Deciphering 2018 Farm Bill program yield updates | Michigan Farm News

Deciphering 2018 Farm Bill program yield updates

Category: Crops

by Jim Hilker, MSU Ag Economist, Dept. of Agricultural, Food, and Resource Economics

Farmbill_MFN_2.13.19

We don’t know all the specifics of the Agricultural Improvement Act of 2018 (2018 Farm Bill), and it will likely be a while before the USDA is ready to begin the signup period for choosing either the Agriculture Risk Coverage (ARC) or the Price Loss Coverage (PLC) programs. But we do know for sure that producers will have the option to update program yields for PLC.

We also know that there is a very strong chance that PLC will be the best choice for most producers this signup for the 2019 and 2020 crop years, although producers will be able to change their choice for the 2021 crop and each year after.

The formula for updating your yield is a bit complicated, and may or may not increase your program yield, but you need to update 2013-2017 yields in order to know. If your program yield from the 2014 calculation is higher than the calculation for the 2018 farm bill, you get to keep 2014, your present program yield. If the 2018 calculation is higher, you get to use it.

So we strongly encourage all producers to update their farm program yields, if they have not already done so, for the years 2013-2017. This is something you can work on before the signup period, which may not begin for another six to 10 weeks. You need to have this done before you head to the fields, so you might as well start working on updating your FSA yields today.

For the 2014 Farm Bill, your program yield was the average of the five years, 2008-2012, of your farm FSA yields, times 0.9 (90 percent). For the 2018 Farm Bill while, using the 2013-2017 yields, the formula will start out the same, but then for corn and soybeans be multiplied by 0.9 again to “de-trend” for the change in the national change in yields.

Bottom line, your 2018 farm program yields for corn and soybeans will be 81 percent of the average yield for the 2013 to 2017 crop years, excluding any crop year in which the yield was zero. Wheat, however, will be 90 percent of the average yield for the 2013 to 2017 crop years, excluding any crop year in which the yield was zero. If your five-year FSA wheat yields increased, which for most Michigan farmers it did, any increase in your five-year average of wheat yield will increase in your wheat program yield.

For corn and soybeans yields, it will take about an 11.2 percent increase in the 2013-2017 average over the 2008-2012 average to increase your corn and soybean program yields. But for wheat, any increase in the 2013-2017 average over the 2008-2012 average will increase your wheat program yield.

Corn Yield Calculation

Let’s assume that your farm FSA corn yields were the same as the average Michigan corn yields in bushels per acre for the 10-year period of 2008 through 2017.

Corn-Graph_MFN_2.13.19

This would put your 2008-2012 average yield at 144.2 bu/ac, and when multiplied by 0.9, your program yield would have been 129.8 bu/ac. Your average yield for the 2013-2017 period would be 158.8 bu/acre, or 10 percent higher. But when multiplied by 0.81, the yield factor update, your program yield would be 128.6 bu/ac, so you would keep your program yield at the higher 2014 level of 128.8 bu/ac.

However, several counties in the southern tier had two droughts in the first period, and if any of those yields were 6 bu/ac lower, it would be a tossup. Or if any of your yields in the second period were 7 bu/ac higher, it would be a tossup.

If your second five-year average was 11.12 percent higher than the first five years, then you would be just above breakeven, (144.4 X 1.12 = 161.5, times 0.81, equals 130.8 bu/ac, increasing your program yield by 1 bu/ac). Over five years that could be real money.

Soybean Yield Calculation

Let’s assume your farm FSA soybean yields were the same as the average Michigan yields in bushels per acre for soybeans during the same 10 years, 2008-2017.

Soybean-yield_MFN_2.12.19

This would put your 2008-2012 average yield at 41.5 bu/ac, and when multiplied by 0.9, your program yield would have been 37.4 bu/ac. Your average yield for the 2013-2017 period would be 45.7 bu/acre, or 10 percent higher. But when multiplied by 0.81, the yield factor update, your program yield would be 37.0 bu/ac, so you would keep your program yield at the 2014 level of 37.4 bu/ac. But, like corn, you need to use your yield to know.

Wheat Yield Calculation

Wheat’s yield factor update is 0.9, not 0.81 like corn and soybeans since FSA wheat yields were the same for both five-year yield averages. Again, using Michigan wheat yields, for example, let’s assume your farm FSA wheat yields were the same as the average Michigan yields in bushels per acre for wheat during the 10 years, 2008-2017.

Wheat-Yield_MFN_2.13.19

This would put your 2008-2012 average yield at 71.4 bu/ac, and when multiplied by 0.9, your program yield would have been 37.4 bu/ac. Your average yield for the 2013-2017 period would be 79.6 bu/acre, or 11.4 percent higher. When multiplied by the .90 wheat yield factor update, your program yield would be 71.6 bu/ac, so you would want to update your program yield to the 2018 level of 71.6 bu/ac, an increase of your program yield of 7.4 bu/ac.

Whether you follow the math or not, we strongly advise you to update your program yields while you have relatively more time so you will be ready to take the higher of the two possible program yields when enrollment does occur.