WASHINGTON, D.C. — Nearly $9.6 billion in farm safety net and conservation payment checks are coming to U.S. farmers, many of whom are dealing with crop, livestock, machinery or structural damage resulting from hurricanes that have wrought havoc on southern coastal states in recent weeks, along with other natural or man-made disasters.
USDA Secretary Sonny Perdue announced last week that $8 billion in payments to producers through the USDA’s Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, along with $1.6 billion under the Conservation Reserve Program (CRP).
“Many of these payments will be made to landowners and producers in rural communities that have recently been ravaged by drought, wildfires, and deadly hurricanes,” Perdue said in an Oct. 3 news release. “I am hopeful this financial assistance will help those experiencing losses with immediate cash flow needs as we head toward the end of the year.”
More than a half-million producers were delivered ARC payments beginning last week, and more than a quarter-million farmers will receive PLC checks for 2016 base acres of crops including barley, corn, grain sorghum, lentils, oats, peanuts, dry peas, soybeans, wheat and canola through the next several months.
A second round of payments will be announced after marketing year average prices are published by USDA’s National Agricultural Statistics Service (NASS). These payments, which will be announced from November through February 2018, will be made to producers of remaining covered commodities, including long and medium grain rice, some oilseeds, temperate Japonica rice and chickpeas.
USDA has also started issuing payments to more than 375,000 participants of the 2017 CRP program, Perdue reported. “American farmers and ranchers are among our most committed conservationists,” he said. “We all share a responsibility to leave the land in better shape than we found it for the benefit of the next generation of farmers. This program helps landowners provide responsible stewardship on land that should be taken out of production.”
The ARC program’s popular “County” (CO) option, selected by most producers, is a state, county-wide revenue plan that makes payments when actual county revenue is below a guarantee set at 86 percent of a benchmark revenue, according to University of Illinois Department of Agricultural and Consumer Economics economists, along with Carl Zulauf of The Ohio State University.
Using national, marketing year average (MYA) prices in the calculation of actual and benchmark revenues, the benchmark price for corn guaranteed under the ARC-CO program comes in at $4.79 per bushel in 2016.
The MYA price for corn in 2016 is $3.36 per bushel, more than 30 percent below the benchmark price, the university economists reported in their Oct. 6 essay 2016 ARC-CO Payments, authored by Zulauf and U of I economists Nick Paulson, Gary Schnitkey and Jonathan Coppess on the U of I farmdocDAILY website.
Determining payment amounts can be complex, as described by the economists. Given the 86 percent guarantee level for ARC-CO, payments are triggered in counties where yields are up 22 percent above the benchmark yield.
Higher yields will offset the price decline and result in revenue above the guarantee, with a similar situation existing for soybeans and wheat. Soybean and wheat payments are triggered in counties with yields up to eight percent and 48 percent above their respective benchmark yields.
In addition ARC-CO payments for 2016 will be impacted by the federal budget sequester, as was the case with 2014 and 2015 payments. The sequester reduction for 2016 is assessed at 6.8 percent of the payment levels.
The USDA’s payment announcement meant farm economists spent the latter part of last week calculating per acre payments by county in Illinois and other states.
“Take Piatt County (Illinois) as an example,” the University of Illinois and The Ohio State University economists wrote. “Landowners and farmers in Piatt County will receive $31 per corn base acre. If a farm has 50 acres of corn, it would receive $1,550 in ARC-CO payments on that corn base.”
Counties that had harvested high 2016 yields relative to their benchmarks, however, will receive no payments, while higher payments will be sent to farmers in counties with low county yields relative to their benchmarks.
In an essay published in March, Zulauf, Schnitkey, Paulson and Coppess noted that a big question for lawmakers working on the 2018 Farm Bill is whether a “more diversified or comprehensive risk-based program can be designed that better incorporates both aspects of farm risk – such as, for example, by dividing base acres between ARC and PLC.” For example, the economists said, “base acres could be divided so that 50 percent is in ARC and 50 percent in PLC.”
CRP, signed into law by President Ronald Reagan in 1985, is one of the largest private-lands conservation programs in the U.S. producers and landowners enroll in CRP through the USDA Farm Service Agency on behalf of the Commodity Credit Corporation.
A permalink to the economists’ 2016 ARC-CO Payments article has been set up at http://farmdocdaily.illinois.edu/2017/10/2016-arc-co-payments.html
For more information on ARC and PLC programs, go to www.fsa.usda.gov/arc-plc