average price for wheat and small grains is from June 1 (in the year of harvest) until May 31 the following year. The market year average price is finalized on June 30.

The market year average price for a given crop is the average U.S. farm-level price for that crop – based on monthly average prices from across the United States. These are then weighted by the percentage of bushels sold in each month.

The 2019-20 price projections in the monthly World Supply and Demand Estimates reports are USDA’s market year average estimates for the 2019 marketing year. These are good price estimates for ARC-CO and PLC calculations.

When will the 2019 RMA county yields be finalized ?

The 2019 final county average RMA yields are based on individual farm yields reported through federal crop insurance. As a result, we will not likely have final 2019 county average RMA yields until after May 1 – which would be well after the March 15 farm program sign-up deadline. So there is not likely to be an advantage to delaying farm program sign-up in order to get the 2019 RMA county yields.

What were the changes to PLC reference price calculations in the 2018 farm bill?

The reference prices for PLC and ARC-CO programs will be established at the greater of the minimum (2018) reference prices or 85 percent of the market year average price for the most recent five years – excluding the high and low year. The reference price can not exceed 115 percent of the minimum reference price. Due to lower market year average price levels in recent years, the 2019 and 2020 reference prices for corn, soybeans and wheat will be at the minimum levels These are:      corn – $3.70/bushel;  soybeans – $8.40/bushel; and wheat – $5.50/bushel.

What will be the ARC-CO and ARC-IC benchmark prices for 2019 and 2020 ?

Corn – $3.70/bushel (2019) and $3.70/bushel (2020); soybeans – $9.63/bushel(2019) ands $9.25/bushel (2020); and wheat – $5.66/bushel (2019) and $5.50/bushel (2020).

What are the calculation formulas for the PLC and ARC-CO programs ?

PLC payments are made when the final market year average price falls below the reference price for a crop. ARC-CO payments are made when the final county revenue (county yield multiplied by market year average price) falls below the benchmark revenue for a given crop. PLC and ARC-CO payments are paid on 85 percent of crop base acres.

Calculation formulas for the PLC and ARC-CO programs are as follows:

PLC payment per crop base acre – (Reference price minus market year average price) multiplied by FSA program yield multiplied by 85 percent. (If the final market year average price is higher than the reference price, there is no PLC payment.)

ARC-CO benchmark revenue guarantee per acre – County benchmark yield multiplied by benchmark price multiplied by 86 percent.

Final ARC-CO revenue per acre – Final county RMA average yield multiplied by the final market year average price.

ARC-CO payment per base acre – (Benchmark revenue guarantee minus final revenue) multiplied by 85 percent. (If the final revenue is higher than the benchmark revenue, there is no ARC-CO payment.)  

How is the calculation formula for the ARC-IC programs different from the ARC-CO program?

Calculations for the ARC-IC program are the same as for ARC-CO, except ARC-IC uses farm-level yield data and considers all crops on a FSA farm unit together. All FSA farm units in the same state, which are enrolled in ARC-IC, are calculated together. Unlike ARC-CO, the ARC-IC benchmark revenue is based on the crops that were raised on a FSA farm unit in a year and the benchmark revenue is factored accordingly – regardless of the mix of crop base acres. For example, 100 base acres, half corn and half soybeans which was planted all to corn in 2019, only the corn data would be used in calculations and ARC-IC payments would be applied to all base acres.) ARC-IC payments are paid on only 65 percent of base acres.

What are situations that may favor ARC-IC as a farm program choice on a FSA farm unit?

Farm units with 100 percent prevent plant acres in 2019 are likely to receive the maximum eligible ARC-IC payment for 2019. Farm units with very low crop yields in 2019 may also qualify for partial or maximum 2019 ARC-IC payments. The ARC-IC program also works well on farm units where non-program fruit and vegetable crops are raised on a portion of the base acres.

What are some cautions to keep in mind regarding ARC-IC as a farm program choice ?

On FSA farm units with partial prevent plant acres and some planted crop acres in 2019, only the crops produced are considered in the ARC-IC calculation (prevent plant acres are not considered). If the final revenue on the planted acres is too high, there would not be an ARC-IC payment on any of the base acres. However, if there is ARC-IC eligibility, it would be applied to all eligible base acres. Due to the fact that ARC-IC payments are paid on only 65 percent of crop base acres vs. 85 percent with ARC-CO, it’s possible that ARC-CO payments in a county with very low 2019 yields may be higher-than-maximum ARC-IC payments. The ARC-IC program usually works best on individual FSA farm units and in situations where several farm units have not been combined together into one large FSA farm unit. It is also important to remember that a farm unit will need to remain in the ARC-IC program for both 2019 and 2020, and the program choice can not be switched to PLC or ARC-CO until 2021.

What are the key factors to consider for finalizing the decision between PLC and ARC-CO ?

Please refer to the “2019 and 2020 Farm Program Decision Cheat Sheet” table to help analyze farm program choices for corn, soybeans and wheat – as well as considerations for ARC-IC.

What are good information resources for producers?

Official farm program details and information is available on the FSA farm program website (www.fsa.usda.gov/programs-and-services/arcplc_program/index).  Following are some good web-based farm program decision tools: www.ag.ndsu.edu/farmmanagement/farm-bill; www.agmanager.info/ag-policy/2018-farm-bill; www.afpc.tamu.edu/tools/farm/farmbill/2018/; and https://farmdocdaily.illinois.edu/category/areas/agricultural-policy/farm-bill

Farm operators are encouraged to take to time to get informed about the various 2019 and 2020 farm program choice. Analyze which program choices are best for their various crops. Remember, the best farm program choice in another county or another area of the country may not necessarily be the best program choice for a given crop in your county. In addition, your neighbor’s farm program choice may not be the best program choice on your farm units, especially in the case of considering ARC-IC as a program choice.  

Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v