Grassley, Ernst Seek Information from Agriculture Secretary on USDA Payment Formula

WASHINGTON – In a letter to Agriculture Secretary Tom Vilsack, U.S. Senators Chuck Grassley and Joni Ernst requested more information from the United States Department of Agriculture regarding the methodology for determining county yields for the Agriculture Risk Coverage or ARC County program.

The majority of Iowa corn and soybean farmers signed up for the ARC program that was enacted in the 2014 farm bill. The formula used to determine ARC payments is composed of two factors, including the average marketing year price and the average county yield. 

Grassley and Ernst are seeking to learn more about the process the USDA uses to determine county yields because there are several instances of significant discrepancies in payments between adjacent counties.

In 2014, Calhoun County received a payment of $23.21 per acre while the county directly north, Pocahontas County, received $91.52 and the two counties to the south received about $75 an acre. Webster County, to the East of Calhoun, received $46.80 per acre, double the payment that farmers in Calhoun County received.

“Farmers have raised concerns about the yield data being utilized by USDA and the resulting distribution of payments to counties," wrote Grassley and Ernst. "We recognize counties are different sizes which can affect how well the crops in a county correlate to the county average yield. However, legitimate questions have been raised about the significant payment disparity that has occurred between adjacent counties in certain areas throughout the country."

The full text of the letter is included below:

May 2, 2016

The Honorable Tom Vilsack
Secretary

U.S. Department of Agriculture
1400 Independence Ave., SW
Washington, D.C. 20250

Dear Secretary Vilsack,

We are writing you to inquire about the methodology USDA is using to determine average county yields for the Agriculture Risk Coverage (ARC) county program.  ARC is designed to protect farmers against sudden drops in revenue by offering protection to farmers based on both the county yield for a crop and the average marketing year price.  Section 1117 of the 2014 Farm Bill instructs you to determine the average yield of counties for the five most recent crop years.

Farmers have raised concerns about the yield data being utilized by USDA and the resulting distribution of payments to counties.  We recognize counties are different sizes which can affect how well the crops in a county correlate to the county average yield.  However, legitimate questions have been raised about the significant payment disparity that has occurred between adjacent counties in certain areas throughout the country. 

To help us better understand how USDA determines ARC county payments, please provide answers to the following questions:

1)     What methodology does USDA use to determine county yields for the ARC program?

2)     If a significant inconsistency in county yields is determined between adjacent counties, does USDA do any further analysis to ensure the county yield numbers are correct?

3)     Does anything prevent USDA from using county yield data from the Risk Management Agency (RMA) for the determination of ARC county yields?

We look forward to working with you to ensure the farm safety net functions properly for farmers across the country.

Sincerely,

Chuck Grassley
United States Senator

Joni Ernst
United States Senator

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