February 27, 2018
Estimated 2017 ARC-CO Payments
Department of Agricultural and Consumer Economics
University of Illinois
Department of Agricultural, Environmental and Development Economics
Ohio State University
farmdoc daily (8):34
Recommended citation format: Schnitkey, G., J. Coppess, C. Zulauf, and N. Paulson. "Estimated 2017 ARC-CO Payments." farmdoc daily (8):34, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February 27, 2018.
The National Agricultural Statistical Service (NASS) released county yields for 2017 (released February 22 on NASS's Quick Stats website. With these NASS yields, fairly accurate estimates of 2017 Agricultural Risk Coverage at the county level (ARC-CO) payments can be made. We present U.S. maps showing estimated payments per base acre for corn, soybeans, and wheat. A table showing estimated payments per county in Illinois also is given.
ARC-CO payments for 2017 will be made in October 2018. At this point, 2017 payments presented in this article are estimates. Actual payments will vary from those presented here for three reasons:
- Farm Service Agency (FSA) uses different yields than NASS when calculating ARC-CO payments. The NASS yield generally will be higher than the yield used by FSA. As a result, estimated payments presented here should be viewed as conservative. NASS does not make estimates of county yields for all counties in which ARC-CO are available. Where NASS data is not available, 2018 ARC-CO payment estimates are not presented in this article.
- Market Year Average (MYA) prices are not known because marketing years do not end until August for corn and soybeans and May for Wheat. MYA estimates are midpoints of World Agricultural and Supply Demand Estimates (WASDE) made in February: $3.20 per bushel for corn, $9.30 per bushel for soybean, and $4.60 per bushel for wheat. Higher prices will result in fewer counties receiving payments and lower payments in those counties receiving payments. Conversely, lower prices will result in more counties receiving payments and higher payments.
- Sequestration amounts may differ from those used here. The ARC-CO payments estimated here use the 6.8% sequestration reduction applied to the 2014, 2015, and 2016 payments.
ARC-CO is a revenue-based program where revenue equals the MYA price times the county yield. Variation in payments across counties occurs because of variations in county yields from benchmark yields. Those areas with county yields substantial above benchmark yields will have no ARC-CO payments. ARC-CO payments increase as the county yield falls relative to the benchmark yield, eventually reaching the cap equal to ten percent of benchmark revenue.
The following maps report payments on a per base acre basis. Payment acres are .85 of base acres and the .85 adjustment has been applied to payments presented in the following maps and table.
Geographical areas with many counties projected to receive 2017 ARC-CO payments include western North Dakota, South Dakota, Kansas, the panhandle of Texas, eastern Arkansas, central Indiana, western Ohio, central Michigan, eastern New York, and Virginia. Other counties sporadically located throughout the United States will receive payments as well (see Figure 1).
Fewer counties are receiving 2017 payments than in 2016 (see farmdoc daily, October 6, 2017). ARC-CO uses five-year Olympic averages in calculating benchmark prices and benchmark yields. By design, benchmark prices will decline in periods of low MYA prices. As a result, benchmark prices used to set guarantees for corn have been coming down, resulting in fewer payments. The 2016 benchmark price was $4.79 compared to a $3.95 price in 2017. Moreover, yields were above average over much of the United States in 2017.
Geographical areas were ARC-CO will make payments in many counties in 2017 include western North and South Dakota; central Kansas; border counties along the Wisconsin-Illinois border; eastern Indiana, western Ohio, and Michigan; and western Pennsylvania (see Figure 2).
Fewer counties are projected to receive payments in 2017 as compared to 2016. The benchmark price used in guarantee calculation is $10.86 in 2017 as compared to $11.86 in 2016. The lower benchmark price results in lower revenue guarantees in 2017. Moreover, yields were relatively high across much of the United States.
Geographical areas having many counties receiving 2017 ARC-CO payments include Montana, North Dakota, South Dakota, eastern Kansas, Oklahoma, central Texas, Indiana, Ohio, Michigan, and Virginia (as Figure 3).
Similar to corn and soybeans, fewer counties are projected to receive payments in 2017 as compared to 2016. The 2017 benchmark price is $6.12 per bushel compared to $6.70 per bushel in 2016. The lower benchmark price resulted in lower revenue guarantees in 2017.
Estimated corn, soybeans, and wheat payments for Illinois counties are shown in Table 1. Corn payments will occur in some northern counties. Also, there is a band of counties in southeast Illinois that will receive corn payments. Some northern Illinois counties are projected to receive soybean payments. ARC-CO is projected to make payments for wheat in most counties for which NASS county yields are available.
Because final yields and prices are not yet known, actual ARC-CO payments can vary from estimates shown in this article. ARC-CO will make payment in fewer counties for 2017 production. In many cases, payments will be lower as well.
Paulson, N., G. Schnitkey, J. Coppess, and C. Zulauf. "2016 ARC-CO Payments." farmdoc daily (7):183, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 6, 2017.
U.S. Department of Agriculture, World Agricultural Outlook Board. World Agricultural Supply and Demand Estimates, WASDE-574, February 8, 2018. http://usda.mannlib.cornell.edu/usda/waob/wasde//2010s/2018/wasde-02-08-2018.pdf
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