Lack of survey returns cause problems
JUD, N.D.—Jeremy Nitschke says he fills out a lot of federal agricultural surveys and responds to government surveys, but says a National Agricultural Statistics Survey that failed in his county shouldn't have cost him $30,000.
At age 38, Nitschke is a farming partner with his younger brother, Nathan. The two farm in both Logan and LaMoure counties in North Dakota. They work in a loose association with an older Nitschke partnership that includes their father, Jon Nitschke, and their uncle, Jeff Nitschke.
When only one out of five farmers who received NASS corn yield returned those surveys last fall, it affected whether farmers in the two counties would get a payment in the Agriculture Risk Coverage-County, also called ARC-CO.
Jeremy and Nathan's partnership is typical and easy to calculate. The younger partners together have 1,000 acres of corn base on their FSA farm. With help from their loan officer, they calculated that, depending on yield, they might expect a net ACR-CO ranging from $20 to $67 per acre, or roughly $20,000 to $67,000.
Instead, they got nothing. Jeremy says he might have made different program decisions if he'd known how ARC-CO could go wrong.
"How can you take $30,000 away just because people didn't fill out a survey?" he says.
How could it be?
The federal Agricultural Act of 2014, signed into law Feb. 7, 2014, is administered by the U.S. Department of Agriculture's Farm Service Agency. Corn farmers who wanted to participate were offered a choice of two FSA farm programs on a farm-by-farm basis—the Price Loss Coverage program or the Agriculture Risk Coverage-County program.
The PLC program has a reference price of $3.70 per bushel. Corn farmers would need to see the 2014 marketing year average fall below that to get a PLC payment.
Few predicted prices would fall below that level.
The final 2014 marketing year average national price came in right at $3.70 per bushel, so farmers did not receive a PLC payment on corn.
Most corn farmers chose ARC-CO, which allows participants to receive revenue coverage when the current year revenue falls below a guarantee.
Under ARC-CO, the benchmark price for corn is $5.29 per bushel. Software programs largely predicted that if farmers received normal yields and decreased prices the next two or three years, they'd likely get a payment in ARC-CO.
In North Dakota, farmers typically relied on spreadsheets provided by North Dakota State University Extension Service. NDSU farm management specialists estimated 140- to 150-bushel-per-acre yields for LaMoure County and 90- to 100-bushel-per-acre yields for Logan County.
Farmers wanting to participate in ARC-CO for the 2014 crop year had until April 7 to make program elections. By Sept. 30, they had to sign up a second time, to enroll into a contract. The same deadline was used for both the 2014 and 2015 crop contract.
ARC-CO guarantees were based on five years of county average yields and marketing year average prices—2009 to 2013.
The benchmark revenue figure to determine whether payment should be made is the combination of yield and price—the Olympic average yield for those years multiplied by the Olympic average price for the same years.
The ARC-CO payment guarantee was based on 86 percent of benchmark revenue, calculated with a formula based on federal budgetary limits. It is further reduced by a factor of 0.932 (another 7 percent reduction) for Congressional sequestration, another budget cut passed in 2011.
In educating farmers about their options, the FSA and Extension Service routinely noted payments would be made on county yields generated by a hierarchy of sources: National Agricultural Statistics Service county yield surveys, if available; FSA data-mined yields from the Risk Management Agency, or crop insurance; crop reporting district; and a yield set by the FSA state committee, using neighboring counties with similar production.
Everybody heard how it worked, but no one imagined the first option wouldn't be available because of a NASS survey. No one expected the second option would have such a negative impact.
Darin Jantzi, NASS state statistician in Fargo, says there are roughly 282 corn producers in LaMoure County, according to the 2012 Census of Agriculture.
Yield surveys for the 2014 crop year were sent to 125 county producers in mid-
October 2014. NASS waited for mailed responses for three weeks. NASS surveyors then attempted to phone recipients, giving up only if the farmer refused, or at the end of the survey period.
Only 27 of the surveys came back—three shy of the 30-
producer minimum required. Further, the responses represented only 9.5 percent of the production acres in the county—far short of the 25 percent needed for a valid NASS yield.
The next option was the RMA figure, which was 165 bushels per acre.
Jeremy wasn't aware this was a problem until October.
He got word from AgCountry Farm Credit Services officials in Jamestown. It sunk in when he wanted to pay a farm loan bill with his ARC-CO payment, and a clerk in the office said it would be impossible.
"She said I got paid on 270 acres of wheat," he says. "Nothing on the corn."
Jeremy's uncle, Jeff, 59, thinks he failed to fill out the survey. But he also says if it were critical to paying farmers what they're owed, NASS should have done something to redo the surveys "if it was this important for our payments."
RMA, FSA differ
Dale Ihry is a former FSA state specialist in Fargo and part of the ARC-CO farm bill team. He left that post in October to take a job as executive director of the North Dakota Corn Utilization Council. Ihry says FSA and RMA matches best in years when almost everyone in a county reports losses and RMA adjusts them.
In years of no loss, RMA corn yields often run roughly 10 bushels per acre higher than the NASS yield.
Ihry says the most reliable yield average for administering ARC-CO is the NASS County average yield. The FSA found that for corn counties in North Dakota, RMA yields would run roughly 10 bushels per acre higher than the county NASS yield. Yields certified to RMA during nonloss years might not reflect moisture content, test weight or damage.
Aaron Krauter, North Dakota FSA state executive director, says he can vividly remember telling farmers about the NASS survey basis for ARC-CO, and the "seed corn caps going up and down."
He says farmers need to understand the surveys are more important today. Farm programs have become more of a safety net and aren't simply direct payments.
"The reality is that farmers say they just throw these in the basket," Krauter says. "I tell them, you can't."
Farmers right now are in the middle of filling out surveys for the 2015 crops.
In October, the FSA state committee requested the FSA in Washington, D.C., allow them to skip the RMA yield step for Logan and LaMoure counties, because it is "obvious the yield is an outlier."
The national officials declined.
Krauter says the 165-bushel-per-acre yield for LaMoure County is a record yield for any county in the state. The FSA state committee requested to use NASS yields for counties with similar productivity.
Corn council and grower association boards have asked for the situation to be revisited. Krauter says he will keep asking Washington to "consider the anomaly" and allow the state committee to make a "reasonable yield decision."
Sen. John Hoeven, R-N.D., has requested that FSA Administrator Val Dolcini revisit the issue and consider making things right in LaMoure, Logan and other counties with similar situations, such as Ransom and Steele.
Some counties in southeast North Dakota received $40 to $60 per acre payments on their corn base acres.
"A lot of corn producers in LaMoure and Logan counties think that is what they should be getting," Ihry says.
Most realize LaMoure County was unlikely to have gotten a payment that high. He says if the state committee had been allowed to adjust the yields properly, LaMoure County would have received about $30 per base acre on their corn.
But Ihry says it makes no sense that LaMoure County—a predominantly nonirrigated county—could exceed the state's record average corn yield by 10 bushels an acre. Next door, Dickey County, which completed its NASS surveys, had a yield of 150—a difference of 15 bushels per acre.
"How, statistically, would that ever happen?" Ihry asks.
The FSA did change the rules for farmers in multiple counties. Farmers like Jeremy who declare LaMoure County their "control" county for FSA payments, can be paid for acres they farm in nearby counties, such as Stutsman County.
About 90 percent of the Nitschkes' land is in LaMoure County, within five miles of the Stutsman County border.
Meanwhile, some farmers who live in LaMoure County, but declare Stutsman County as their control county, receive the Stutsman County payment rate, before budget-reduction factors, of $61.36 per acre, even for land they farm in LaMoure County.
Jeremy doesn't indicate his operation is jeopardized by the ARC-CO snafu, but it did hurt.
He came back to the farm in 2004 and holds an associate's degree in agricultural finance from North Dakota State College of Science in Wahpeton. He is the chairman of the CHS-Dakota Prairie Ag elevator board in Edgeley, N.D., and is concerned about the dozens of farmers have been hit with the problem.
"It's a lot of money," Jeremy says, estimating it is a multi-million-dollar difference from what was anticipated. "It's going to make a huge impact in LaMoure County."