Following five consecutive years of lower corn and soybean prices, due in large part to ample supplies and reduced demand, the revenue support provided by Agriculture Risk Coverage-County Option is fading. The benchmark price for corn for 2018 ARC-CO coverage was $3.70 per bushel, down 30%, or $1.59 per bushel, from the coverage provided during the 2014 and 2015 marketing years. Similarly, the benchmark price for soybeans in 2018 was $9.63 per bushel, down 20%, or $2.63, from 2014 and 2015 levels.
The benchmark prices for corn and soybeans for the 2019 crop year are also $3.70 per bushel and $9.63 per bushel, respectively, Figure 1. Program payments for 2018 ARC-CO coverage will be issued this year and farmers are eligible to enroll for 2019 ARC-CO coverage through
March 15, 2020. Today’s Market Intel reviews the 2018 ARC-CO payment rates and the revenue guarantee for the 2019 coverage year. Payments for 2019 ARC-CO coverage will be delivered in late 2020, after the close of the marketing year.
Agriculture Risk Coverage-County Option was introduced in the 2014 farm bill and reauthorized in the 2018 farm bill. ARC-CO is a county-based program that makes deficiency payments to farmers when the actual crop revenue for a marketing year, defined as the product of the county average yield and marketing year average price, falls below 86 percent of a benchmark revenue guarantee, defined as the product of the five-year Olympic moving average county yield and 5-year OMA crop price. The OMA is a five-year average that excludes the maximum and minimum from the calculation. For the 2019 coverage year, the OMA will average prices and yields for the five-year period beginning in 2013. This sample period was moved back administratively following the 2018 farm bill
ARC-CO Benefits for 2018
For the 2018/19 marketing year, the marketing year average price for corn was $3.61 per bushel, 9 cents below the benchmark price of $3.70 per bushel. Given these prices, a yield decline of 12% relative to the OMA yield was needed to trigger an ARC-CO payment for corn, i.e., -12%=(86%×3.70)÷3.61.
The national average corn yield in 2018 was 176.4 bushels per acre, in line with prior-year levels and above the national five-year OMA. It follows then that in many counties corn yields were above the county-level OMA. As a result, across many of the corn-producing areas of the U.S. the actual county revenue was greater than the revenue guarantee, resulting in no program payments from ARC-CO.
Nearly 500 counties triggered an ARC-CO payment for corn. In those counties, the average ARC-CO payment was $34 per acre and ranged from 46 cents per acre in Coos County, New Hampshire, to $89 per acre in Chaves County, New Mexico, where crop yield fell by 22% compared to the OMA. Figure 2 highlights average ARC-CO program payments for both irrigated and non-irrigated corn for the 2018 coverage year.
For the 2018/19 marketing year, the average price for soybeans was $8.48 per bushel, $1.15 cents below the benchmark price of $9.63 per bushel. Given these prices, a yield decline of 2% relative to the OMA yield was needed to trigger an ARC-CO payment for soybeans, i.e., -2%=(86%×9.63)÷8.48.
Like corn, the national average soybean yield was in line with prior-year levels, and in many counties the soybean yield was above the five-year OMA yield, resulting in slightly more than 650 counties triggering an ARC-CO payment for soybeans. Payments ranged from a low of 16 cents per acre in portions of Missouri and Pennsylvania to more than $50 an acre in portions of Kansas, Texas and Nebraska, among others, Figure 3.
What to Expect in 2019?
The OMA prices for corn and soybeans in 2019 remain unchanged from 2018 due to an administrative tweak to shift the averaging period following the 2018 farm bill. Current projections are for a MYA corn price of $3.80 per bushel, above the benchmark price of $3.70, and for an MYA soybean price of $9.00 per bushel, below the benchmark price of $9.63 per bushel.
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