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OMAHA (DTN) -- Law firms and grain marketers are pushing for possible legal action against the U.S. Department of Agriculture over the way USDA came up with the final county yield totals for the Agriculture Risk Coverage program.
Complaints have festered since last fall when the Farm Service Agency released the final 2014 payment rates. Payments weren't as high as projected in some counties around the country, especially in areas with high yields for particular crops.
A caveat to the 2014 farm bill is that it requires the Farm Service Agency to calculate yearly county yields for ARC-County payments. Therein lies the problem. At least a couple of law firms and others are holding meetings with farmers in parts of the Plains and Midwest to argue that FSA did not accurately calculate county yields.
"We've had a lot of inquiries, a lot of questions from producers in eastern Colorado, Kansas and other states as well where they believe FSA did not follow the proscribed procedures in determining county yield," said Jeff Todd, an attorney in Oklahoma City for the law firm McAfee & Taft.
ARC-County and Price Loss Coverage were created in the 2014 farm bill and farmers were given a choice of which program they wanted to enroll individual commodities in for the life of the farm bill. Farmers enrolled roughly 96% of soybean base acres and 91% of corn base acres in ARC-County.
Producers are used to direct payments that allowed them to go to bankers and point to a consistent, steady payment. Under ARC, potential government payments could vanish for counties, districts or states that see bumper crops.
USDA has paid out roughly $4.4 billion for ARC-County, of which $3.7 billion went to corn farmers. PLC has paid out about $756 million, mainly to long-grain rice and peanut farmers.
Farmers in just three states -- Iowa, Minnesota and Nebraska -- account for just under $2.19 billion of that $4.4 billion paid out for ARC-County, a full 49% of the payments.
Todd points out that the terms and conditions of the program spell out how FSA is supposed to determine county yield. That language begins, "Actual average county yield means the yield calculated as the production of a covered commodity in the county divided by the commodity's total planted acres for a crop year in the county, as determined by FSA."
Ray Grabanski, president of the North Dakota-based marketing and risk-management company Progressive Ag, recently wrote a column on ARC-County yields describing that farmers "got shafted" and "got screwed" by FSA's yield calculations. Grabanski estimated $100 million or more in government payments may have been lost.
"This program (ARC-County) looks arbitrary and capricious in the way it's administered," Grabanski said in an interview.
Grabanski is collecting contact information for farmers and consulting other attorneys who have a history of challenging USDA in court.
At least a few commodity organizations have posted information on their websites about meetings with attorneys over FSA calculations of ARC-County yields.
USDA officials have pointed out in the past that ARC-County has 21 covered commodities spread over more than 3,000 counties nationally. In order to do ARC-CO calculations, FSA needed five years of county benchmark yields, as well as the yield for the current year. That translates into six years of yields for each crop in each county, or roughly 100,000 separate crop-county combinations for yields.