June 26, 2017
2016 CORN ARC-CO PAYMENT ESTIMATES INCREASE
Most crop producers in the Upper Midwest are enrolled in the county yield-based Ag Risk Coverage (ARC-CO) farm program choice on their corn and soybean base acres for the 2014 to 2018 crop years. Given the decrease in the corn and soybean market prices in the past few months, many farm operators and ag lenders are now wondering what impact that may have on potential 2016 ARC-CO payments, which are scheduled to be paid in October, 2017.
For the 2016 corn and soybean crop, producers in counties that had very high corn and soybean yields in 2016, relative to their benchmark yields, were likely already projected to get a zero 2016 ARC-CO payment, which will not change in most of those counties. Producers in counties that had 2016 corn yields that were very near or below the 2016 benchmark yields will likely get the maximum, or close to the maximum, 2016 corn ARC-CO payment. However, producers that had 2016 corn yields between 110% to 122% of their 2016 benchmark yield, and were previously projected to receive a 2016 corn ARC-CO payment, will likely now see their 2016 ARC-CO payments increased from earlier estimates.
The 2016 Market Year Average (MYA) prices for corn and soybeans, which are used to calculate potential 2016 ARC-CO payments, are the U.S. average farm-level prices from September 1, 2016 to August 31, 2017. The 2016 MYA prices will be finalized on September 30, 2017. As of June 1, 2017, the estimated 2016 MYA prices are $3.35 per bushel for corn, and $9.55 per bushel for soybeans, which represents a decrease of $.05 per bushel for both corn and soybeans from the MYA estimates on March 1, 2017. The downward adjustment in the projected corn MYA price will have a positive affect the estimated 2016 corn ARC-CO payments in many counties across the Upper Midwest; however, there will be virtually no affect any potential 2016 soybean ARC-CO payments.
Based on June 1, 2017 estimates, many counties in Southern Minnesota and Northern Iowa, as well as some counties in Eastern South Dakota, that were already anticipating a 2016 corn ARC-CO payment, will now see the ARC-CO payments in October increased by $7 to $9 per corn base acre. A much smaller percentage of counties in Central and Northern Minnesota, along with Eastern North Dakota, were previously scheduled to receive corn ARC-CO payments; however, those counties that are scheduled to receive payments will see the 2016 corn ARC-CO payments increase by $6-$7 per base acre from the earlier figures.
Approximately six new counties in Minnesota, and two new counties each in Northern Iowa and Eastern South Dakota, are now scheduled to receive a small 2016 corn ARC-CO payment, after being previously projected to receive a zero payment. Five counties in Minnesota and nine counties in Eastern South Dakota are now expected to receive the maximum 2016 corn ARC-CO payment, based on the June 1 MYA corn price estimate.
Even following the small decline in the projected 2016 soybean MYA price, all counties in Minnesota, Northern Iowa, and the Eastern Dakotas are still not likely to receive a 2016 soybean ARC-CO payment. This is due to the record actual 2016 soybean yields in many counties in the Upper Midwest. Even if the 2016 MYA price drops another $.05-$.10 per bushel by August 31, 2016, there still would likely be a zero 2016 soybean ARC-CO payment in nearly all counties in the region. Any further small downward adjustment in the final 2016 corn MYA price between now and August 31 would further enhance the level of estimated 2016 corn ARC-CO payments in many counties in the Upper Midwest. Please refer below for information to contact Kent Thiesse for a Table with updated 2016 corn ARC-CO payment estimates for all counties in Minnesota.
The MYA price for a given crop year is used to calculate any potential payments for the PLC, ARC-CO, and ARC-IC programs. The historical MYA prices are also used to determine the “benchmark revenues” for both the ARC-CO and ARC-IC program options. The MYA price for a given commodity is not based on the Chicago Board of Trade (CBOT) commodity prices, or any specific local or terminal grain prices. The MYA price is the 12-month national average price for a commodity, based on the average market price received at the first point of sale by farm operators across the United States. The USDA National Agricultural Statistics Service (NASS) collects grain sales data on a monthly basis, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month.
USDA updates the average MYA price estimates for a given marketing year on a monthly basis in the World Agricultural Supply and Demand Estimate (WASDE) Report.. The WASDE Report is usually released around the middle of each month, and provides a pretty good price estimate for potential ARC-CO payments. USDA also publishes monthly and season-average estimated market prices for various commodities, which are available on the FSA farm program web site at: http://www.ers.usda.gov/data-products/season-average-price-forecasts.aspx. Some Universities also update projected MYA prices on a monthly basis for selected crops. Kansas State University offers one of the best monthly updates of MYA prices for corn, soybeans, and wheat. The Kansas State web site is at: www.agmanager.info/crops/insurance/risk_mgt
It is important to remember that the 2016 corn and soybean ARC-CO payment levels are still estimates, which are based on the 2016 NASS County yield estimates and the current MYA prices. The final payments could vary depending on the final MYA price levels on August 31, 2017, or any adjustments made by USDA in the announced NASS yields to arrive at the final 2016 FSA County yields, which are used to calculate 2016 ARC-CO payments. There will likely be a 6.8 percent Federal sequestration reduction on all 2016 ARC-CO payments that will be paid in October, 2017, similar to adjustments made in the 2014 and 2015 ARC-CO payments.
Producers must be enrolled in the 2016 ARC-CO program for corn and soybeans in order to be eligible for any 2016 ARC-CO payments. Producers are required to enroll in the 2017 ARC-CO program at local FSA offices by August 1, 2017, to be eligible for 2017 ARC-CO payments, which will be paid in October, 2018. Given the current projected corn and soybean price levels for 2017-18, along with likely increases in 2017 benchmark yields in many counties, there could be a possibility of 2017 corn and soybean ARC-CO payments in many areas, especially if the 2017 crop yields return closer to average yield levels.
Previous county yields for corn, soybeans, and other crops, benchmark yields and revenues, ARC-CO payment levels, and other farm program information are available on the FSA ARC-PLC web site, which is at: www.fsa.usda.gov/arc-plc. Kent Thiesse has prepared an Information Sheet titled: “Estimating 2016 Corn and Soybean ARC-CO Payments”, along with “2016 ARC-CO Payment Estimate Tables” for most counties in Minnesota and Northern Iowa, as well as for Eastern North and South Dakota, which were all updated after the June 1, 2016 MYA price estimates. To receive a free copy of the Information Sheet and Tables, send an e-mail to: kent.thiesse@minnstarbank.com
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — kent.thiesse@minnstarbank.com)