FOCUS ON AG

Written by Kent Thiesse

Farm Management Analyst and Senior Vice President, MinnStar Bank
January 6, 2020
THE FARM PROGRAM DECISION FOR 2019 AND 2020
The farm program choices that are part of the 2018 Farm Bill have been discussed for a long time, and the time
to make the initial farm program decisions for 2019 and 2020 has now arrived. Enrollment for the 2019 and
2020 farm program is from now until March 15, 2020 at local USDA Farm Service Agency (FSA) offices.
Producers can sign-up for both years together; however, they 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 program crops include corn, soybeans, wheat, and many other crops.

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 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 PLC and ARC-CO farm program choice will be
specific to each eligible crop on a FSA farm unit, 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 2018 FSA 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. 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 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 (BM) 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 BM calculations. Calculations for county 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.

Beginning in 2019, 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.

The reference prices for PLC and ARC-CO programs will be established at the greater of the minimum
(statutory) reference prices or 85 percent (.85) of the market year average (MYA) price for the most recent five
years, excluding the high and low years. The increased 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 in 2019-2023 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 similar to 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.

Kent Thiesse, Farm Management Analyst, has prepared a series of information sheets to help analyze the 2019
and 2020 farm program decision. To receive a free copy of these information sheets, send an e-mail to:
kent.thiesse@minnstarbank.com. 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

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 program 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 farm 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 for 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)
 2019 ARC-CO benchmark yields in counties for some crops may vary significantly from the previous
BM yields in 2018, due to the switch to using RMA yield data, rather than NASS yield data. In addition,
RMA “trend adjustments” are being used for county BM yield calculations.

Remember …… the preferred farm program choice in other States or other counties may not necessarily be the
best choice where your FSA farm units are located. In addition, your neighbor’s farm program choice may not
be your best choice, especially in the case of the ARC-IC program option. Farm operators are encouraged to
take the time to attend informational meetings, to read information sheets, and to fully analyze the farm
program options for 2019 and 2020.

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Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960);
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/