Disparity in ARC Payments

By Marcia Zarley Taylor
DTN Executive Editor

LOUISVILLE, Ky. (DTN) — When USDA issues an estimated $3.5 billion in farm program checks for the 2014 crop to corn growers later this month, policymakers should brace for a torrent of complaints between the have nots and the haves.

Growers were warned that payments would vary based on county revenue formulas, but the disparity may catch some off guard. In parts of Texas, for example, growers in one county will collect about $109 per base corn acre, while those in a county next door will collect nothing. In Nebraska, some checks will run $20 an acre, others closer to $80 an acre. Similar situations are cropping up in Kansas, Iowa and Illinois, in large part because of the local variation in 2014 yields, policy experts report. In parts of Oklahoma, USDA may have had difficulty establishing county wheat yields, since farmers often graze fields rather than completing harvest, others theorize.

"In the past, Loan Deficiency Payments were the only farm program payment I can think of where checks varied by counties," said Dee Vaughan, a former National Corn Grower Association president and Dumas, Texas, grower. "But that amount varied by only a few dollars per acre, not by $100 an acre."

The shift to county-based calculations for the new farm safety net highlights how aid is supposed to be targeted to those in need. For most producers, it means bumper 2014 county yields offset the decline in prices, so they won’t meet the threshold for farm payments. But for farmers who operate in more than one county, this bureaucratic technicality has become a sore point.

At issue is that program payments will be determined by your "administrative" county Farm Service Agency (FSA) office. For growers with farms in multiple counties, that rule means Agricultural Risk Coverage-County checks will not be paid at county rates where the ground is located but where records are housed.

All of Nebraska farmer John Oehlerking’s 1,600-acre Nebraska farmland will be paid at the Otoe County rate even though half of his land is located in Cass County where other farmers are being paid at a much higher rate. The difference could be up to 50% more, although FSA has not released final calculations yet, he said.

"It is perplexing to me why my Cass County ground should be penalized, just because of where I sign my papers," Oehlerking told DTN. "Had I chosen to do all my paperwork in Cass County, I would have had a windfall."

Payments in Cass County are projected to be close to $50 an acre for corn while projected payments in Otoe County are projected at $18 an acre.

Underpaying some land and overpaying others makes little sense. But when Oehlerking contacted his FSA office "they were polite but they basically said, ‘We don’t like it either, but there is nothing we can do about it, so contact your elected officials,’" he said.

Iowa corn growers first noticed the discrepancy last winter, but the last-minute remedy they were able to secure in the FSA handbook only allowed farmers to change administrative offices due to a county FSA office closure or consolidation. Even then, farmers were required to designate a new office by Sept. 25 for 2014 payment purposes.

"FSA communicated this change in April. However, I am not aware of any direct outreach to individual farmers as they did on other farm program changes," said National Corn Growers Association’s Sam Willett, who calls the experience one of the more frustrating issues encountered with implementation of the farm bill. FSA argued that paying farmers based on where the land was located, rather than where records were housed, would create an administrative nightmare.

"My understanding is that the complexity of their information and record systems made it very difficult for FSA to alter their procedures," Willett added.

Congress gave FSA enough flexibility to pay farmers based on the counties where their land is located, a House Agriculture Committee staffer told a group of agricultural economists this week in Louisville. Hopefully, there’s a pathway there, he said. As a last resort, a farmer hurt by an FSA action has the right to ask for "equitable" relief.

Brad Lubben, a University of Nebraska economist who specializes in farm policy, said a formula for blending irrigated and non-irrigated acres may also contribute to some payment disparities. FSA determined that counties needed at least 25% irrigated production and 25% non-irrigated production to break irrigated and non-irrigated fields into separate county yields by farm practice.

Nebraska counties with high percentages of irrigated corn acres were much more likely to trigger 2014 ARC payments than dryland corn acres, Lubben said. That’s because the non-irrigated farmers in 2014 had higher overall yields than their average yield used in the ARC formula. In situations where the 25% irrigation rule wasn’t met, FSA blended irrigated yields and non-irrigated yields into a single county average, which may also skew results.

For growers with multiple county locations and underpaid due to the administrative ruling, Lubben said "an administrative appeal may be in order."

Marcia Taylor can be reached at marcia.taylor@dtn.com

Follow her on Twitter @MarciaZTaylor