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What can Iowa farmers expect from ARC/PLC and the Trade Assistance Package in 2018?

pdf fileAgDM Newsletter
September 2018

While few Iowa farms will receive payments this fall from the current farm bill programs ARC or PLC, payments will be made across the state to current producers through the Market Facilitation Program, one component in the trio of programs included in the short- term tariff relief package.

ARC/PLC Payments in 2018

Farm Bill payments will not bring any relief to farmers in most Iowa counties with strained working capital in 2018. ARC-CO payments on corn base acres will only be triggered in six counties in Iowa, and will average $26.13 per base acre. After 6.8 percent sequestration, the expected 2017/18 ARC-CO payments per base acre are: $48.76 in Davis County, $4.22 in Jefferson County, $3.97 in Mahaska County, $15.32 in Union County, $50.62 in Van Buren County, and $33.90 in Wapello County.

ARC-CO payments on soybean base acres will be triggered in five counties in Iowa, and will average $19.71 per base acre. After sequestration, the 2017/18 payments per base acre are projected at $37.85 in Davis County, $7.02 in Jefferson County, $7.05 in Lucas County, $39.58 in Van Buren County, and $7.03 in Wapello County.

PLC payments per corn base acre will be triggered for the third consecutive year in 2018. Using FSA PLC yields, average payments will range from $23.29 in Lucas County to $41.35 in Grundy County, averaging $34.65 across the 99 Iowa counties. However, since only about one percent of all Iowa base crop acres are enrolled in the PLC program, the impact of PLC payments on Iowa farms is very limited. There will be no PLC payments for soybean base acres in 2018, as in all previous years since the implementation of the 2014 Farm Bill.

The checks from FSA with ARC-CO and PLC payments for the 2017/18 are expected to start arriving in October.

Based on the first four years of the current Farm Bill, choosing ARC-CO was not the best choice for all farms with corn base acres:

  • Eleven counties didn’t receive any ARC-CO payment on their corn base acres since the implementation of the program (while PLC payments were triggered in all Iowa counties): Appanoose, Clarke, Decatur, Henry, Keokuk, Lucas, Monroe, Ringgold, Warren, Washington and Wayne.
  • For 26 counties, the nominal value of all payments per base acre over the last four years under the ARC-CO program fell short of the corresponding value under the PLC program: Adair, Calhoun, Chickasaw, Dallas, Davis, Des Moines, Fremont, Guthrie, Hamilton, Iowa, Jasper, Jefferson, Lee, Louisa, Madison, Mahaska, Marion, Page, Polk, Pottawattamie, Poweshiek, Sac, Scott, Union, Van Buren and Wapello.

For farms with soybean base acres, ARC-CO was typically a better choice than PLC given the null payments issued by the latter program over the last four years. Eighty-seven counties received ARC-CO payments for their soybean base acres at least once since 2015. However, the following 12 counties did not receive an ARC-CO payment for soybean base acres in any year: Adair, Appanoose, Calhoun, Carroll, Cerro Gordo, Guthrie, Henry, Madison, Mitchell, Monroe, Sac, and Worth.

Finally, three counties in South Central and Southeast Iowa did not receive any ARC-CO payment for corn or soybean base acres over the four years: Appanoose, Henry, and Monroe.

For more detailed information by county, see the online decision tool "ARC/PLC Payments per Base Acre in Iowa", or download the ARC-CO/PLC Projected Payments calculators.

Trade Assistance Package in 2018

On August 27, 2018, USDA announced the details for the short-term tariff relief package. The trio of programs making up the relief package is authorized to utilize up to $12 billion to reduce the impacts of trade disputes on U.S. agricultural producers. The three programs are the Market Facilitation Program, the Food Purchase and Distribution Program, and the Agricultural Trade Promotion Program. The Market Facilitation Program will provide direct financial support to corn, cotton, dairy, hog, sorghum, soybean, and wheat producers. The Food Purchase and Distribution Program will purchase commodities targeted in the trade disputes. The Agricultural Trade Promotion Program will provide additional resources to access and develop new international markets for U.S. products.

In the initial phase of this relief package, an estimated $6.31 billion of the $12 billion will be spent, with $4.69 billion for the Market Facilitation Program, $1.41 billion for the Food Purchase and Distribution Program, and $200 million for the Agricultural Trade Promotion Program. The remaining funds could be utilized for a second round of support later this winter, likely in December. Sign-up for the various programs will begin on September 4, 2018.

For the Market Facilitation Program (MFP), the crop payments will be based on current 2018 production, so farmers must apply after harvest. Hog payments will be based on the number of owned live hogs, as of August 1, 2018. Dairy payments will be based on the historical production record for the Margin Protection Program for Dairy, established with the operation’s highest annual milk production during 2011-2013. Dairy farms must have been operating on June 1st to receive a payment. In all cases, applicants must have an ownership interest, be actively engaged in farming, have an average adjusted gross income (AGI) of less than $900,000 for the 2014-2016 tax years, and have complied with regulations on highly erodible land and wetland conservation.

table 1The payment rates were determined by USDA, based on their estimates of trade disruptions for the individual commodities. For all commodities covered, the payments will be made on 50 percent of eligible production, with the potential for another round of payments for the remaining 50 percent later this winter. The table shows the payment rates and the estimated total payments by commodity this round.

Given USDA’s recent production estimates, Iowa producers stand to gain over $550 million from MFP, with the lion’s share going to pork and soybean producers. The MFP payments do have a $125,000 cap per person or legal entity, but the cap works differently between crops and livestock. The cap for the crops is a combined one, summing producers’ MFP payments from all five of the crops. The cap for the livestock products is separate from the crops, so diversified producers with both crop and livestock production can receive more than $125,000 from the program. A second MFP payment is not guaranteed this winter. If the USDA determines that the trade disputes are still damaging U.S. commodity markets this winter, they will compute another MFP payment rate, based on the damage estimates at that time, and apply that payment rate to the remaining 50 percent of production not covered by the initial payments.

The Food Purchase and Distribution Program will purchase a variety of products, from beef and pork to peanut butter and orange juice, that face trade disruptions. While USDA has outlined targeted values for individual commodities, the purchases will be adjusted to match estimates of economic damage from tariffs and will be spread out to match the purchases with needs in nutrition assistance programs. The purchased commodities will be used in the school lunch program, along with other food assistance and child nutrition programs. Targeted purchases include $93 million of apples, $15 million of beef, $85 million of dairy products, $559 million of pork, and $2.4 million of sweet corn.

The $200 million addition to the Agricultural Trade Promotion Program will be used for cost-share assistance on agricultural market development. Eligible U.S. organizations that create and promote agricultural trade relationships can tap into these funds for consumer advertising, demonstrations, exhibits, market research, public relations and outreach, and technical assistance. Applications for these funds will be open until November 2, 2018 or until funding is exhausted, whichever happens first.

For more details on these programs, along with information on how to apply, see USDA’s Trade Retaliation Mitigation website.

View the AgDM Decision Tool for the Market Facilitation Program to estimate payments for 2018.

 

Alejandro Plastina, extension economist, 515-294-6160, plastina@iastate.edu
Chad E. Hart, extension economist, Iowa State University, 515-294-9911, chart@iastate.edu