The likli hood of 2024 farm program payments

With the advent of much lower corn and soybean market prices during 2024, together with reduced corn and soybean yields in some areas, many farmers and ag lenders are now wondering what the impact might be on potential farm program payments for corn and soybeans for the 2024 crop year. These payments would not be made until after October 1, 2025; however, it may be beneficial for 2025 cash flow planning purposes to make estimates regarding the potential 2024 farm program payments. Many crop producers in the Midwest were enrolled in the Ag Risk Coverage (ARC-CO) farm program choice on their corn and soybean base acres for the 2024 crop year. There will likely be a wide variation in the potential for 2024 ARC-CO payments from county-to-county, depending on where final 2024 county average yields for corn and soybeans end up.
Producers have a farm program choice each year on all eligible crops between the Ag Risk Coverage (ARC) and Price Loss Coverage (PLC) farm program choices. Payments in the PLC program are “price-only” and are based on comparing the 12-month national market-year average (MYA) price for a given crop compared to the established reference price for that year. If the 12-month MYA price is lower than the reference price, the producer would earn a PLC payment for that crop for the year. Enrollment in the PLC program has been fairly low in recent years due to corn and soybean commodity prices that have been well above the established PLC reference prices. The PLC reference prices for corn and soybeans increased for 2024; however, market-year average (MYA) prices for corn, soybeans and wheat will need to decline from current projections in order to earn PLC payments for the 2024 crop year.
The ARC-CO farm program choice includes a formula that uses 5-year average county-based yield calculations and 5-year average MYA prices to establish a benchmark revenue for the farm. The final calculated revenue for the farm is the actual county yield for a given year times the final MYA price for the year. If the final calculated revenue is lower than 86 percent of the benchmark revenue for the year there would be an ARC-CO payment for that year. There is also an “ARC-IC” farm program choice, which is based on farm-level yields; however, in many instances the ARC-IC program has had less payment potential than the ARC-CO program.
Many times understanding the formula for the ARC-CO programs can be a bit confusing. Sometimes the formula can be easier to understand by reviewing the data and results for the ARC-CO program from previous years. For information on 2023 ARC-CO payments, current and past benchmark yields, prices and revenues, historical ARC-CO payment levels, and other farm program information, producers should access the USDA ARC-PLC web site, which is at: www.fsa.usda.gov/arc-plc
The 2024 corn and soybean yields were above average in portions of the Midwest that avoided the extremely wet weather early in the growing season and were not impacted extensively by the very dry weather that existed late in the growing season. On the other hand, portions of southern Minnesota and adjoining areas on northwest Iowa had significantly reduced yields resulting from excess rainfall in May and June, together with very dry conditions in August and September.
In areas that have final 2024 county average yields that are above the established 2024 county benchmark yield for the county, there will likely be limited chances of receiving 2024 ARC-CO payment, unless MYA prices decline further from current levels. However, in portions of the region that have final county yields that are below county benchmark yields, there should be a possibility for some level of 2024 ARC-CO payments. The final 2024 county yield data for corn and soybeans in every State will not be available from the USDA National Agricultural Statistics Service (NASS) until late February, 2025.
The market year average (MYA) price for corn and soybeans is 12-month national average price in a given year from September 1st during the year of harvest until August 31st the following year, which is then finalized on
September 30th in the year following the production year for the crops. This is why any farm program payments that are earned for a given crop year are not paid by USDA until after October 1st in the following year. The marketing year to calculate MYA prices for wheat and other small grain crops is from June 1st in the year of harvest until May 31st the following year.
The 12-month national average MYA price for a given crop is based on the monthly average market price received by farm operators across the United States, which is then “weighted” at the end of the year, based on the volume of bushels sold in each month. The MYA price estimates can be tracked on a monthly basis in the monthly USDA World Agricultural Supply and Demand Estimates (WASDE) reports. The next WASDE report will be released on December 10, 2024.
Many crop producers in the Midwest are enrolled in the Ag Risk Coverage (ARC-CO) farm program choice on their crop base acres for the 2024 crop year. The 2024 benchmark prices for potential 2024 ARC-CO payments for corn, soybeans, and wheat were all increased from 2023 price levels. The reference prices for potential PLC payments were also increased for corn and soybeans for 2024, but stayed the same for wheat. The marketing year to determine the 2024 market year average (MYA) prices is from September 1, 2024 through August 31, 2025 for corn and soybeans, and June 1, 2024 through May 31, 2025 for wheat.
Summary of 2024 potential PLC and ARC-CO payments:
•Corn --- The 2024 PLC corn reference price is $4.01 per bushel and the 2024 corn benchmark price for ARC-CO payments is $4.85 per bushel. Based on the October USDA WASDE report, the current estimate for the 2024 MYA corn price is $4.10 per bushel. This is only $.09 per bushel above the threshold for 2024 corn PLC payments; however, it is $.75 below the 2024 corn benchmark price. At the current MYA 2024 corn price estimate, 2024 corn ARC-CO payments would initiated with a final 2024 county corn yield that is very near the 2024 county benchmark yield.
•Soybeans --- The 2024 PLC soybean reference price is $9.26 per bushel and the 2024 soybean benchmark price for ARC-CO payments is $11.12 per bushel. Based on the October WASDE report, the current estimate for the 2024 MYA soybean price is $10.80 per bushel. This is $1.54 per bushel above the threshold for 2024 PLC payments; however it is $.32 below the 2024 soybean benchmark price. At the current soybean MYA price estimate, ARC-CO payments would initiated with a 2024 county soybean yield reduction that is about 11-12 percent below the county benchmark yield.
•Wheat --- The 2024 PLC wheat reference price is $5.50 per bushel and the 2024 wheat benchmark price for ARC-CO payments is $6.21 per bushel. Based on the October WASDE report, the current estimate for the 2024 MYA wheat price is $5.70 per bushel. This is only $.20 per bushel above the threshold for 2024 wheat PLC payments and is $.51 below the 2024 wheat benchmark price. At the current wheat MYA price estimate, 2024 wheat ARC-CO payments would initiated with a final county wheat yield reduction of about 6 percent below the county benchmark yield.
There are many variables when it comes to estimating 2024 ARC-CO payments for corn and soybeans, since those payments are based both on final county average yields and final market year average (MYA) prices. We will have a much better handle on making sound ARC-CO payment estimates once we get the NASS yield data in February and get further into the 12-month market year. For information on current and past benchmark yields, prices and revenues, historical ARC-CO payment levels, and other farm program information, producers should access the USDA ARC-PLC web site, which is at: www.fsa.usda.gov/arc-plc
Note --- For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone --- (507) 381-7960; E-mail --- [email protected]