ARC, PLC Payments Could Be Lower Than Expected


by Chris Clayton DTN Ag Policy Editor

OMAHA (DTN) — Farmers could start getting checks for Agricultural Risk Coverage or Price Loss Coverage programs as soon as October, but the checks could be roughly 7{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} lower than they were expecting.

Depending on who makes the call, ARC or PLC checks could be 6.8{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} to 7.3{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} smaller than calculated, thanks to a little-noticed provision in the 2014 farm bill. Considering USDA forecasts for lower net farm income, that cut may be felt a little deeper than it would have been a few years ago.

Kansas State University Ag Economist Art Barnaby realized the sequester problem last week when an astute ag lender raised the question. Barnaby sent out a column Friday highlighting federal sequestration cuts and their impact on farm programs. Barnaby noted he had not seen any notification about sequestration cuts and the cuts were not detailed in the actual farm bill.

Barnaby noted, “I read every page of the commodity title and crop insurance title in the Law. Probably about 200 pages; the full Law is printed on about 900 pages.” He added, “This was never mentioned in any of the national training that Extension people like me attended. I don't think the trainers were aware of this cut.”

The ag lender who first emailed Barnaby about it stated he wasn't aware of the sequester cuts until a county Farm Service Agency office pointed out the issue.

Federal budget sequestration was passed by Congress in 2011 and officially kicked in during 2013. The legislation detailed specific percentage cuts for mandatory and discretionary federal programs. Sequester remains controversial in Washington because Congress has been pressured to exclude some agencies and programs from sequester, but not others. Moreover, presidential candidates are increasingly weighing in as members of the public ask about cuts to specific programs that affect them.

More debate about sequester cuts is expected in coming weeks because without some change another round of cuts could hit the Defense Department at the end of the month. The amount of sequester cuts could loom large as Congress tries to pass appropriations bills and avoid yet another government shutdown.

Sequester affected direct payments, but will now also cut the new farm program payments next month. Next year's payments (FY 2015) also could take a cut of 7.3{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} and Fiscal Year 2016 payments could be cut 6.8{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0}.

Farmers have until Sept. 30 to enroll in the Agricultural Risk Coverage or Price Loss Coverage commodity programs they elected earlier in the year. According to a statement from USDA's FSA public affairs, once farmers are enrolled they are eligible to claim payments that will be made after Oct. 1.

The year and timeline for payments is confusing because payments for the 2014 harvested crop and 2014-15 marketing year are considered as part of federal fiscal year 2014, yet payments will go out after the beginning of fiscal year 2016, which starts Oct. 1.

Because of the issue over crop marketing years, sign-up time frame for the ARC-PLC programs and the fiscal year when the checks will be cut, USDA is waiting for a ruling from the White House Office of Budget and Management to determine just how much the sequester cuts could be.

The percentage difference could adjust payments by hundreds of dollars. Factoring in the fiscal year 2014 cut of 7.2{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} means a potential $100,000 payment is reduced by $7,200. Using the 6.8{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} for FY 2016 brings the cut down to $6,800.

USDA officials reiterated they are waiting for the White House to make the call in the coming weeks regarding the actual percentage of the ARC-PLC cut.

USDA alerted producers and other observers to sequester cuts in November 2013, citing the impact on mandatory programs in fiscal-year 2014. Conservation Reserve Program payments are exempt, but several other programs, especially in commodities, were hit with the cut. (See…).

However, that news release went out before ARC and PLC were actually created in the 2014 farm bill. Details about the sequester cut have largely been missing from USDA news releases about ARC-PLC, marketing loans or other impacted programs. Still, a FSA official noted that farmers were alerted to the possibility of sequester cuts in the fine print and legalese of their ARC-PLC contracts. It's stated in the appendix of the contract, page 9, under the letter “U.”

“Unfortunately sequester is in place for most FSA mandatory programs until congressional action is taken,” FSA stated to DTN.

To read Barnaby's commentary on the sequester, go to…



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