FOCUS ON AG

Written by Kent Thiesse

Farm Management Analyst and Senior Vice President, MinnStar Bank
February 14, 2022

2022 FARM PROGRAM QUESTIONS AND ANSWERS

March 15 is the deadline to sign-up for the 2022 farm program at local USDA Farm Service Agency (FSA)
offices throughout the United States. Eligible producers are able to choose between the price-only “Price Loss
Coverage” (PLC) and revenue-based “Ag Risk Coverage” (ARC) program choices. The ARC program choice includes
both the county-yield based ARC-CO program choice and the ARC-IC program, which is based on farm-level
yields. Following are some of the common questions that have been raised regarding 2022 farm program
sign-up and some potential answers:
 Do I need to sign-up for the 2022 farm program if I do not intend to change my PLC or ARC-CO
choice from 2021 ?
Based on FSA guidelines and requirements, farm units will automatically remain with the same farm
program option as 2021 if no farm program choice is made for 2022; however, producers would still
need to enroll in the 2022 farm program by March 15, 2022, to remain eligible for program benefits.
Farm operators need to complete FSA Form #866 to finalize both steps in the farm program enrollment
process.

 At the current high price levels should I automatically choose ARC-CO for corn ?
The odds of receiving either a PLC or ARC-CO payment for 2022 are not very high. The 2022
benchmark (BM) price for corn is $3.70 per bushel, which is the same as the 2022 PLC reference price.
PLC payments begin at a final MYA price below $3.70 per bushel, while potential 2022 ARC-CO
payments are dependent on final 2022 county average yields. At a final 2022 MYA price of $3.70 per
bushel, the 2022 county yield would need to be 15 percent or more below the BM yield to initiate an
ARC-CO payment. For example, if the county BM yield is 200 bu./A., the county yield would need to
be 170 bushels per acre or lower for a 2022 ARC-CO payment. If the final 2022 county average yield is
the same as the county BM yield, the final 2022 MYA price would need to decline below $3.20 per
bushel in order to initiate an ARC-CO payment. At a $3.20 per bushel final MYA price, there would be
a $.50 per bushel PLC payment.

The final corn MYA price from 2014-2019 was $3.70 per bushel or lower, resulting in corn PLC
payments from 2015-2019. The final 2020 MYA price was $4.53 per bushel and the current 2021 MYA
corn price estimate is $5.45 per bushel, which would be at the highest MYA price level since $6.89 per
bushel in 2012. The PLC program provides corn MYA price protection from $3.70 down to $2.20 per
bushel.

 How do the current higher price levels affect the farm program decision for soybeans and wheat ?
Soybeans --- The final 2022 soybean MYA price needs to drop below $8.40 per bushel to initiate 2022
PLC payments. The MYA price did not drop below $8.40 per bushel from 2014-2020 and will not drop
below that level for the 2021 marketing year that ends on August 31, 2022. There has never been a
soybean PLC payment paid since the current farm program format was initiated in 2014. The final
county yield for 2022 will likely need to be 15 percent or more below the 2022 county BM yield in order
to initiate a 2022 soybean ARC-CO payment, which equates to a 2022 county average yield decline of
7-10 bushels or more per acre in most counties. Given the current soybean price projections, the 2022
farm program choice probably leans toward ARC-CO in most instances; however, the odds of a 2022
payment are low.
Wheat --- Both the 2022 PLC reference price and the ARC-CO BM price for wheat are $5.50 per
bushel, so the ARC-CO scenario is somewhat similar to corn. The final wheat MYA price was below
 $5.50 per bushel from 2015-2020, with substantial PLC payments earned in many of those years;
however, the current projected MYA wheat price for 2021 is $7.10 per bushel. Generally, wheat
producers have tended to favor the PLC program over the ARC-CO program from 2014 to 2021 and the
PLC payments were much more favorable in most instances during that period; however, the odds of a
2022 payment are low.
 Are there situations where ARC-IC might be a favorable farm program choice ?
The ARC-IC program utilizes the same BM price and final MYA price as the ARC-CO program;
however, ARC-IC is based on farm-level yields rather that the county BM and final yields. The ARC-IC
program must be applied to all covered commodities on a given FSA farm unit, and all farm units in a
State that are enrolled in ARC-IC are considered together in one ARC-IC calculation. In addition, ARC-
IC payments are paid on only 65 percent of crop base acres, compared to payments on 85 percent of
base acres for PLC and ARC-CO payments, which tends to limit instances where ARC-IC is a favorable
farm program option. However, there may be situations on individual farm units that are being planted
to a single crop in 2022 where ARC-IC might be a consideration, especially in areas that may be
impacted by drought this year.

 How is the “Market Year Average” (MYA) price determined ?

All 2022 PLC and ARC-CO payments for corn and soybeans will be based on the market year average
(MYA) price from September 1, 2022, through August 31, 2023, which means that the current high
price levels may have little impact on final 2022 MYA prices. The MYA price is a monthly average
farm-level price from throughout the U.S. that is “weighted” for the volume of bushels sold each month.
The 2022 MYA price marketing year for wheat and small grains runs from June 1, 2022 through May
31. 2023.

 Does “Supplemental Coverage Option” (SCO) insurance coverage impact farm program
decisions?
The SCO coverage is an “add-on” option to traditional Federal crop insurance that is only available with
the PLC farm program choice and not with ARC-CO or ARC-IC. The federal government subsidizes
65% of the premium for SCO coverage, so farm-level premiums are quite reasonable, which may make
SCO a viable option for producers that choose the PLC farm program option. SCO allows producers to
purchase additional county-level crop insurance coverage up to a maximum of 86 percent coverage, so it
can be a very attractive insurance option for producers that typically utilize 75 or 80 percent for their
revenue protection (RP) crop insurance coverage. The “Enhanced Coverage Option” (ECO) crop
insurance option provides additional area-based insurance coverage from 86 percent up to 95 percent
coverage, utilizing county yields similar to SCO coverage; however, the purchase of ECO coverage is
available with selection of either the PLC or ARC-CO farm program choice. Check with a crop
insurance agent for details on SCO and ECO insurance coverage.

 Where can I find some good PLC/ARC-CO calculators to assist with the farm program decision ?
Following are links to some very good farm program calculators that allow for comparison of potential
PLC and ARC-CO payments at various final 2022 MYA prices and various final 2022 county yields:
 North Dakota State University --- https://www.ag.ndsu.edu/farmmanagement/farm-bill
(The NDSU website also has an ARC-IC farm program calculator available.)
 Kansas State University --- http://www.agmanager.info/ag-policy/2018-farm-bill
 Iowa State University --- https://www.extension.iastate.edu/agdm/info/farmbill.html
 University of Minnesota --- https://extension.umn.edu/business/farm-bill

 Are there some other good farm program resources ?

The official farm program details and information is available on the FSA farm program website at:
https://www.fsa.usda.gov/programs-and-services/arcplc_program/index
Kent Thiesse, Farm Management Analyst, has prepared two information sheets titled: “2022 Farm
 Program Decision Cheat Sheet” and “2022 Crop Insurance Decisions”, which contains information
and a table with examples for SCO and ECO insurance coverage. To request a free copy of these
information sheets, send an e-mail to: kent.thiesse@minnstarbank.com

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Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President,
MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960)
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/