Decision time nears on murky farm bill safety-net options

Jason Mewes has done his homework. He's collected statistics, made assumptions, performed calculations and come to a few conclusions. Now, he's getting ready to visit his county Farm Service Agency office to sign up for key safety-net options in the new federal farm bill.

The Colgate, N.D., farmer won't know for five years whether the selections he makes this month are right or wrong. All he can do is make an educated guess and hope for the best.

"You just can't be sure what you should do," he says.

Farmers across the Upper Midwest have until March 31 to decide between Agricultural Risk Coverage and Price Loss Coverage. Both options, created by the federal farm bill approved in early 2014, provide financial help in tough economic times, but they do so in different ways. ARC protects against falling revenues; PLC provides payments when crop prices fall. To complicate matters further, ARC comes in two varieties: county and individual.

Farmers are locked in to the choice for five years.

Picking ARC or PLC is a "difficult thing to get a handle on," says Howard Person, veteran Pennington County, Minn., extension agent. "You have to guess prices out for the next five years. It comes down to who can outguess the market, and it's a hard sandwich to swallow if you guess wrong."

In general, the price-driven PLC has more appeal if farmers hold a pessimistic view of prices over the next five years, while ARC-County is more attractive if prices are assumed to hold up relatively well.

Predicting future prices is tricky, at best, making the choice between ARC and PLC a "shot in the dark," says Darrell Davis, an Ipswich, S.D., farmer.

Beginning late last year, area farmers, often using computerized programs developed by their state extension service, have analyzed details of their individual operation -- crops, yields and prices, both past and future -- to weigh the merits of ARC and PLC. What they're learning varies from farm to farm and crop to crop across the sprawling Upper Midwest.

Split appeal

In general, however, ARC-County appears to be the better choice for corn and soybeans, with PLC and ARC-County holding split appeal for wheat, farmers and others in North Dakota, South Dakota, Minnesota and Montana tell Agweek. Corn, soybeans and wheat are the region's three major crops.

ARC-County is particularly popular for soybeans, says Mewes, president of the North Dakota Soybean Growers Association.

The option holds widespread appeal for corn, too.

Ryan Buck, a Goodhue, Minn., corn farmer, already has signed up for ARC-County.

"Down in the southeast part of the state, that (ARC-County) seems to be the consensus. A few guys will try PLC on a few acres to see how it plays out," he says.

Generalizations about wheat are risky.

In eastern North Dakota, for instance, farmers generally are picking ARC-County for wheat, says Dan Weber, with Weber Insurance Agency in Casselton, N.D., which has many farm clients.

In contrast, Davis says PLC is winning favor with wheat farmers in his immediate area in South Dakota.

And in wheat-dominated Montana, most producers are leaning toward PLC, even though ARC-County might be a better option, says Matt Flikkema, a Manhattan, Mont., farmer and immediate past president of the state Growers Association.

"PLC seems easier, so guys prefer it. But make sure you don't overlook ARC-County," he says.

Mix and match

The farm bill covers barley, canola, large and small chickpeas, corn, crambe, flaxseed, grain sorghum, lentils, mustard seed, oats, peanuts, dry peas, rapeseed, long grain rice, medium grain rice, safflower seed, sesame, soybeans, sunflower seed and wheat.

Many of those crops are grown in the region, and, again, ARC-County and PLC have mixed appeal for them, farmers say.

For instance, PLC appears a much better option for canola, a popular crop in northern North Dakota, experts say.

Farmers can mix and match ARC and PLC, using ARC-County for one or more crops they raise and utilizing PLC for other crops.

ARC-Individual isn't generating much interest, in part because it's more complex than ARC-County or PLC.

Experts say ARC-Individual shouldn't be dismissed out of hand. They also say it's usually best only for farms with highly variable yields.

There's a major downside to ARC-Individual. A producer who selects it must use it for the entire farm and for all his crops, losing the ability to mix and match that ARC-County and PLC allow.

That loss of flexibility is a serious shortcoming with ARC-Individual, says Dwight Aakre, North Dakota State University farm management specialist.

Part of the process

Farmers and farm groups pushed hard in Washington, D.C., to include a safety net in the federal farm bill, the centerpiece of U.S. food and agricultural policy. ARC and PLC are cornerstones of that protection, which plunging crop prices might invoke over some or all of the next five years.

"I give them (political leaders) credit. I think they're moving in the right direction (with ARC and PLC). But it's just that these (ARC and PLC) are new, and anytime something's new it takes time to understand," Person says.

By all accounts, extension service and FSA officials have worked hard to help farmers understand ARC and PLC.

More than 2.9 million educational postcards have been sent to producers and more than 4,100 training sessions have been held, according to the U.S. Department of Agriculture, of which FSA is an arm.

Some farmers have attended two or three meetings, often at their local county level, to learn more, says Debra Crusoe, state executive director of Minnesota FSA.

FSA and the extension service have held many joint meetings, with FSA focusing on explaining deadlines and technical aspects of the options and extension officials offering insight into which might make more financial sense for producers.

FSA and the extension service also have cooperated on informational meetings about updating crop yields and reallocating crop base acres, which the new farm bill also authorized.

On Feb. 27, FSA extended the deadline to update and reallocate to March 31.

Landowners are responsible for updating and reallocating, while producers are the ones who decide between ARC and PLC.

What to do next

Farmers, FSA and extension officials have been working for months on ARC and PLC. By all accounts, most producers have a fairly good idea of what they should do.

But a handful are getting a late start, and they need to act quickly, experts say.

Key steps now include:

• Communicate as soon as possible with your local FSA office.

• Visit with other producers in your county.

• Tap online tools developed by the extension service that evaluate the merits of ARC and PLC.

FSA wants farmers to take their time and make the best decision, says Aaron Krauter, state executive director of the North Dakota Farm Service Agency.

But the agency also wants to avoid a last-minute sign-up rush that will swamp its local offices, he says.

So Krauter and other FSA officials suggest farmers who are fairly sure of their intentions sign up as soon as possible. The election decision can be reversed before the March 31 deadline, so farmers can adjust their choice if they change their mind before then.

The choice can't be changed after March 31, however.

Though the ARC vs. PLC decision is complicated, completing the actual form is quick and simple, farmers and FSA officials say.

USDA's last-minute decision to extend the Feb. 27 yield update and reallocation deadline has led some farmers to speculate whether the March 31 ARC-PLC deadline will be extended, too.

USDA says the ARC-PLC deadline remains in place. If a choice isn't made by March 31, the farmer will receive no payments for the 2014 crop year and the farm will default to PLC coverage through the 2018 crop year.

Mewes says he plans to sign up sooner rather than later.

"I'm pretty sure of what I'm going to do. And FSA will appreciate if I don't come in at the last minute," he says.