2019 NASS yields assist final farm program decisions
The USDA National Agricultural Statistics Service (NASS) released the 2019 estimated average county yields for corn, soybeans, and other crops on February 20. Farm operators were more interested in the NASS yields this year than in other years, due to the potential impacts on the 2019 and 2020 farm program decisions. Eligible producers have until March 16 to finalize their farm program choice for the 2019 and 2020 program year at local Farm Service Agency (FSA) offices. The 2019 county yields for all crops in Minnesota, Iowa, Wisconsin and all other States are available on the NASS web site at http://www.nass.usda.gov/.
Producers need to make a farm program choice for all eligible crops on FSA farm unit numbers by March 16. If either the Price Loss Coverage (PLC) or county-yield based Ag Risk Coverage (ARC-CO) program is chosen, farm operators may choose between PLC or ARC-CO for each crop on a FSA farm unit, and can vary the choice on different FSA farm units. Producers that had FSA farm units that were totally prevent plant acres in 2019, or had very low yields, may want to consider the farm-yield based ARC-IC program for 2019 and 2020 (see more details on ARC-IC later in this column).
Any potential 2019 ARC-CO program payments for corn and soybeans will be based on the final 12-month national market year average (MYA) price from September 1, 2019 through August 31, 2020, as well as the final 2019 county average yields. The final county yields will be based on the 2019 average RMA (crop insurance) reported yields in that county. The 2019 county average RMA yields are not expected to be announced until later this year (well after the March 16 farm program sign-up deadline). The recently released NASS County-level yields are not “official” for farm program calculations; however, the 2019 NASS corn and soybean yields do provide data to make estimates for 2019 ARC-CO payment potential.
Impacts on 2019 and 2020 farm program decisions
The price estimates in the February 11 WASDE report will likely be the last USDA market year average (MYA) price estimates that farm operators get before finalizing their farm program decisions for the 2019 and 2020 crop years. The MYA price estimates in the latest WASDE report were $3.85 per bushel for corn and $8.75 per bushel for soybeans. The final 2019 MYA price for corn and soybeans is based on the monthly average MYA prices from September 1, 2019 through August 31, 2020, which are then “weighted” by the volume of bushels sold each month, before being finalized by September 30. Following is a summary of the impact on farm program decisions of the recently released 2019 estimated NASS county yields for corn and soybeans at the current 2019 MYA price estimates:
• Corn: At an estimated MYA price of $3.85 per bushel, final 2019 county average corn yields will need to be about 18 percent below the county benchmark yield in order to earn any 2019 farm program payments through the ARC-CO farm program choice. Based on the recently released NASS yields, it appears that only a few counties in Minnesota will likely earn corn ARC-CO payments for 2019.
The corn PLC reference price for 2019 and 2020 will be $3.70 per bushel, so the final corn MYA price needs to be below $3.70 per bushel to earn any PLC payments in either 2019 or 2020. Even though 2019 PLC payments do not look likely at this point, many producers see the PLC program for corn as a good risk management tool to protect against significant declines in the 2020 MYA corn prices below $3.70 per bushel from September 1, 2020 through August 31, 2021.
• Soybeans: At the current USDA estimated MYA price of $8.75 per bushel, final 2019 county average soybean yields will only need to decline by about 2-4 bushels per acre (depending on the county) below the county benchmark yield in order to earn a 2019 ARC-CO payment. A decline of about 8-10 bushels per acre or more below the county benchmark yield will likely result in close to the maximum 2019 soybean ARC-CO payment.
The soybean PLC reference price for 2019 and 2020 will be $8.40 per bushel, so the final soybean MYA price needs to be below that level to earn any PLC payments in either 2019 or 2020. It does not appear that there will be a soybean PLC payment for 2019, and at this point prospects do not look very good for 2020 soybean PLC payments.
ARC-IC farm program consideration for 2019 and 2020
Any FSA farm unit numbers that are enrolled in the ARC-IC program for 2019 and 2020 must include all program crops that are raised on that farm unit for a given year. All FSA farm units in the same State that are enrolled in ARC-IC are calculated together. Calculations for ARC-IC benchmark revenues are based on national MYA prices and farm-level average yields for 2013-2017. The actual revenue for 2019 will be based on the final 2019 MYA price (described earlier) and the 2019 crop insurance yields on that FSA farm unit.
If an entire FSA farm unit was prevent planted in 2019, it will likely earn the maximum ARC-IC payment for the year. However, if any crop acres were planted on that farm unit, only the planted acres are used for 2019 ARC-IC calculations. FSA farm units with very low 2019 corn and soybean yields could also qualify for significant 2019 ARC-IC payments. Farm operators in Minnesota, North and South Dakota are encouraged to use the North Dakota State University ARC-IC farm program calculator, located on the NDSU website (referenced below) to make ARC-IC payment estimates.
Summary thoughts on farm program decisions
Now that the 2019 NASS county yield estimates have been released, farm operators are encouraged to enroll on the 2019 and 2020 farm program at local FSA offices as soon as they have reached their final farm program decision (March 16 is the final deadline). Failure to enroll in the farm program for 2019 and to make a farm program choice for 2019 and 2020 will result in no payment eligibility for the 2019 crop year. The initial farm program choice is only for the 2019 and 2020 crop years. Beginning in 2021, farm operators will be able to make their farm program choices on an annual basis.
Kent Thiesse is the Farm Management Analyst and Vice President, MinnStar Bank. This article originally appeared in Farm Forum.