By Clint Schroeder OSU Extension
With all of the challenges that Ohio farmers have faced this year it was sometimes easy for helpful information to get lost in the shuffle. There was rampant speculation about potential government intervention and expanding safety net coverage as farmers faced multiple hardships related to the weather, as well as, the ongoing trade dispute. Details of a new round of Market Facilitation Program (MFP) payments were leaked in late May and some clarity was provided in early June. On July 25th there was an official announcement regarding payment rates and eligibility requirements. This program as well as potential disaster payments have dominated the news cycle over the summer and overshadowed many details regarding the Agriculture Improvement Act of 2018 that was signed last December. The Agriculture Improvement Act of 2018 is commonly referred to as the Farm Bill and there are several programs within it. Grain producers are most likely to be interested in the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. Each of these programs are administered through the Farm Service Agency (FSA), but it is important to remember that they have different eligibility requirements and enrollment deadlines.
Market Facilitation Program
Payments will be based on 2019 planted acres to MFP-covered crops. Those crops are alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and wheat. Each county has a payment rate per acre. A farm’s 2019 payment acres cannot exceed the payment acres on the farm for the Payments acres in 2019 cannot exceed the payment acres on the farm for the 2018 MFP. Producers who filed prevented planting claims then planted an MFP-eligible cover crop qualify for a $15 per acre payment, provided that the cover crop was planted by August 1, 2019. The deadline to enroll acres in the MFP program is December 6, 2019. Payments will be made in three rounds, and the first round will cover 50% of the county rate and be made after enrollment. The USDA will determine need for the second and third round of payments, and if needed 25% of the county rate will paid in November and January. Total MFP payments are capped at $250,000 per person or legal entity. More information on this program including county payment rates can be found at https://www.fsa.usda.gov/programs-and-services/market-facilitation-program/index
2018 Farm Bill
The 2018 version of the Farm Bill brings back the ARC-County, ARC-Individual, and PLC that were used in the previous Farm Bill. Unlike the previous bill farmers are able to change their program election after the 2020 growing season. Producers need to elect which program they will enroll in for the 2019 and 2020 crop years by March 15, 2020. They will also need to enroll for the 2019 program by that date. Enrollment for the 2020 program ends on June 30, 2020. If you do not elect your program prior to March 15, 2020 your decision defaults to the option chosen under the 2014 Farm Bill. You will also be ineligible for payment on the 2019 crop. In 2021 producers can decide on program election annually. There is an annual $125,000 limit per payment entity on payments from the commodity portion of the Farm Bill.
Producers will be unlikely to choose the Individual Coverage (IC) portion of the ARC program because it makes payments on 65% of base acres compared to 85% for PLC and ARC-County (ARC-CO). There are provisions that might make this option attractive to growers that took 100% prevent plant on individual FSA farm numbers. The decision that producers will likely be left with is if the payment for 2019 ARC-IC on those farm numbers is large enough to offset the potential for no payment in the 2020 crop year. Producers making an ARC-IC election will have to report their actual yields for each crop grown on those farm numbers as payments are based off of the individual revenue. This factor is another reason that some producers might not elect ARC-IC.
Like the 2014 Farm Bill producers are given the option to update their yield for the PLC option. The formula for the 2018 Farm Bill is different in that each crop has a yield factor where in 2014 there was a standard factor of 75 percent. More detailed information on yield updates and the PLC option can be found at https://farmdocdaily.illinois.edu/2019/09/weekly-farm-economics-the-price-loss-coverage-plc-option-in-the-2018-farm-bill.html
The decision to elect PLC or ARC-CO needs to be made when producers have a good yield estimate for county yields and the market year average prices. For this reason it would be best for producers to wait until after harvest data from 2019 is available. The Decision Tool that many producers used in 2014 from the University of Illinois is being updated, but will be available to producers later this fall. This tool allows the producers to choose between four price forecast models. In each scenario the output will show an expected payment amount for each option as well as the likelihood of payment percentage. The only information a producer would need to run the simulations is their PLC yield. It is important to remember that the payment amounts will be per FSA farm base acres not planted acres. While this tool will be helpful in showing producers which option may provide the higher program payments it is not a risk management tool. The best fit for each operator will depend on their preference to protect against catastrophic price decline (PLC), or to protect against minor losses in successive years (ARC-CO).
If producers have questions on these programs they are encouraged to contact their local extension office. Currently there are meetings being planned state-wide that will offer a more in-depth analysis of the program options. These meetings will likely take place after farmers wrap up their harvest season, so be on the lookout for those announcements.