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The U.S. Department of Agriculture has announced sign-up details for the 2021 commodity farm program, which is part of the Agricultural Improvement Act of 2018(the 2018 farm bill). The farm programs for 2021 will function very similarly to the farm programs in the 2019 and 2020 crop years. However, there were some significant changes in the price and yield dynamics for certain crops in some areas. 

Important details regarding 2021 farm program sign-up

Enrollment for the 2021 farm program is from now until March 15 at local USDA Farm Service Agency offices. Farm program decisions and sign-up for the 2021-2023 crop years will be on an annual basis at FSA offices.

Eligible cops include corn, soybeans, wheat, oats, barley, grain sorghum, long grain rice, medium/short grain rice, temperate japonica rice, seed cotton, dry peas, lentils, large and small chickpeas, peanuts, sunflower seed, canola, flaxseed, mustard seed, rapeseed, safflower, crambe, and sesame seed.

Eligible producers will be able to choose between the price-only Price Loss Coverage (PLC) and revenue-based Ag Risk Coverage (ARC) programs for the 2021 crop production year.  The ARC program choice includes both the county-yield based ARC-CO program choice (which is most popular) and the ARC-IC program, which is based on farm-level yields.

The farm program choice between the PLC and ARC-CO farm program choices will be specific to each eligible crop, and the choice can vary from farm unit to farm unit for the same crop. If the ARC-IC program is chosen, it must be applied to all covered commodities on a given farm unit; and all farm units in a state which are enrolled in ARC-IC must be considered together in one calculation.

Crop base acres will remain at 2019 and 2020 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 or acres no longer eligible for farm program payments.

Producers had the opportunity to update their FSA farm program payment yields beginning with the 2020 crop year. These 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 90 percent for wheat. If the updated yields were lower than 2014-2018 farm program yields, producers were able to keep the previous FSA program yields. The farm program yields are used to calculate PLC payments on individual FSA farm units.

Risk Management Agency (RMA) yields used for crop insurance yield calculations (which will be calculated at the county-level) are now being used for determining ARC-CO 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, are now be used as a secondary yield data source. The RMA yields will include trend-adjusted yields for county calculations.

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 administrative farm units in multiple counties, ARC-CO revenues will be weighted according to the base acres which are physically located in a county.

Calculations for county benchmark prices and yields will no longer include the data from the previous year, due to the annual farm program choice. (For example, 2021 benchmark prices and yields are based on the “olympic average” (drop the high and low) for the 2015-2019 crop years. Due to variability in crop yields in recent years, there may be some variation in county benchmark yields compared to 2020.

The reference prices for PLC and ARC-CO programs will be established at the greater of the minimum (current) 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 cannot exceed 115 percent of the minimum reference price. Due to lower market year average price levels in recent years, the 2021 reference prices for corn, soybeans and wheat will be at the minimum levels: corn, $3.70/bu.; soybeans, $8.40/bu.; and wheat, $5.50/bu.

Calculation formulas for the PLC, ARC-CO and ARC-IC programs remained similar to the farm programs in the last farm bill. 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. 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 farm unit together. PLC and ARC-CO payments are paid on 85 percent of crop base acres, and ARC-IC payments are paid on 65 percent of base acres.

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

PLC payment per crop base acre is the reference price minus the market year average price, multiplied by the FSA program yield, times 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 is the county benchmark yield multiplied by the benchmark price, times 86 percent.

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

ARC-CO payment per base acre is calculated by subtracting the final revenue from the benchmark revenue guarantee and multiplying that figure by 85 percent. (If the final revenue is higher than the benchmark revenue, there is no ARC-CO payment.)  

Key points to remember about the 2021 farm program decision

Producers will be able to make a farm program choice for 2021 while having the flexibility to update that choice for the 2022 and 2023 crop years. Producers can change the farm program choice on different FSA farm units for the same crop.

Producers can make a different farm program choice for each crop on a FSA farm unit if they choose either the PLC or ARC-CO program choice.

If ARC-IC is chosen on a FSA farm unit, the benchmark and actual revenue for all crops raised during that year on that farm unit are considered in calculations. If multiple FSA farm units are enrolled in ARC-IC, all farm units in a state are considered in ARC-IC calculations. Some farm units with 100 percent prevent plant acres in 2019 received significant ARC-IC payments. However, the likelihood of potential ARC-IC payments for 2021 is less likely and much harder to predict.

The ARC-CO and ARC-IC benchmark prices for 2021 are: corn, $3.70/bu.; soybeans, $8.93/bu.; and wheat,  $5.50/bu.

Final 2021 market year average prices for corn and soybeans will be calculated from Sept. 1, 2021 to Aug. 31, 2022, so the current major upswing in corn and soybean prices may have very little impact on 2021 farm program decisions. Final 2021 market year average prices for wheat will be calculated from June 1, 2021 to May 31, 2022. 

Refer to the table, “2021 Estimated Farm Program Payments” to help analyze farm program decisions for the PLC and ARC-CO program choices.

For more information on PLC and ARC-CO programs, and other farm program details, go to the FSA farm program website: www.fsa.usda.gov/arc-plc.

Following are some good web-based farm program decision tools to assist producers: North Dakota State University — https://www.ag.ndsu.edu/farmmanagement/farm-bill; Kansas State University —http://www.agmanager.info/ag-policy/2018-farm-bill; University of Minnesota Extension —https://extension.umn.edu/business/farm-bill; and the University of Illinois FarmDoc website —https://farmdocdaily.illinois.edu/category/areas/agricultural-policy/farm-bill.

Remember to sign up for the 2021 farm program by March 15 at local FSA offices.

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.

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