Farm Bill payments create confusion, frustration for producers
HURON, S.D. -- The Farm Bill payments are in for South Dakota producers, and some aren't happy with the returns. According to Craig Schaunaman, state executive director for the Farm Service Agency in South Dakota, the crop commodity payment progr...
HURON, S.D. -- The Farm Bill payments are in for South Dakota producers, and some aren't happy with the returns.
According to Craig Schaunaman, state executive director for the Farm Service Agency in South Dakota, the crop commodity payment programs under the Agricultural Act of 2014 are a "complete 180 (degree) turn" from the most recent iterations of the Farm Bill. For some producers who grow crops across county lines, the restructured programs became a source of frustration when payments were sent out at the end of October.
But Schaunaman said the elimination of the statewide guaranteed payments in favor of targeted payments based on past county yields was popular when the Farm Bill was being written.
"Our commodity groups and producers wanted something that was drilled down closer to what would represent their actual losses, so the county option actually answers that call," Schaunaman said.
Under the previous Farm Bills, which are funding bills for agriculture and nutrition in the United States that are rewritten usually every five years, farmers were guaranteed payments from the federal government regardless of their crop yield or revenue. The new bill features three payment options which farmers had to choose at the implementation of the bill, becoming locked into that plan for the duration of the bill that ends in 2018.
The new bill, which saw its first round of payouts for the 2014 crop last month, has three payment plans, but about 98 percent of South Dakotans chose the Agriculture Risk Coverage County (ARC-CO) program. It's the ARC-CO plan that stirred up some discontent among farmers, particularly those whose farms split county lines.
FSA Program Director Paul Hanson, who works out of the Huron office, said he's heard from some of South Dakota's 57,000 producers since the payments were returned in late October. Many of those concerned producers fall among the 7 percent of farmers who grow crops in multiple counties.
"I wouldn't call them angry, it's just frustration," Hanson said. "The farm economy is tightening up again and I think these payments are becoming more and more important to the operations and the success of those operations."
These producers, Hanson said, were mainly upset with the hefty differences in payouts they received compared to farmers in neighboring counties. Because the ARC-CO plan establishes payments based actual county yields over the past five years, minus the high and low data points, counties with heavy rains, excessive dryness or hail damage have lower benchmarks to meet. With lower benchmarks in counties with weather damage in the recent past, it's easier for farmers to exceed the average yield, which reduces payments.
By shifting the most popular program from guaranteed statewide payments to a program based on county yields, there are now huge disparities in neighboring counties. For example, Clay County farmers received $2.76 per bushel of corn for the 2014 yield and neighboring Union County received $84.11 per bushel. There was a similar case in Davison County, where producers received $40.97 per bushel, and neighboring Hanson County, where the rate received was $74.59 per bushel.
The differences in county returns is where multi-county producers took issue. If a farmer operates in two or more counties, they received the entirety of their Farm Bill payments in their administrative county, or the county they fill out and sign their Farm Bill contract with the federal government.
One farmer on the Davison and Hanson County line, who asked to remain anonymous, administers his farm in Davison County even though his acreage is split evenly between the two counties. He questioned why his neighbors were receiving more in payments than he did, but was unsure why.
If that farmer decided to administer his farmland in Hanson County, he would have gained an additional $34 per bushel for the entirety of his crop.
But the FSA, who has been aware of this issue for months, found a solution to address the payment differences that many farmers were unaware of when choosing their Farm Bill payment plan.
In the past two weeks, Schaunaman said the FSA decided to offer multi-county producers a one-time recalculation that would allow farmers to have their payments changed for the 2014 yield. This recalculation will be available until Feb. 1 and will provide payment based on acreage in each county. So a farmer with half of their 1,000-acre farm in both Hanson and Davison will receive the Davison rates for 500 acres and Hanson rates for the other 500 acres.
After the recalculation, the FSA will offer multi-county producers the ability to reconstitute--or divide--their farm so they will continue to receive payments similar to those included in the one-time recalculation. These payments will also be based on acreage in each county.
But Hanson said reconstitution could be a risky maneuver.
"One thing that producers will need to keep in mind is that these benchmarks are a moving target from year to year, and that decision could be totally wrong in the next year depending on what yields do and prices do," Hanson said.
Neither Hanson or Schaunaman would make a recommendation to farmers about whether they should reconstitute their farm, but Schaunaman said farmers are accustomed to risk.
Schaunaman said the recalculation should be equitable for the farmers who choose to participate, but it's not going to change the new Farm Bill's large differences in county-by-county payment rates.