2014 Yield Updates
2014 Farm Program Yield Updating
The 2014 farm bill provides landowners a one-time opportunity to update the program payment yields for the commodities they grow on the farm. As a default, landowners may choose to retain their previous counter-cyclical program (CCP) yields used in calculating payments in previous years. If the choice is made to perform an update, the landowner will need to calculate the average actual yield from 2008 to 2012, times 90%, for each CCP crop listed on the farm. This sounds simple, but there are some challenges. This article will address the process of updating your program yields and several related considerations.
The decision to update program yields must first appreciate that the update is made for a full farm unit. This means that if a farm (by FSA serial number) has more than one parcel of land, then the contribution of each parcel to the overall average yield must be considered. For example, consider a farm that grows corn and has four separate parcels of ground. The calculation of average yield for program year 2011 is shown in Table 1.
|Table 1. Farm Program Yield for 2011 Corn with Four Land Parcels|
|Acres||Average Yield (bu)||Total Production (bu)|
In total, in 2011, this farm planted 320 acres of corn with a total production of 37,430 bushels; therefore, the average 2008 corn yield for this farm is 116.97 (or 117) bushels per acre (see Table 2). It is important to note, that the total production for each parcel represents the actual harvested yield, and the acres represents the total actual harvested acres. Do not include failed plantings or unharvested acres in your calculation.
The FSA office does not have any requirements regarding where acre and yield information originates. It might come from scale tickets, feed disappearance, or crop insurance close-out sheets. The only requirement is that if requested, the landowner must produce evidence in support of the yield claim. Some evidence provides more support than others; for example, RMA insurance close-out sheets are considered certified yields and will be stronger evidence for a claim than a harvest map generated from a yield monitor. The weighting of evidence in support of a claim is at the discretion of the FSA county board and staff.
Once a calculation is made for a crop for each year the crop was planted or assumed planted for the years 2008 to 2012, a final calculation is made to arrive at an adoptable program yield. The farm bill program does allow a producer to use a substitute yield in any year in which:
- it is known that the covered commodity crop was planted, but for which there is no evidence of yield, or
- in years where the approved substitute yield is greater than the average yield on the farm.
The substitute yield is equal to 75% of the county average yield calculation for the years 2008-2013. This number will vary for each covered commodity and for each county in the state. When making your calculations, be sure to contact the county that administers your farm for the appropriate program yield.
Below is an example of a program yield calculation. Note that in program year 2010, no yield information is provided. In this year, the entire farm was planted to soybeans. Because corn was not planted, the year is not considered in making the program yield calculation, thus, the simple average yield of a five-year period becomes a simple average of the existing four-year period. In some cases, a farm might discover that they only planted a covered commodity for one year from 2008-2012. In that case, the program yield calculation is made against the only existing year of information available.
|Table 2. Program Corn Yield Adjustment, 2008-2012|
|Average Yield||No Evidence||124||Not Planted||117||132|
|Calculation Yield||120||124||Not Used||120||132|
If the farm was never planted to a covered commodity, but it does maintain a previous counter-cyclical program yield, it may only retain the previous yield for payment purposes. (If no new yield information is available, there is no option but to retain.) Also note that in program year 2008, the average yield reads, "No Evidence." In 2008, the farm was not owned by the current owner; however, the FSA office has advised that there is evidence that the farm was planted to the covered commodity. In this case, either the current owner will need to try to contact the owner or producer in 2008 to get yield information, or they will need to use the substitute yield provided by the county.
Table 2 indicates average yield data was available for four of the five years; therefore, the new program yield will be calculated by taking the four-year simple average of the reported yields times 90%:
= ( (120 + 124 + 120 + 132) ) / 4 * .90
= 496 / 4 * .90
= 124 * .90
= 111.6 Bushels per Acre
What if I don't have all the numbers? One major consideration for landowners is where to get their information. If the farm is split into more than one parcel, and the parcels are being rented out by different producers, it will be the landowner's responsibility to contact each tenant to get yield information. In some cases, a tenant might report that he only has partial yield information, such as having yield data for years 2010-2012, but not for 2008 or 2009. In this case, the landowner has only a few options. He or she might try to make contact with the previous tenant to get yield information, or they might choose not to use the yield and acres from that parcel in the year's average yield calculation. A similar practice might be to use the yield from neighboring parcels within the same farm number to apply a yield too. Be cautious in getting too creative in making assumptions on a farm parcel's yield, because you might need to be able to justify how you arrived at that number in the future if audited.
What if the new calculated yield is less than the old CCP yield? If the newly calculated program yield is less than the old CCP yield, then the landowner should choose not to update the yields. This decision is the default option; no further action would be required at this point. This decision is done for each crop on the farm for which there is an assigned counter-cyclical production yield established, even if the crop has not been grown on the farm for many years. For example, a landowner might decide to update yields for corn and soybean, and retain CCP yields for sorghum and wheat. This decision is made farm by farm, crop by crop.
Where do I find yield information on the insurance forms? Every crop insurance company is a little bit different, and each might report their client's yield information in different places. You must find the total production in bushels that the farm or parcel produced. Do not use the APH (Actual Production History) yield in your calculation, as it is calculated as an average yield across multiple years, and is not necessarily the production for the year in question. If your insurance sheets are ambiguous or you are having trouble finding the information you need, you are encouraged to contact the insurance agency or agent for assistance in finding the numbers. Remember, their business is based on your satisfaction with their service, and more often than not, they will be agreeable to your needs as a client.
If you have used more than one insurance company over the years, you may need to make more than one contact. If the insurance is held by the farm tenant(s), you will need to communicate and encourage them to get this information to you so as a landowner you can make an informed decision. Remember, program yields will affect future payments, and ultimately the risk protection the tenant receives on the rented ground.
My farm used enterprise unit insurance. Now what? If you typically use enterprise units or whole farm insurance, your insurance provider should be able to break out yields by individual farm parcel. Each farm parcel has an accompanying FSA serial number. It may take a bit more work, but it will be necessary to pull together all farm parcels with the same farm serial number, and perform the program commodity yield calculation for each year as shown in Table 1. This process will take time, and landowners should be prepared.
This takes too much time to complete. The process of updating your farm's program yields will take time and effort to pull information together, sometimes from multiple sources; however, the option to update your yields has not been offered since 1986. It will be well worth your time and effort to update the payment yields on your farm. This may improve the value of your farmland to both a potential renter and/or buyer.
My farm is going into the ARC program, why should I bother? Updated program yields will be used to calculate program payments for the Price Loss Coverage (PLC) program election. Payment calculations for the ARC-CO and the ARC-IC program elections do not require updated program yields to make payments; however, this farm bill program is only in effect until 2018, when a new program and/or bill might be introduced. The decisions made under this bill will affect current program payments, but will also have the potential to affect payments in future bills. Every landowner should take the time to analyze and compare his or her current CCP yields against the newly calculated program yields, and select the option that offers the best risk management coverage for the operation and investment.
I thought this was a producer decision, can't he/she do this for me? The decision to retain or update program yields is the responsibility of the landowner. If a farm is owned by more than one person or entity, the signature of just one legal owner is required to update the program yields. If the tenant(s) on the farm has a current, valid, and legal Power of Attorney form (POA) on file with the FSA office, he or she can make the yield update decision on behalf of the landowner(s). If you are unsure of the status of your POA form, it is highly recommended that you contact your administrating FSA office and check to make sure the form on file is current, valid, and legal, and update as needed.My tenants won't give me the yield information I need. It might be necessary to educate your tenants on the advantages of updating program yields and the potential to improve payments. While the ultimate decision to hand over business-sensitive information is up to them, it is possible to persuade them by demonstrating how their cooperation will improve the overall farm bill program payments they might receive in the future.