In the current environment of declining crop prices and farm revenue, landowners and producers realized the importance of making the best selection of 2014 farm bill safety net options.

“However, in many situations, the right decision was not obvious,” says Andrew Swenson, North Dakota State University Extension Service farm and family resource management specialist. “There were several options, several moving parts in the safety net calculations and unknown outcomes because, ultimately, any payments are determined by future prices and yields.”

The Farm Service Agency (FSA) has provided a summary of landowner and operator farm bill decisions at http://www.fsa.usda.gov/arc-plc.

“We were very interested in seeing the results,” says NDSU Extension farm management specialist Dwight Aakre. He and Swenson presented information about the 2014 farm bill at more than 150 educational meetings.

“We’ve provided farm bill education for each of the five previous farm bills dating back to 1985, but none generated as much interest as the 2014 farm bill,” Aakre adds. “Several meetings were attended by more than 200 operators and landowners.”

Under the farm bill, payments are made on base acres of program crops. Base acres were fixed in past farm bills and originally were determined by historic plantings.

The 2014 farm bill did not allow landowners to increase or decrease the total base acres of an FSA farm, but it gave the landowner a one-time opportunity to reallocate base acres among program crops. If chosen, reallocation was determined by a formula based on the farm’s average crop mix in the 2009 to 2012 time period. The landowner did not have the flexibility to choose how to reallocate base acres.

Operators also could decide whether to elect a revenue protection program, Agricultural Risk Coverage (ARC), at the county or individual farm level, or a Price Loss Coverage (PLC) program for the crops in which the farm has base.

The easiest decision was whether to update the payment yields, based on the farm’s 2008-2012 yield history, for the PLC program, the specialists say. This decision could be made crop by crop.

“In the educational programs, we emphasized that there was not a ‘sure thing,’” Swenson says. “But given current price projections, the best combination of a base acre crop and program election in North Dakota was canola (PLC) and corn (ARC). There was strong incentive to reallocate an FSA’s farm base acres if the outcome provided more canola or corn base at the expense of losing base acres of other crops.”

The FSA report shows that in North Dakota, corn base acres increased 138 percent, from 1,292,739 to 3,081,710, with ARC-county program election on 94 percent of the acres. Canola base acres increased 124 percent, from 598,881 to 1,340,695, with 97 percent in the PLC program.

Although not as obvious as with canola or corn, in most cases, a soybean base looked preferable to wheat, the specialists told producers. Much more corn and soybeans were grown in the 2009-2012 period for which reallocation was applied than when previous base acres were set. Therefore, if a landowner reallocated the base to increase corn acres, then a greater soybean base also would result, usually at the expense of the wheat and barley base.

Of all crops, soybeans looked to be the best fit for the ARC-County program. In North Dakota, soybean base acres increase 221 percent, from 1,282,211 to 4,116,755, with 97 percent of acreage electing ARC-county, the FSA report shows.

In most cases, the ARC-county program projected to be best for wheat. Exceptions were when FSA farms had a very high payment yield for PLC. Wheat was the crop that lost most base acres; it declined 28 percent, from 12,995,167 to 9,364,358. The ARC-county program was elected for 77 percent of the wheat base.

Sunflowers were one of the most difficult crops in which to choose between ARC and PLC safety net options, according to the specialists. Some counties were projected to favor ARC-county, and PLC looked better in others. Usually the difference in projected payments for the five years of the farm bill were small. Sunflower base acres declined 13 percent, from 939,531 to 816,044, and PLC was elected on 54 percent of the base, according to the FSA report

Barley looked like a PLC crop unless payment yields were very low. The barley base declined 55 percent, from 2,521,786 to 1,128,232 acres, and PLC was elected on 73 percent of the acres.

The crop that projected the lowest potential payments was oats. The oat base declined 42 percent, from 517,336 to 299,255, with the ARC-county program being elected on 66 percent of the oat base.

“The farm bill sign-up results were as expected, given the price and yield scenarios which seemed reasonable when doing our analysis,” Swenson says. “However, the combination of farm bill options which provide the best safety net for each individual farm will not be known until after five years.”

NDSU Agriculture Communication - June 17, 2015