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County Agricultural Risk Coverage Payments Explained

NDSU Extension Service Farm and Family Resource Management Specialist, Andrew Swenson, explains why some farmers had questions upon receiving their ARC-CO payments.

The U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) recently issued Agricultural Risk Coverage – County (ARC-CO) payments for all program crops, except minor oilseeds and chickpeas, which will be determined at a later date.

“ARC-CO was designed as a safety net that would provide income when crop revenue dropped below 86 percent of a benchmark revenue,” says Andrew Swenson, North Dakota State University Extension Service farm and family resource management specialist. “However, the payments are quite limited; they cannot exceed 10 percent of the benchmark revenue.”

Though producers and lenders were anticipating the ARC-CO payments, there have been questions about the payment amounts. In certain instances, the payments were lower than expected.

The payments vary by crop and by county. For example, 30 counties in North Dakota received the maximum possible payment for corn, and nearly all other counties received between one-half of the maximum payment up to the maximum payment. The counties of LaMoure and Logan received no ARC-CO payments on their corn base acres.

The explanation of disparate ARC-CO payments for a crop is solely county yields. Payments are triggered by revenue shortfall. Revenue in ARC-CO calculations are determined by two things: price and yield. The same price, the national average marketing year price, is used throughout the country, but the yield varies county to county.

The benchmark yield, the Olympic average of the previous five years, is used in the calculation of the benchmark revenue. The current year’s county yield is used to determine actual revenue.

The actual price of corn in 2014 was $3.70 per bushel, compared with its benchmark price of $5.29 per bushel. This drop in price was enough to cause a maximum ARC-CO payment in every county of the country if actual 2014 county yields were similar to the county benchmark yields. In fact, the actual yield could have been up to 8.6 percent greater than the benchmark and a maximum payment still would be made. However, at higher actual county yields, the ARC-CO payment would diminish and eventually be eliminated if it was more than 23 percent greater than the county benchmark yield.

For example, Richland County received a maximum corn ARC-CO payment for the 2014 crop year. Its benchmark yield was 130 bushels per acre and its actual yield was 134 bushel per acre. Ransom County received about one-half of its potential maximum payment. It had a benchmark yield of 139 bushels per acre and an actual yield of 162 bushels per acre. LaMoure County did not receive a corn ARC-CO payment because its actual yield was 165 bushels per acre, compared with its benchmark of 129 bushels per acre.

Although high yields in 2014 may have reduced ARC-CO payments within a county, it also will increase the probability of payments in the remaining years of the farm bill, from 2015 to 2018, because it will be part of the benchmark yield for those years.

As expected, only a few North Dakota counties received any ARC-CO payments for wheat and barley. Divide, Burleigh and LaMoure counties received less than $2 per base acre of wheat, but Mercer, Oliver, Stark and Foster County producers received between $15 and $20 per acre on their wheat base. Only Traill, Pembina and Williams counties received an ARC-CO payment on barley base acres. There were no payments on oat base acres.

There were soybeans ARC-CO payments for 28 counties, but the 12 counties with the maximum payment are all in western North Dakota and have very little soybean base acres. Between one-half and the maximum ARC-CO payment was made to Rolette, Cavalier, Nelson, Burke, Pembina and Pierce County producers on their soybean base acres. About one-third of the maximum possible ARC-CO soybean payment was made to producers in Ramsey, Towner and Wells counties.

ARC-CO payments on dry pea base acres were made in 23 counties, and 14 counties received a payment on lentil base acres.

A list of all the North Dakota and Minnesota ARC-CO county payments by crop is available at https://www.ag.ndsu.edu/farmmanagement/farm-bill.

A detailed list of ARC-CO yields, prices and payment rates is available by selecting “ARC-County Yields, Revenue, and Payment Rates as of Nov. 5, 2015” on the FSA website at http://www.fsa.usda.gov/programs-and-services/arcplc_program/index.


NDSU Agriculture Communication - Nov. 11, 2015

Source:Andrew Swenson, (701) 231-7379, andrew.swenson@ndsu.edu
Editor:Kelli Armbruster, (701) 231-6136, kelli.armbruster@ndsu.edu
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