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THE LAND — SEPTEMBER 17/SEPTEMBER 24, 2021
PLC and ARC-CO payments for 2020 will be limited Under the current Farm Bill, crop producers have more options for annual farm program enrollment at local Farm Service Agency offices. Producers initially made their program choice for the 2019 and 2020 crop years and now can make an annual farm program choice each year. Farmers made their 2021 farm program choices earlier this year. A majority of producers have chosen the price-based, Price Loss coverage (PLC) program on crop base acres for corn, wheat and other crops for 2018-2021, while the county yield-based Ag Risk Coverage (ARC-CO) farm program choice has been more popular for soybean base acres. Some farmers in areas with very low crop yields in 2019 chose either ARC-CO or ARC-Individual (farm yield based) on their corn for 2019 and 2020. 2020 PLC Payment Potential PLC payments are made any time the final market year average price for a given crop drops below the reference price for that crop. The PLC payments are made in October in the year following the year the crop was raised. For example, potential 2020 PLC payments will be paid in October of 2021. The established reference prices for the 2020 crop year were: corn, $3.70 per bushel; soybeans, $8.40 per bushel; wheat, $5.50 per bushel; barley, $4.95 per bushel; oats, $2.40 per bushel; grain sorghum, 3.95 per bushel; canola, 0.2015 per pound; and sunflowers, .2015 per pound. The 2020 market year average price for corn and soybeans is the national average corn or soybean price from Sept. 1, 2020 to Aug. 31, 2021, with the market year average price being finalized on Sept. 30, 2021. The market year average price is the 12-month national average price for a commodity, based on the average market price received by farm operators across the United States, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month. The price year for market year average prices for wheat and other small grain crops runs from June 1 in the year of harvest until May 31 the following year, with market year average prices finalized on June 30 each year. Based on the end of the 2020-21 marketing year on Aug. 31, 2021, The U.S. Department of Agriculture is estimating the 2020 market year average prices at $4.45 per bushel for corn and $10.90 per bushel for soybeans. The market year average price for wheat was earlier finalized at $5.05 per bushel. 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. The current 2020-21 market year average price estimates are $5.45 per bushel for corn, $12.90 per bushel for soybeans, and $6.60 per bushel for wheat. Based on the expected final market year average
prices, there will not be a 2020 PLC payment for corn, soybeans, oats, grain sorghum or sunflowers. However, there will be a PLC payment of 45 cents per bushel for wheat base acres that were enrolled in PLC for 2020, as well as small payments for barley and canola. By comparison, PLC FARM PROGRAMS payment rates for the 2019 By Kent Thiesse crop year were 92 cents per bushel for wheat, 14 cents per bushel for corn, and zero for soybeans. There has been a PLC payment for wheat in every year from 2015 to 2020; and prior to 2020, there had been a PLC payment for corn in every year from 2015 to 2019. There has not been a PLC payment for soybeans since the initiation of the last Farm Bill in 2014. 2020 ARC-CO Payment Potential ARC-CO payments for a given crop are paid when the actual county revenue for the crop falls below the county benchmark revenue guarantee for that crop. The county benchmark revenue guarantee is the county benchmark yield times the benchmark price for a given year, times 86 percent. The actual county revenue is the final county FSA yield for the year times the final market-year average price for the same year. The ARC-CO benchmark prices for the 2020 crop year were $3.70 per bushel for corn, $9.25 per bushel for soybeans, and $5.50 per bushel for wheat. The benchmark prices are adjusted each year, using the USDA market-year average price for the five years preceding the most recent year (2014-18 market year average prices to calculate 2020 benchmark prices), then dropping the high and low market year average price, and averaging the other three market year average prices. The annual benchmark price for a given crop can never drop lower than the reference price for that crop. The current reference prices are $3.70 per bushel for corn, $8.40 per bushel for soybeans, and $5.50 per bushel for wheat. Lower benchmark prices reduce the potential for ARC-CO payments. The 2021 benchmark prices are set at $3.70 per bushel for corn, $8.95 per bushel for soybeans, and $5.50 per bushel for wheat. The benchmark county yield for 2020 was calculated by taking the average county yields for the previous five years prior to 2019 (2014-2018), dropping the high and low yield, and averaging the other three yields. The 2020 county benchmark revenue for a given crop is the 2020 county benchmark yield times the 2020 benchmark price, which is then multiplied by 86 percent to calculate the “County Revenue
Guarantee.” The county benchmark yields for corn and soybeans in many Upper Midwest counties has increased in recent years, due to fairly strong average county yields from 2015 to 2018. The increased county benchmark yields for 2020 increases the potential for ARC-CO payments. However, that gain has been largely offset by the large reduction in the benchmark corn and soybean price. The USDA National Agricultural Statistics Service releases the estimated average county yields for corn, soybeans, and other crops in the spring of each year. These are not the final county yields used by FSA to calculate final ARC-CO payments for a given year. However, the NASS yields do give a pretty good indicator of ARC-CO payment potential for a year. Adjustments in final county yields from the NASS yields (which are made by FSA) are usually quite small and many times result in lower final yields than the NASS estimates. This can potentially increase the likelihood or amount for ARC-CO payments in some counties. The 2020 NASS county yields are available on the NASS web site at http://www.nass.usda. gov/ Overall, 2020 ARC-CO payments for corn and soybeans are not likely in many portions of the Upper Midwest, due to 2020 crop yields that were close to or slightly above benchmark yields in many areas, as well as the higher final market year average prices which were well above the benchmark prices for corn and soybeans. There are few counties in central Iowa which were impacted by the derecho storm in August of 2020, as well as some counties in western North and South Dakota which may earn a corn ARC-CO payment for 2020. Virtually no counties are likely to qualify for a soybean ARC-CO payment in 2020. Looking ahead… At this point, it does not appear there will be any PLC payments for any farm program commodity crops for the 2021 crop year. All current market year average price estimates are running well above the established reference prices for the same crops. Of course, the 12-month marketing year for 2020-21 for corn and soybeans just began on Sept. 1, 2021. It is early to project corn and soybean ARC-CO payment potential for the 2021 crop year, as lower yield levels in some of the areas impacted by the drought in 2021 could potentially qualify for an ARC-CO payment. Areas with near-average or above corn and soybean yields in 2021 are not likely to see an ARC-CO payment for either crop. Any 2021 PLC or ARC-CO payments would be paid in October of 2022. 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
MARKETING
