Farm Program Payments and Projections - March 2018

Farm Program Payments and Projections - March 2018

Updated yield and price estimates and projections available from USDA provide the basis for solid estimates of Price Loss Coverage (PLC) and Agricultural Risk Coverage county-level (ARC-CO) payments to be paid on the 2017 crop in October 2018.

USDA’s National Agricultural Statistics Service (NASS) published 2017 yield estimates for many county-crop-practice combinations in late February through the Quick Stats database on their website ( The numbers are still subject to revision as USDA’s Farm Service Agency (FSA) has to adjust yield numbers to yields/planted acre and determine final prices after the end of the marketing year for each crop.

In the meantime, the current estimates provide a good planning guide as to ARC-CO payments to come, particularly for county-crop-practice combinations where county-level NASS data is available. In addition, the price projections also lead to estimates for PLC program payments to be paid on the 2017 crop in October 2018 as well. The following tables summarize the current projections.

Table 1 provides actual and projected prices for the 2014-2018 crops used to calculate the program payments and projections. While the national marketing year average prices for the 2014-2016 crop years are complete and final as published by NASS, the 2017 crop year price is currently a projection subject to revision until the end of the marketing year (September-August for corn, grain sorghum, and soybeans; June-May for wheat). The current projection is based on the midpoint of the projected price range for the national marketing year average price as publsihed in the latest supply and demand estimates released by the World Agricultural Outlook Board and the USDA Office of the Chief Economist (available at

Table 1. National Marketing Year Average Prices and Projections*

From the prices and projections in Table 1, one can calculate the PLC payments and projections shown in Table 2. While PLC payments for any farm enrolled in the PLC program are a function of that farm’s PLC payment yields, the weighted average PLC payment yield across all counties in Nebraska is shown in Table 2 to provide a basis for calculating payments. A PLC payment is calculated based on the PLC payment rate (equal to the reference price minus the higher of the market price or the loan rate) multiplied by the PLC payment yield on the farm multiplied by the farm’s paid acres (equal to base acres times 85%).

Table 2 provides estimates of average PLC payments per base acre at the weighted average PLC payment yield in Nebraska after adjusting for the 85% paid acre factor for four major commodities in the state. With prices dropping below the reference rate for most commodities since 2014, the PLC payment rates have grown substantially.

Table 2. Average PLC Payment Rates in Nebraska*

Finally, with both the current price and yield data and projections, one can calculate ARC-CO payment rates. ARC-CO payments are made when calculated crop revenue at the county level for the crop and practice in question is below the ARC-CO guarantee for that county-crop-practice combination. The guarantee for each year is equal to 86% of the benchmark revenue (equal to the preceding 5-year Olympic average yield multiplied by the preceding 5-year Olympic average price with some minimum adjustments for both). When crop revenue falls below the ARC-CO guarantee, the ARC-CO payment rate is calculated as the difference, subject to a maximum limit of 10% of the benchmark revenue. To calculate ARC-CO payments on a farm, the ARC-CO payment rate is multiplied by the farm’s paid acres (equal to base acres times 85%).

Table 3 summarizes the average ARC-CO payment rates per base acre for four major commodities after adjusting for the 85% paid acre factor. The average is calculated as a simple average across all county-practice combinations for each crop to provide an indicator of relative ARC-CO payment levels. Each county-practice combination for a given crop may have a different payment rate based on differences in actual yield and 5-year Olympic average yields for that respective county-practice combination.

Table 3 demonstrates that ARC-CO payments on the 2017 crop to be paid in October 2018 are projected to be substantially lower than the payments of the past 3 years on the 2014-2016 crops. Projections for 2018 show continued low or non-existent ARC-CO payment projections as the 5-year Olympic average price in the ARC-CO guarantee has fallen to its minimum at reference rate level prices.

Table 3. Average ARC-CO Payment Rates in Nebraska*

In addition to the summarized data in Table 3, calculated ARC-CO payment rates are available for every county-crop-practice combination in Nebraska in a set of tables dating to the 2014 crop year. While the 2014-2016 data is final as published by FSA, the 2017 data builds on either the current estimated yields from NASS at the county level where available or the state yield estimate form NASS extrapolated to the county level (assuming similar yield results relative to the 5-year Olympic average). The projections for 2018 rely on the 5-year Olympic yields as a yield estimate and thus project no yield variation from average in the calculations. ARC-CO payment estimates for each year from 2014 through 2018 by county, crop, and practice are available in a series of tables by year at the following links:


Looking backward, it is apparent that ARC-CO provided substantially greater payments than PLC early in the 2014-2018 period as prices were falling from the high levels of 2009-2013. But, as prices have fallen below and stayed below reference rate levels, PLC payment rates have increased and now look to be larger than ARC-CO payment rates per acre going forward for every crop other than soybeans (which is projected at $0.00/base acre for both PLC and ARC-CO).

Remembering however, that producers had a one time decision under the 2014 Farm Bill to choose PLC or ARC-CO (or ARC-IC, the individual farm-level ARC program) for the 2014-2018 crop years, overall farm program payments in Nebraska will shrink substantially given the predominant enrollment in ARC-CO across the state. Enrollment in ARC-CO exceeded 95% of base acres for both corn and soybeans in Nebraska while grain sorghum and wheat were more evenly mixed between PLC and ARC-CO. Total farm program payments for PLC, ARC-CO, and ARC-IC exceed $600 million in Nebraska for each of the 2014-2016 crops. In contrast, pending payments for each of the 2017 and 2018 crops could fall to around $100 million or less in Nebraska.

A new farm program or an extension of current programs could likely provide producers a new enrollment decision between PLC and ARC in 2019. Absent substantial changes to the programs or to the market outlook, the enrollment decision then could look very different than it did in 2014. But, those decisions and any payments under the 2019 programs would not help support producers bottom lines before October 2020, so there is a significant cash flow decline coming from current farm programs and a sizable adjustment period before new programs or new decisions can provide any support.

Posted by Bradley D. Lubben, Thursday, March 22, 2018