North Dakota Ag Connection - Producers to Receive Maximum Farm Bill Payments for Wheat

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Producers to Receive Maximum Farm Bill Payments for Wheat
North Dakota Ag Connection - 03/17/2017

All North Dakota wheat base acres enrolled in the Agricultural Risk Coverage -- County (ARC-CO) program should receive the maximum allowed payment rate in late 2017 for the 2016 year.

The payment rate per base acre should range from $21.44 in Williams County to $42.21 in Traill County. Payments are applied to only 85 percent of base acres, therefore the effective rate averaged over all wheat base acres would range from $18.22 in Williams County to $35.88 in Traill County.

"The payments are not official because the 2016 national marketing year average wheat price and county average yields are not final," says Andy Swenson, North Dakota State University Extension Service farm management specialist. "However, we are nine months into the marketing year with an estimated wheat price of $3.85 per bushel, and the National Agricultural Statistics Service has reported spring wheat yields for 36 of the 53 North Dakota counties."

In all instances, the payments would be capped at the maximum allowed. The maximum payment rate is 10 percent of the county's benchmark revenue. The benchmark revenue is the product of the Olympic averages of the previous five years of county yields and national marketing year prices.

Under the farm bill, producers could choose the ARC program or the Price Loss Coverage (PLC) program for each crop on a farm. About one-fourth of North Dakota's 9.6 million wheat base acres are enrolled in the PLC program instead of the ARC program.

Wheat base acres enrolled in PLC will receive very strong payments because the projected 2016 national marketing year average price of $3.85 per bushel is much less than the wheat reference price of $5.50 and would trigger a $1.65-per-bushel PLC payment rate.

For example, the PLC payment calculation for a farm with 100 acres of wheat base and a 40 bushel PLC payment yield would be $5,610 ($1.65 payment rate estimate x 40 bushel payment yield x 85 percent x 100 base acres).

Actual ARC-CO and PLC payments probably will be reduced slightly because of sequestration. The Budget Control Act of 2011 required the U.S. Department of Agriculture to reduce payments by 6.8 percent the past two years, and a similar sequestration is likely this year.

Overall, Swenson expects farm bill payments of nearly $350 million on North Dakota wheat base acres, after an assumed 7 percent payment reduction due to sequestration. These payments, based on the 2016 crop year, will be made sometime after Oct. 1.

Unlike wheat, producers should not expect ARC-CO payments on corn and soybean base acres. Record yields of those crops will provide revenue in excess of the ARC-CO revenue guarantee in nearly every county.

Producers can use the 2016 ARC-PLC Calculator at https://www.ag.ndsu.edu/farmmanagement/tools to estimate farm bill payments.

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