Farmers weigh crop insurance options

Upper Midwest farmers are wrapping up harvest. Now, with help from government employees, agricultural economists and others, they're beginning their next big task.

Beginning Nov. 17, producers must make important choices involving safety-net provisions in the 2014 federal farm bill. The decisions they make this winter could have a huge impact on their bottom line for the next five years.

Every new farm bill, the centerpiece of the U.S. government's food and agricultural policies, brings change and challenge for farmers and others in ag. But there's a special significance this time. Farmers will make a one-time choice between two key programs known as ARC and PLC -- and once their decision is made, they're locked in to it through 2018. Other important choices must be made, too.

"Farmers have more decisions to make than they've had under previous farm bills," says Bruce Nelson, Montana Farm Service Agency executive director.

The duties of the FSA, an arm of the U.S. Department of Agriculture, include administering the farm bill.

The best choice on the farm bill programs will vary from farmer to farmer and depend on the crops they raise, the yields they achieve and the prices they receive.

"Every producer will have a different solution. There's a lot of variables. It's not a one-size-fits-all situation," says David Iverson, an Astoria, S.D., farmer.

The choice takes on greater urgency because of falling grain prices.

A year ago, when crop prices were still relatively strong, safety-net farm programs -- and choices involving them -- weren't immediately relevant to many producers. But plunging prices make it increasingly likely that many producers will be eligible for the programs.

"Some crops already qualify (for farm-program payments). Other crops are right on the cusp of qualifying," says Andy Swenson, North Dakota State University farm management specialist.

"Interest in the programs has gone up as grain prices have gone down," he says.

There's a final kicker: It's impossible to determine in advance what the right decision will be. Variable yields and prices -- largely dictated by unpredictable weather and markets -- will play a crucial, unavoidable role in which program will be better.

In five years, after they've harvested their crops and sold their grain, farmers will know whether the choice they make this winter was the right one. For now, producers can only gather information, study their options and make their best guess, ag officials say.

"We just can't know yet which will be best," says Dan Wogsland, executive director of the North Dakota Grain Growers Association.

As Kent Olson, University of Minnesota Extension economist, puts it, "Not even the Shadow knows this one," a reference to the classic radio show crime-fighter whose catch line was, "The Shadow knows!"

Choices, choices

The biggest decision involves the one-time choice between Agricultural Risk Coverage, or ARC, and Price Loss Coverage, or PLC. To complicate matters further, ARC comes in two versions: the county level (known as ARC-County) and the individual farm level (known as ARC-Individual).

Both programs offer a financial safety net to farmers in tough economic times. But the net operates in different ways: ARC protects against falling revenue. PLC provides payments when crop prices fall.

For some farmers, ARC will be the better choice. For other producers, PLC will be better.

A few general assumptions can be made, experts say.

For instance, PLC appears to be the better option for farmers who raise canola, a popular crop in northern North Dakota, Swenson says.

But in most cases, farmers will need to analyze specific details of their own operation -- crops, yields and prices, both past and future -- to make the best choice. Keep in mind that future numbers are no more than estimates and educated guesses.

The choice between ARC and PLC is important for all farmers. But the talk will be most complicated for farmers who grow many crops.

More crops mean more decisions and "adds another layer of complexity," Olson says.

The new farm bill requires farmers to make another big decision. This one is whether to reallocate their base acres.

Base acres refers to the number of acres of wheat, feed grains, upland cotton, rice, oilseeds, pulse crops and peanuts eligible to participate in commodity programs.

Farmers can't increase their base. But they can reallocate their existing base acres, using 2009 to 2012 planted acres to create a new base. By doing so, farmers might make their crops eligible for farm program payments.

Reallocating can be particularly important to farmers who have substantially changed the mix of crops they grow. Some area producers, especially ones in northwest Minnesota and the western Dakotas, are growing more corn and soybeans and less wheat.

One aspect of the 2014 farm bill isn't complicated.

Farmers have the opportunity to update crop yields. The yields help determine the size of potential farm program payments, so updating them could mean more money for farmers.

Ag experts strongly recommend farmers check into updating.

Concerted effort

Extension service and USDA officials, particularly employees of FSA, are making a major push to educate farmers about the ARC and PLC programs.

The effort includes public meetings, at which USDA officials talk about the programs' timetables and mechanics, and extension officials provide insights into which programs might be most beneficial to farmers.

This winter, Minnesota FSA will team up with University of Minnesota Extension to offer more than 70 producer meetings throughout the state on the ARC and PLC programs. For more information, visit www.fsa.usda.gov .

David Haugo, a Wauban, Minn., farmer and chairman of the state FSA, says he doesn't have any particular insight into the programs or advice for other producers.

He says he's still trying to figure out how his own farming operation will be affected.

But FSA takes the new programs seriously and is doing its best to help farmers and others understand them, Haugo says.

Montana has wrapped up a month-long series of meetings on the two programs. Officials with the FSA, Risk Management Agency (another arm of USDA) and Montana extension led the meetings.

Nelson had spent three weeks on the road, when he talked with Agweek.

Nearly 1,900 farmers already had attended the meetings, and several hundred more producers were expected to come to the remaining ones, he says.

County FSA executive directors are scheduling local meetings, too, and Montana FSA will send out 48,000 paper mailings and 8,000 electronic mailings with information on farm bill changes.

"We're hard at it here to get out the word," Nelson says. "We've got a bigger job to do under this farm bill than we've had under previous farm bills."

Numerous informational meetings have been held in North Dakota and South Dakota, too, and more are planned. There are too many to list, but here's a very small sampling of still-to-come meetings:

• The Williams County (North Dakota) FSA has scheduled three meetings on ARC and PLC. The first is at 9 a.m. Nov. 21 in the Pinnacle meeting room in Tioga. The second is at 9 a.m. Nov. 24 at the Williston Extension Research meeting room, and the third is at 9 a.m. Nov. 25 at the Wildrose Fire Hall.

• The Lake County (South Dakota) FSA will host a farm bill meeting at 10 a.m. Nov. 21 at the 4-H Exhibit Hill in Madison.

Lake County farmers generally have been focused on harvest. But questions about the federal farm program "have been in the back of their mind," Zach Neises, the county's FSA director, says.

Now, with harvest wrapping up, producers are beginning to dig into the farm bill programs, he says.

Take your time

Though the decisions on base reallocations and yield updates and ARC and PLC are complicated and important. They don't need to be made quickly. Producers have until Feb. 27 to decide about base reallocations and yield updates and until March 31 to decide between ARC and PLC.

"There's no need to make a decision right away. Make sure you get all the information," says Matt Flikkema, a Manhattan, Mont., farmer and president of his state Grain Growers Association.

The March 31 deadline takes on additional significance because it's the same date USDA will release its annual spring estimate of perspective plantings across the country, Olson says.

The widely watched report influences crop prices and what farmers ultimately plant, which, in turn, could affect whether ARC or PLC is the better choice.

Olson says he's heard talk that timing of the report or the deadline for the ARC and PLC decision, or both, should be changed.

Attending at least one farm bill meeting is a good step, but it's only a starting point, experts say.

Extension economists and others involved in agriculture will get a firmer handle on ARC and PLC as time passes, and they'll have more and better advice to pass on later this winter.

"We're still working through the numbers, too," Olson says. "Yes, this is a big decision, but it doesn't need to be made right away."