FOCUS ON AG
May 11, 2020

Corn prices have declined significantly in the past couple of months, due to the coronavirus outbreak and greatly reduced ethanol production. Soybean prices also declined somewhat in March and April, and wheat prices have remained quite low. While the lower corn and soybean prices are having a negative financial impact for farm operators with remaining 2019 grain inventory, as well as on prices for 2020 crop production, the lower prices will likely result in higher levels of 2019 farm program payments for many producers.

All farm program payments are based on the national market year average (MYA) price for a given crop commodity. The 2019 MYA price for corn and soybeans is the 12-month average price from September 1, 2019 to August 31, 2020, with the MYA price finalized on September 30, 2019. The 2019 MYA price for wheat and other small grains is the average price from June 1, 2019 to May 31, 2020, with MYA price being finalized on June 30, 2020. Any 2019 farm program payments that are earned will be paid after October 1, 2020.

The MYA price is based on the monthly average farm-level market price received by producers across the United States, which is then “weighted” at the end of the marketing year, based on the volume of bushels sold in each month. MYA price estimates are updated on a monthly basis in the USDA World Agricultural Supply and Demand Estimates (WASDE) report, which is usually released around the middle of each month. As of April 1, 2020, USDA was estimating the 2019 MYA prices at $3.60 per bushel for corn, $8.65 per bushel for soybeans, and $4.60 per bushel for wheat. Many analysts expect the MYA price for both the corn and soybeans to decline another $.05 to $.10 per bushel by the end of the marketing year. This would further enhance PLC payment levels for corn and increase the likelihood or level of 2019 ARC-CO payments for corn and soybeans in many counties that are not at maximum payment levels.

For the 2019 and 2020 crop years, 76 percent of the corn base acres in the U.S. are enrolled in the price-only, price loss coverage (PLC) farm program choice, and only 19 percent in the county yield-based Ag Risk Coverage (ARC-CO) program choice. By comparison, 94 percent of the corn base acres were enrolled in the ARC-CO program from 2014-2018. In 2014, producers needed to make a one-time farm program choice for five years (2014-2018), while the current program choice is only for two years (2019 and 2020).

The biggest change causing the shift in the PLC and ARC-CO farm program choice for corn was the decline in the benchmark (BM) price from $5.29 per bushel in both 2014 and 2015 to $3.70 per bushel for 2019 and 2020. The BM price of $3.70 per bushel is the same as the reference price for corn that is used to calculate PLC payments. PLC payments are initiated when the MYA corn price drops below $3.70 per bushel, while 2019 ARC-CO payments require more than a 14 percent decline below the MYA price to generate an ARC-CO payment, if the final county average RMA yield is equal to the BM yield. The ARC-CO program was attractive for corn in some counties due to very low 2019 average corn yields.

The 2019 BM price for soybeans is $9.63 per bushel, which is well below the BM price of $12.27 per bushel in both 2014 and 2015; however, it is still well above the soybean PLC reference price of $8.40 per bushel. The 2019 BM price for wheat is $5.66 per bushel for 2019, but will decline to $5.50 per bushel for 2020, which is the same as the reference price for wheat. As a result, the higher BM price together with reduced 2019 soybean yields in many areas was favorable for farm program enrollment in the ARC-CO program for soybeans, while the low projected 2019 MYA price for wheat was more favorable for enrollment in the PLC program. For 2019 and 2020, 80 percent of the soybean base acres are enrolled in ARC-CO and only 14 percent in PLC. For wheat, 93 percent of the base acres are enrolled in the PLC program and only 6 percent in ARC-CO.

For ARC-CO calculations, the benchmark (BM) revenue for a given crop is the county BM yield times the BM
price, which is multiplied by 86 percent (.86) to calculate the “county revenue guarantee”. The county BM yield
for 2019 is the average county yield for the five years from 2013-2017, dropping the high and low yield, and the
averaging the other three yields. County BM yields for corn and soybeans have increased in recent years, due to
very good yield averages from 2015-2017. ARC-CO payments for a given crop are paid when the actual county
revenue for the crop falls below the county BM revenue guarantee. The actual county revenue is the final Risk
Management Agency (RMA) county average yield times the final MYA price for the year.

USDA has not yet released the final county RMA average yields for 2019, which will be used to calculate final
2019 ARC-CO payments. However, USDA has released the National Agricultural Statistics Service (NASS)
estimated 2019 average county average yields for corn, soybeans, and other crops, which can offer a good
estimate of potential 2019 ARC-CO payments. The 2019 NASS county yields are available on the NASS web
site at: http://www.nass.usda.gov/

Approximately, 6 percent of the corn and soybean base acres were enrolled in the farm yield-based Ag Risk
Coverage (ARC-IC) program choice for 2019 and 2020. ARC-IC utilizes the same MYA price as PLC and
ARC-CO; however, ARC-IC calculates all crops on a farm together and utilizes farm-level historic and 2019
crop yields for calculations. The high level of prevent plant acres and very low yields on some farms in 2019
made near maximum 2019 ARC-IC payments likely for many producers in some areas.

Summary of potential 2019 PLC and ARC-CO payments:
Based on the current MYA price estimates and the NASS county yield estimates, following is an overview of
potential 2019 PLC and ARC-CO payments:
• Corn — A PLC payment of $.10 to $.20 per bushel is likely ($3.60-$3.50/Bu. MYA price).
ARC-CO payments are likely if the final RMA county yield is 10 percent or more below BM
yields. Maximum ARC-CO payment will likely occur with a 22 percent or more yield decline.
• Soybeans — No PLC payments are likely (reference price is $8.40/Bu.).
ARC-CO payments are likely with a final 2019 RMA county yield decline of 2-3 Bu./A. below
the BM yield. Maximum ARC-CO payment will likely occur with a 15 percent yield decline.
• Wheat — A PLC payment of $.85-$.90 per bushel is likely ($4.65-$4.60/Bu. MYA price).
Near-maximum ARC-CO payments are also likely in many areas.

Notes — Please refer to the attached Table for 2019 PLC payment estimates for corn and wheat and for
2019 ARC-CO payment estimates for corn and soybeans in Minnesota.
All PLC payments are paid on FSA farm unit yields, which are usually lower than normal yields.
PLC and ARC-CO payment estimates may change in future months as MYA prices change.
ARC-CO payment estimates may change when final county RMA yields are used for calculations.

2019 benchmark (BM) yields and revenues, previous county yields for corn, soybeans, and other crops, 2014-
2018 farm program payment levels, and other farm program information are available on the FSA ARC-PLC
web site, which at: https://www.fsa.usda.gov/programs-and-services/arcplc_program/index
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/

2019 PLC AND ARC-CO PAYMENT ESTIMATES FOR MN

PLC Payment Estimates for Corn

Following are PLC payment estimates at various FSA farm unit corn yields ……
165 Bu./A. — $3.60/Bu. MYA = $14 per base acre; $3.50/Bu. MYA = $28 per base acre
150 Bu./A. — $3.60/Bu. MYA = $12.75 per base acre; $3.50/Bu. MYA = $25.50 per base acre
135 Bu./A. — $3.60/Bu. MYA = $11.50 per base acre; $3.50/Bu. MYA = $23 per base acre

PLC Payment Estimates for Wheat

Following are PLC payment estimates at various FSA farm unit wheat yields ……
50 Bu./A. — $4.60/Bu. MYA = $38 per base acre; $4.70/Bu. MYA = $34 per base acre
40 Bu./A. — $4.60/Bu. MYA = $30.50 per base acre; $4.70/Bu. MYA = $27 per base acre
30 Bu./A. — $4.60/Bu. MYA = $23 per base acre; $4.70/Bu. MYA = $20.50 per base acre

Corn ARC-CO Payment Estimates

Following are counties likely to receive 2019 ARC-CO payments for corn ……
Max. Payment Level/Base Acre Other ARC-CO Payments/Base Acre
Cottonwood = $65 Lincoln = $40-$50
Hennepin = $58 Martin = $30-$40
Jackson = $63 Mille Lacs = $20-$30
Murray = $64 Steele = $10-$20
Nobles = $63 Traverse = $40-$50
Pipestone = $63 Wabasha = $30-$40
Rock = $66 Watonwan = $30-$40
Yellow Medicine = $10-$20

Soybean Arc-CO Payment Estimates

Following are counties likely to receive 2019 ARC-CO payments for soybeans ……
$40 or more per Base Acre________ ____ $30 to $39 per Base Acre _____
Blue Earth Brown Faribault Hennepin
Cottonwood Dodge Lincoln Mower
Jackson Murray Stevens Swift
Nobles Pipestone Traverse Waseca
Rock Steele
Watonwan Yellow Medicine
_____$20 to $29 per Base Acre________ ____ $19 or less per Base Acre _____
Big Stone Chippewa Chisago Douglas
Freeborn Isanti Fillmore Goodhue
Lyon Martin Grant Kittson
Nicollet Redwood Mille Lacs Pine
Renville Wabasha Winona

NOTES

…… Some counties did not have 2019 NASS yield estimates, so there were no ARC-CO calculations.
…… ARC-CO payment estimates were based off of NASS yields and may change with RMA yields.
…… ARC-CO payment estimates were based on current 2019 MYA price estimates (as of 5-01-20).
*** Table prepared by Kent Thiesse, Farm Management Analyst ***