FSA Changing ARC Policy

10 Nov 2015

By Chris Clayton
DTN Ag Policy Editor
and
Marcia Taylor
DTN Executive Editor

OMAHA (DTN) -- Farmers with base acres in multiple counties are getting a chance to reassess whether they could collect larger payments under the Agricultural Risk Coverage (ARC-County) program for the 2014-15 crop.

Those checks, the first under the new county-based farm safety net, started being issued last month.

USDA's Farm Service Agency is retroactively changing the policy on how farm locations are used to determine payments under the ARC-County program. In a letter to FSA county offices last week, Brad Pfaff, acting deputy administrator for farm programs, stated the agency is revising the requirement that ARC-County payments be based on the designated administrative county FSA has on record for the farm.

Under the new policy, FSA will allow farmers to calculate ARC-County payments based on the physical location of each tract of the farm.

Until now, farmers with tracts in multiple counties were seeing their entire base acreage calculated under ARC-County based on the administrative county designated by the farmers. That worked out fine if the administrative county happened to have the higher payment; but farmers were upset if they learned they were missing out on larger payments from other counties because the administrative county had a lower ARC-County payment.

Now, farmers can go into an FSA office and request to recalculate their ARC-County payments based on the county where base acres are located. The change could lead to a dramatic boost in payments for at least some farm operators.

FSA's retroactive decision should benefit growers such as John Oehlerking whose 1,600-acre farm straddles the line between two Nebraska counties. Half of his land is located in Cass County, which should have qualified for 2014 corn ARC-CO payments of $49.27/base acre before budget reductions, according to the University of Nebraska. Unfortunately, Oehlerking had used Otoe County's FSA office as his "administrative county" which recorded slightly higher yields in 2014. That meant all his corn payments ran only about $14.25/base acre, before the budget adjustments.

"Once I got the 2014 corn check, and spread the payment across all our acres, it came out to about $13/acre," Oehlerking said. "I don't like to live on handouts, but that check wasn't anywhere close to our real losses from the economic market downturn."

Still, every little bit helps and Oehlerking said he's grateful for the reconsideration. FSA's willingness to recalculate the 2014 ARC-CO payments based on a farm's physical location might be the only ARC payment he gets. Oehlerking is combining such amazing corn yields this fall -- about 50 bpa above his normal actual production history on dryland fields -- that he doubts either Cass or Otoe County will trigger 2015 ARC-CO payments a year from now.

"With the computer technology we have today and the fact that FSA keeps tabs on every tract, it always seemed plausible to me that they could pay us based on where the land was located, rather than where our records were housed," he said.

Wayne Myers, a farm policy specialist at K-Coe Isom in Kansas, said the FSA decision is "huge" for farmers operating in multiple counties. He suspects FSA's decision came after farmers began trying to restructure their operations to tie them to those counties with higher ARC-County payment rates.

"There were probably a lot of requests to change administrative counties or to be reconstituted," Myers said.

FSA stated the change allowing farms to recalculate payments does not allow a farmer to retroactively change the administrative county or be reconstituted. The change only relates to how payments are calculated.

Farmers won't be allowed to pick and choose between crops or tracts. If a farm operation chooses to recalculate all base acres, then there will be instances in which a farm may get a higher payment for one crop and a lower payment for another crop. Any recalculated payment would be the net of the commodities. In some cases, a shareholder may have to return a payment depending on how shares are split among the farmers of that particular operation.

Moreover, to recalculate the payments, all producers on a farm with a share in the payment must agree to recalculate based on the physical location of the tracts. If everyone on the farm doesn't agree, then FSA won't recalculate the payments. However, farmers will be given a choice to recalculate for both 2014-15 and 2015-16, or recalculate only one year.

"What might be an advantage in '14 might not be in '15, depending on what yields do," Myers noted. "Apparently, they are able to make that selection, which could be very beneficial."

FSA stated farmers will have until Feb. 1, 2016, to request a recalculation. Those new ARC recalculations may not happen quickly, however, because FSA will be sending down new software and policy to the county offices on how to do the calculations.

Moving ahead, the Farm Service Agency stated that for 2016-18 crop years, farmers would have to either transfer the farm to a different county or reconstitute the separate tracts of the farm that would then allow those tracts to be transferred.

Chris Clayton can be reached at Chris.Clayton@dtn.com.
Follow him on Twitter @ChrisClaytonDTN.

Marcia Zarley Taylor can be reached at Marcia.Taylor@dtn.com.
Follow her on Twitter @MarciaZTaylor

(ES/AG)