EVALUATING FARM PROGRAM DECISIONS

for the 2019 and 2020 Crop Years

Written by Kent Thiesse, Farm Management Analyst
Phone --- (507) 381-7960; E-mail --- kent.thiesse@minnstarbank.com

USDA has announced sign-up details for the 2019 and 2020 commodity farm program, which is being
implemented as part of the “Agricultural Improvement Act of 2018” (the 2018 Farm Bill). The farm programs
under the 2018 Farm Bill will function very similarly to the farm programs for the 2014-2018 crop years; however,
there were some significant changes in certain aspects of the farm program.

Important details regarding 2019 and 2020 Farm Program sign-up:

• Enrollment for the 2019 and 2020 farm program is from now until March 15, 2020 at local USDA
Farm Service Agency (FSA) offices. Producers have until June 30, 2020 to sign-up for the 2020 program.
Farm program sign-up for the 2021-2023 crop years will be from October (the previous year) through
March 15 (program year).
• Eligible cops include --- Corn, soybeans, wheat, oats, barley, grain sorghum, long grain rice,
medium/short grain rice, temperate japonica rice, seed cotton, dry peas, lentils, large and small chickpeas,
peanuts, sunflower seed, canola, flaxseed, mustard seed, rapeseed, safflower, crambe, and sesame seed.
• Eligible Producers will be able to choose between the price-only “Price Loss Coverage” (PLC) and
revenue-based “Ag Risk Coverage” (ARC) program choices for the 2019 and 2020 crop production
years. Beginning with the 2021 crop year, producers will be able to make an annual election between the
ARC and PLC program choices. The ARC program choice includes both the county-yield based ARC-
CO program choice and the ARC-IC program, which is based on farm-level yields.
• The farm program choice between the PLC and ARC-CO farm program choices will be specific to
each eligible crop, and the choice can vary from farm unit to farm unit for the same crop. The ARC-
IC program must be applied to all covered commodities on a given farm unit, and all farm units in a State
that are enrolled in ARC-IC must be considered together in one calculation.
• Crop base acres will remain at current levels for all crops on most farms. The only adjustments in
base acres will be for crop acres that were added via land purchases or land rental agreements, for
unassigned generic base acres from the last Farm Bill, or for acres that are no longer eligible for farm
program payments.
• Producers will have the opportunity to update their FSA farm program payment yields beginning
with the 2020 crop year. Yield updates will be based on the average farm yields for the 2013 to 2017
crop years on planted acres for eligible crops, which will be factored down to 81 percent (.81) for corn
and soybeans, and 90 percent (.90) for wheat. If the updated yields are lower than current levels, producers
can choose to keep their current FSA program yields. The farm program yields are used to calculate
PLC payments on individual FSA farm units.
• Risk Management Agency (RMA) yields that are used for crop insurance yield calculations, which
will be calculated at the county-level, will now be used for determining ARC-CO benchmark and
actual county yields for ARC-CO payments. The National Ag Statistics Service (NASS) yields, which
were the primary yield source in the last Farm Bill, will now be used as a secondary yield data source.
The RMA yields will include “trend-adjusted” (TA) yields for county calculations.
• ARC-CO payments will be based on the county where an FSA farm unit is located, rather than the
county of the FSA administrative office of the producer (as existed in the last Farm Bill). For producers
with FSA administrative farm units in multiple counties, ARC-CO revenues will be “weighted” according
to the base acres that are physically located in a county.
• Calculations for County benchmark (BM) prices and yields will no longer include the data from the
previous year, due to the annual farm program choice. (Example --- 2019 BM prices and yields are
based on the “olympic average” (drop the high and low) for 2013-2017.)
 • The reference prices for PLC and ARC-CO programs will be established at the greater of the
minimum (current) reference prices or 85 percent (.85) of the market year average (MYA) price for
the most recent five years, excluding the high and low year. The reference price can not exceed 115%
of the minimum reference price. Due to lower MYA price levels in recent years, the 2019 and 2020
reference prices for corn, soybeans, and wheat will be at the minimum levels, which are:
Corn = $3.70/Bu.
Soybeans = $8.40/Bu.
Wheat = $5.50/Bu.
• Calculation formulas, etc. for the PLC, ARC-CO and ARC-IC programs will remain similar to the
farm programs in the last Farm Bill. PLC payments are made when the final market year average MYA)
price falls below the reference price for a crop. ARC-CO payments are made when the final county
revenue (county yield x MYA price) falls below the benchmark revenue for a given crop. Calculations for
the ARC-IC program are the same as for ARC-CO, except ARC-IC uses farm-level yield data and
considers all crops on a farm unit together. PLC and ARC-CO payments are paid on 85 percent of
crop base acres, and ARC-IC payments are paid on 65 percent of base acres.
• Calculation formulas for the PLC and ARC-CO programs are as follows:
➢ PLC payment per crop base acre = (Reference Price – MYA price) x FSA program yield x .85
(If the final MYA price is higher than the reference price, there is no PLC payment.)
➢ ARC-CO Benchmark (BM) revenue guarantee per acre = County BM yield x BM price x .86
Final ARC-CO revenue per acre = Final County yield x Final MYA price
ARC-CO payment per base acre = (BM Revenue Guarantee – Final Revenue) x .85
(If the final revenue is higher than the BM revenue, there is no ARC-CO payment.)

Key points to remember about the 2019 and 2020 Farm Program decision:
• Producers will have more flexibility by being able to make an initial farm program choice is for
2019 and 2020, followed by making an annual choice from 2021-2023.
• Producers can change the farm program choice on different FSA farm units for the same crop.
• Producers can make a different fam program choice for each crop on a FSA farm unit, if they choose
either the PLC or ARC-CO program choice.
• If ARC-IC is chosen on a FSA farm unit, the benchmark and actual revenue for all crops raised
during that year on that farm unit are considered in calculations. If multiple FSA farm units are
enrolled in ARC-IC, all farm units in a State are considered in ARC-IC calculations. Farm units with
100 percent prevent plant acres in 2019 are likely to receive a significant ARC-IC payment; however,
farm units with partial prevent plant acres are more questionable to receive ARC-IC payments.
• The expected ARC-CO and ARC-IC benchmark prices for 2019 and 2020 are:
Corn = $3.70/Bu. (2019); $3.70/Bu. (2020)
Soybeans = $9.63/Bu. (2019); $9.25/Bu. (2020)
Wheat = $5.66/Bu. (2019); $5.50/Bu. (2020)
• ARC-CO benchmark yields in counties for 2019 may vary significantly from the previous BM yields
(2018) in some crops, due to the switch to using RMA yield data, rather than NASS yield data. In addition,
RMA “trend adjustments” will be used for county BM yield calculations.
• Please refer to the “2019 and 2020 Farm Program Choice Summary” later in this Information Sheet to
help analyze farm program decisions for the PLC and ARC-CO program choices.
• For more information on the PLC and ARC programs, and other details, go to the FSA farm
program website at: https://www.fsa.usda.gov/programs-and-services/arcplc_program/index
• Following are some good Farm Program web-based decision tools to assist producers:
➢ North Dakota State University --- https://www.ag.ndsu.edu/farmmanagement/farm-bill
➢ Kansas State University --- http://www.agmanager.info/ag-policy/2018-farm-bill
➢ Texas A & M Calculator --- https://www.afpc.tamu.edu/tools/farm/farmbill/2018/
➢ U of Illinois FarmDoc website ---
https://farmdocdaily.illinois.edu/category/areas/agricultural-policy/farm-bill
 PLC and ARC-CO Farm Program Comparison Table
PROGRAM PRICE LOSS COVERAGE
DETAILS ( PLC )
Base Price • Crop Reference Price (RP).
• Likely RP’s for 2019 and 2020:
➢ Corn = $3.70/Bu.
➢ Wheat = $5.50/Bu.
➢ Soybeans = $8.40/Bu.
Final Price • 12-month national market year
average (MYA) price.
➢ Sept. 1 to Aug. 31 for corn &
soybeans.
➢ June 1 to May 31 for Wheat.
Payment Yield • Farm Unit FSA program yields.
➢ 2019 --- Current FSA yields.
➢ 2020 --- Higher of Current or
updated FSA yields based on
2013-2017 ave. farm yields.
Payment Revenue
N/A
Payment Acres • 85 percent (.85) of Base Acres
for an eligible crop.
Payment Formula • PLC Payment per Base Acre =
(Ref. Price minus Final MYA Price)
x FSA Yield x .85
• If the final MYA price is higher
than the Ref. Price, there is not a
PLC payment for that crop.
Maximum Payment • (Ref. Price - Nat. Loan Rate) x
(Per Crop Base Acre) FSA Yield x .85
Payment Limits • $125,000 per individual or entity.
• $900,000 max. adjusted gross
income on Federal Tax Return.
SCO Insurance Coverage • Available up to 86% coverage.
• Must sign-up by March 15.
FSA Farm Program Data & Details on MYA prices, benchmark prices and yields, etc. are available at:
Information www.fsa.usda.gov/arc-plc
*** Table developed by Kent Thiesse, Farm Management Analyst ***
AG RISK COVERAGE
*** COUNTY ***
( ARC-CO )
• Benchmark (BM) Price.
• Higher of the Reference Price or
the 5-year “Olympic” ave. price.
• Likely 2019 & 2020 BM Prices:
Corn = $3.70/Bu. (2019 & 2020)
Wheat = $5.66/Bu.(2019)
$5.50/Bu. (2020
Soybeans = $9.63/Bu. (2019)
$9.25/Bu. (2020)
• Same as for PLC.
• 2019 MYA Price Est. (as of 1-01-20)
➢ Corn = $3.85/Bu.
➢ Soybeans = $9.00/Bu.
➢ Wheat = $4.55/Bu.
• County Benchmark (BM) Yields.
➢ 5-year rolling “Olympic” ave.
County RMA yield (TA).
• Harvest yield is the final county
ave. yield (RMA data).
• BM Revenue =
County BM Yield x BM Price
• Revenue Guarantee =
BM revenue x .86 percent (.86)
• 85 percent (.85) of Base Acres
for an eligible crop.
• ARC-CO Payment per Base Acre =
Revenue Guarantee minus Final
County Revenue (Final Co. yield x
final MYA price) x .85
• If the final County Revenue is
higher than the Revenue
Guarantee, there is not an ARC-
CO payment for that crop.
• County BM Revenue x .10 x .85
• Same as PLC.
N/A
2019 and 2020 Farm Program Choice Summary
Following is an initial summary of the situations that may favor the PLC or ARC-CO program for the 2019 and
2020 crop years for corn, soybeans, and wheat, based on current farm program analysis:

Corn
• A producer is likely to select the PLC program for corn in 2019 and 2020, if they ……
➢ Think the final MYA average price of corn will be below $3.70 per bushel.
(Note: The MYA price has been $3.70/bu. or lower from 2014 to 2018.)
➢ Have very high FSA program yields. (FSA yields can be updated for the 2020 crop year.)
➢ Feel that the final county average yields will be near or above the county benchmark yield.
➢ Want price protection from $3.70 per bushel down to $2.20 per bushel.

• A producer is likely to select the ARC-CO program for corn in 2019 and 2020, if they ……
➢ Think the final MYA corn price will be near $3.70 per bushel or above, with reduced yields.
➢ Are in a county with high benchmark yields, relative to their farm unit FSA program yields.
➢ Feel that the county average yields will be 20% or more below the county benchmark yield.
➢ Are not as worried about price protection (ARC-CO is a revenue-based program).

Soybeans
• A producer is likely to select the PLC program for soybeans in 2019 and 2020, if they ……
➢ Think the final MYA average price of soybeans will be below $8.40 per bushel.
(Note: The MYA price has been above $8.40/bu. from 2014 to 2018.)
➢ Have very high FSA program yields. (FSA yields can be updated for the 2020 crop year.)
➢ Feel that the final county average yields will be near or above the county benchmark yield.
➢ Want price protection from $8.40 per bushel down to $6.20 per bushel.

• A producer is likely to select the ARC-CO program for soybeans in 2019 and 2020, if they ……
➢ Think the final MYA soybean price will be near $8.40 per bushel or above, with lower yields.
➢ Are in a county with high benchmark yields, relative to their farm unit FSA yields.
➢ Feel that the county average yields will be 4-5 Bu./A below the county benchmark yield.
➢ Are not as worried about price protection (ARC-CO is a revenue-based program).

Wheat
• A producer is likely to select the PLC program for wheat in 2019 and 2020, if they ……
➢ Think the final MYA average price of wheat will be below $5.50 per bushel.
(Note: The MYA price has been below $5.50/bu. from 2015 to 2018.)
➢ Have very high FSA program yields. (FSA yields can be updated for the 2020 crop year.)
➢ Feel that the final county average yields will be near or above the county benchmark yield.
➢ Want price protection from $5.50 per bushel down to $3.38 per bushel.

• A producer is likely to select the ARC-CO program for wheat in 2019 and 2020, if they ……
➢ Think the final MYA wheat price will be near $5.50 per bushel or above, with reduced yields.
➢ Are in a county with high benchmark yields, relative to their farm unit FSA yields.
➢ Feel that the final county average yields will be 15% or more below the county benchmark yield.

Tables --- Please refer to the attached Tables for 2019 and 2020 ARC-CO and PLC payment estimates at
various yield levels and final MYA prices. The final analysis of the PLC and ARC-CO program
choices may change slightly in future months, as we have a better handle on final crop yields for 2019,
as well as MYA price estimates for the 2019 and 2020 marketing years.
 ESTIMATED ARC-CO AND PLC PAYMENTS FOR CORN (2019 & 2020)
*** Normal Yield Year (Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

200 180 160 170 150 130
Final County Average Yield Final Farm-Level Yield
Final MYA 200 180 160 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$3.90 0 0 0 0 0 0
$3.70 0 0 0 0 0 0
$3.50 0 0 0 $29 $25 $22
$3.30 0 0 0 $58 $51 $44
$3.10 $14 $12 $11 $87 $76 $66
$2.20 $63 (*) $57 (*) $50 (*) $217 (*) $191 (*) $166 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

ESTIMATED ARC-CO AND PLC PAYMENTS FOR CORN (2019 & 2020)
*** Low Yield Year (20% Below Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

200 180 160 170 150 130
Final County Average Yield Final Farm-Level Yield
Final MYA 160 144 128 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$3.90 $11 $10 $11 0 0 0
$3.70 $38 $35 $32 0 0 0
$3.50 $63 (*) $57 (*) $50 (*) $29 $25 $22
$3.30 $63 (*) $57 (*) $50 (*) $58 $51 $44
$3.10 $63 (*) $57 (*) $50 (*) $87 $76 $66
$2.20 $63 (*) $57 (*) $50 (*) $217 (*) $191 (*) $166 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

NOTES :
➢ PLC corn reference price will be $3.70 per bushel for 2019 and 2020.
➢ PLC payment occur if the final corn MYA price for a given crop year falls below $3.70 per bushel.
➢ PLC payments are only affected by the MYA price, and are not affected by final farm-level yields.
➢ ARC-CO calculations assume a $3.70 per bushel MYA benchmark price for corn in 2019 and 2020.
➢ If final County yields increase, ARC-CO payment estimates may be lowered, and if County yields decrease,
ARC-CO payment estimates may be higher (if below the maximum level).
➢ The payment factor for both ARC-CO and PLC payments is 85% (.85) of base acres.
➢ The listed payment estimates are per Base Acre (have been factored by .85).
➢ There is no Federal sequestration reduction of 6.8% (.068) deducted from listed farm program payments.

*** Tables were developed by Kent Thiesse, Farm Management Analyst ***
 ESTIMATED ARC-CO AND PLC PAYMENTS FOR SOYBEANS (2019 & 2020)
*** Normal Yield Year (Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

60 50 40 50 40 30
Final County Average Yield Final Farm-Level Yield
Final MYA 60 50 40 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$9.00 0 0 0 0 0 0
$8.70 0 0 0 0 0 0
$8.40 0 0 0 0 0 0
$8.10 $9 $8 $6 $13 $10 $8
$7.80 $24 $20 $16 $25 $20 $15
$6.20 $49 (*) $41 (*) $33 (*) $93 (*) $75 (*) $56 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

ESTIMATED ARC-CO AND PLC PAYMENTS FOR SOYBEANS (2019 & 2020)
*** Low Yield Year (10% Below Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

60 50 40 50 40 30
Final County Average Yield Final Farm-Level Yield
Final MYA 54 45 36 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$9.00 $9 $8 $6 0 0 0
$8.70 $23 $19 $15 0 0 0
$8.40 $37 $30 $24 0 0 0
$8.10 $49 (*) $41 (*) $33 (*) $13 $10 $8
$7.80 $49 (*) $41 (*) $33 (*) $25 $20 $15
$6.20 $49 (*) $41 (*) $33 (*) $93 (*) $75 (*) $56 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

NOTES :
➢ PLC soybean reference price will be $8.40 per bushel for 2019 and 2020.
➢ PLC payment occur if the final soybean MYA price for a given crop year falls below $8.40 per bushel.
➢ PLC payments are only affected by the MYA price, and are not affected by final farm-level yields.
➢ ARC-CO calculations assume a $9.63 per bushel MYA benchmark price for soybeans in 2019.
➢ If final County yields increase, ARC-CO payment estimates may be lowered, and if County yields decrease,
ARC-CO payment estimates may be higher (if below the maximum level).
➢ The payment factor for both ARC-CO and PLC payments is 85% (.85) of base acres.
➢ The listed payment estimates are per Base Acre (have been factored by .85).
➢ There is no Federal sequestration reduction of 6.8% (.068) deducted from listed farm program payments.

*** Tables were developed by Kent Thiesse, Farm Management Analyst ***
 ESTIMATED ARC-CO AND PLC PAYMENTS FOR WHEAT (2019 & 2020)
*** Normal Yield Year (Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

70 60 50 60 50 40
Final County Average Yield Final Farm-Level Yield
Final MYA 70 60 50 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$6.00 0 0 0 0 0 0
$5.50 0 0 0 0 0 0
$5.00 0 0 0 $25 $21 $17
$4.50 $22 $19 $16 $51 $42 $34
$4.00 $34 (*) $29 (*) $24 (*) $76 $64 $51
$3.38 $34 (*) $29 (*) $24 (*) $108 (*) $90 (*) $72 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

ESTIMATED ARC-CO AND PLC PAYMENTS FOR WHEAT (2019 & 2020)
*** Low Yield Year (10% Below Benchmark Yield) ***
ARC – CO PLC
(MYA Price & County Yields) (MYA Price Only)

Benchmark (BM) County Yield PLC Payment Yield

70 60 50 55 45 35
Final County Average Yield Final Farm-Level Yield
Final MYA 63 54 45 N/A N/A N/A
Price
Est. Payment Per Base Acre Est. Payment Per Base Acre
$6.00 0 0 0 0 0 0
$5.50 0 0 0 0 0 0
$5.00 $22 $19 $16 $25 $21 $17
$4.50 $34 (*) $29 (*) $24 (*) $51 $42 $34
$4.00 $34 (*) $29 (*) $24 (*) $76 $64 $51
$3.38 $34 (*) $29 (*) $24 (*) $108 (*) $90 (*) $72 (*)
(*) --- Denotes maximum ARC-CO and PLC payment level.

NOTES :
➢ PLC wheat reference price will be $5.50 per bushel for 2019 and 2020.
➢ PLC payment occur if the final wheat MYA price for a given crop year falls below $5.50 per bushel.
➢ PLC payments are only affected by the MYA price, and are not affected by final farm-level yields.
➢ ARC-CO calculations assume a $5.66 per bushel MYA benchmark price for wheat in 2019.
➢ If final County yields increase, ARC-CO payment estimates may be lowered, and if County yields decrease,
ARC-CO payment estimates may be higher (if below the maximum level).
➢ The payment factor for both ARC-CO and PLC payments is 85% (.85) of base acres.
➢ The listed payment estimates are per Base Acre (have been factored by .85).
➢ There is no Federal sequestration reduction of 6.8% (.068) deducted from listed farm program payments.

*** Tables were developed by Kent Thiesse, Farm Management Analyst ***