A Tale of Two Counties

By Marcia Zarley Taylor
DTN Executive Editor

OMAHA (DTN) -- USDA's latest marketing year price forecast for 2014-crop corn means "close to maximum" Agricultural Revenue Coverage (ARC) payments in big chunks of the Corn Belt come this October. Except for a band of counties from eastern Kansas to southern Indiana, many farms could be eligible for payments of $60 per acre or more, University of Illinois economists forecast in a DTN webinar March 12. But whether one county pays the ARC max and a neighboring county receives little or nothing depends largely on the official USDA estimate of county yields.

"It's really a tale of two counties," pointed out Jonathan Coppess, a former Farm Service Agency administrator and director of the University of Illinois Agricultural Law and Policy program, speaking at a DTN webinar this week. McLean County, Illinois, averaged 217 bushels per acre in 2014, above its county average yield, so it stands to trigger no ARC-County or PLC payment for last season's crop. On the other hand, DeKalb County with 192 bpa corn is in line to collect $79 per base acre.

Growers have until March 31 to finalize their farm program choices for the 2014-2018 crops.

Coppess and University of Illinois colleague Gary Schnitkey mapped the county-by-county projected payouts, based on USDA's newly released 2014 county yield data and an estimated $3.65 per bushel marketing year average price, slightly lower than the $3.70 2014-crop price estimate USDA unveiled March 10. While that USDA price upgrade makes little difference for ARC, it essentially negates any chance of Price Loss Coverage (PLC) payments on 2014 crops if $3.70 or better actually materializes, Schnitkey said. By the same measure -- using USDA's latest price forecasts -- only a scattering of soybean counties will trigger ARC payments in 2014. ARC wheat payments are largely concentrated in Oklahoma, Kansas, parts of Texas, Washington and Oregon. PLC's best chances for trumping ARC payments are in crops like sorghum, rice and peanuts.

Yield differences between adjacent counties can be quite striking and "mean the merits of ARC are not the same," added Keith Coble, a Mississippi State University economist. In his state, Sunflower and Washington counties adjoin one another, but their five-year Olympic county corn yield averages run 131 bpa versus 166 bpa, respectively. Lower yields not only reduce the chance of triggering a payment but also reduce the amount of payment as well, he said. In some situations, growers with exceptionally high yields compared to their county may find higher PLC payments over the life of the 2014-2018 crop years.

(USDA's National Agricultural Statistics Service has not released 2014 county yield data for all crops yet. That's posing problems for estimating 2014 corn payouts on roughly half of Kansas, Kansas State University reported this week. While one southwest Kansas county could trigger 2014 corn payments as high as $94 per base acre, many others have no data yet. Kansas State economist Mykel Taylor attributed the problem to a shortage of statistically valid yield information, since NASS must receive at least three operator surveys covering 25% of a county's acreage to be valid. Without reliable farmer survey data, the agency must access federal crop insurance records to determine yields, although that data might not be available for months.)

Both Coble and the University of Illinois farm bill experts note the largest potential payments for ARC peak in 2014 and 2015. In later years, it's hard to assess which farm program option will pay more, ARC or PLC, given long-term price forecasts.

With the prospect for red ink in both 2014 and 2015, many corn growers may prefer the certainty of ARC's up-front payments, some farm lenders report. Thanks to a combination of crop disasters and poor prices, "just about two-thirds of Iowa and much of Minnesota likely will get maximum ARC payments on corn for 2014," Ken Thiesse, a loan officer with MinnStar Bank in Mankato, Minnesota, told DTN. "Without big crop insurance indemnities and ARC payments on the 2014 crop, many people around here would be losing money otherwise."

EDITOR'S NOTE: Watch a recording of the DTN webinar, "Farm Program Countdown: ARC or PLC: Which Safety Net Fits You?" at http://goo.gl/…. Registration is free and PDF downloads of the slides are available. The program is sponsored by the National Corn Growers Association.

Marcia Taylor can be reached at marcia.taylor@dtn.com

Follow Marcia Taylor on Twitter @MarciaZTaylor

(AG/CZ)

Copyright 2015 DTN/The Progressive Farmer. All rights reserved.