Across Minnesota, farmers are crowding into meeting rooms for 2 ½-hour financial seminars. One in Farmington last week drew more than 200 farmers and landowners; one in Redwood Falls attracted more than 400.
Why the interest? The 2014 federal farm bill provides payments to farmers under certain conditions in years when grain prices plummet. To qualify, producers must sign up for one of three new programs before the end of March — and commit for a five-year time period.
"These are the biggest changes we've seen in the last 30 years for the farm bill," said University of Minnesota regional extension educator Betty Berning. "It's confusing, there are a lot of changes and it's different than what we've seen before, so I think that's what is driving the attendance."
The new programs are also important to taxpayers. Critics are questioning whether the new system will be better than the direct subsidies of the past that funneled billions of dollars to farmers. Some studies have projected that the new programs may cost more. That will depend on how many farmers sign up for which programs, and what the market prices will be for corn, soybeans, wheat and other commodities during the next five years.
New programs, new info
Berning spoke in Farmington last week at one of 80 meetings being held across the state this winter to get out the word about the new farm bill changes.
The programs are a safety net of payments that kick in when prices or revenue falls below legislated benchmarks, and do not pay when corn, soybean and other commodity prices or revenues are high. They are designed to supplement the crop insurance that a majority of Minnesota crop farmers already purchase, and that is also partly subsidized by federal funds.
"It's not crop insurance," said Berning of the new programs. "It works with crop insurance."
U.S. Agriculture Secretary Tom Vilsack said the new system is a "more rational approach to helping farmers manage risk" when he unveiled the details in St. Paul last September. "Unlike the old direct payment program, which paid farmers in good years and bad, these new initiatives are based on market forces and include county and individual coverage options," he said.
But others see new names, rules and language, but not much true reform.
"It introduces needless complexity into the decisionmaking process," said Michael Swanson, agricultural economist for Wells Fargo. Instead of attending insurance meetings, he said, farmers would be better off listening to experts talk about crop genetics, controlling pesticides and nitrogen runoff, and improving their soil management.
"The time they spend filling out these forms and worrying is time that wasn't spent doing something that actually grows more corn or reduces negative environmental impacts," Swanson said.
Farmers have little choice but to attend the meetings and follow the rules, said Robert Adamek, who grows corn and soybeans in Scott County.
"The weather the last three years has been terrible," he said, with unusually heavy rains or drought in several areas, and record national harvests in 2014 that drove down prices. "It would be foolishness not to be signed up," Adamek said, in addition to having crop insurance.
Besides weather affecting yields, market prices can surge or retreat based on world demand, foreign restrictions, the strength of the dollar, ethanol production and other variables.
Kent Olson, University of Minnesota Extension economist, said the new programs are designed to protect producers against different types of risks.
One program called Price Loss Coverage (PLC) pays farmers when the average national price of commodities falls below levels set by Congress. Another called Agriculture Risk Coverage (ARC-CO) pays farmers for "shallow losses" when declining prices or yields cause their revenue to fall below 86 percent of the five-year average of the local county.
Farmers may also choose a third alternative, an ARC-Individual plan based on individual farm history instead of local county yield averages.
The programs are much more complicated than that, and producers may mix and match the ARC-CO and PLC programs for different crops or farms that they own or rent. But once programs are selected, farmers are locked into the decisions for five years, even if someone else rents or buys the land.
The University Extension and the federal Farm Service Agency — an arm of the U.S. Department of Agriculture — are distributing a 62-page booklet with PowerPoint slides and fact sheets to accompany their seminars.
"Without this class, you'd be lost," Adamek said after the Farmington meeting. "It's getting more complicated, just like everything else." Deciding which program to sign up for requires guessing what prices and yields may be for the next five years, and running numerous scenarios on free online tools that will calculate different potential payouts.
"It's very, very complicated, much more so than past programs," said Washington County farmer Gene Smallidge, who has seen his share of farm bill changes since be began growing corn and soybeans in 1960.
Landowners affected, too
Berning said some farmers attend the same presentation multiple times because it's difficult to absorb so much new information in one setting. Some of them are landowners, she said, who also must pay attention to the rules and who also have a deadline.
By Feb. 27, landowners must make key decisions about updating yields and adjusting the mix of crops eligible for payments in the programs. They are also encouraged to learn about the crop payment programs, Berning said, since the choices made by the growers can affect land values and future rental rates.
Olson said that farmers who don't meet the deadline will not receive a payment for the 2014 crop year, which could be substantial because corn and soybean prices dropped significantly after several years of relatively high prices.
The next couple of years could be difficult for farmers, Olson said, making it especially important to have both crop insurance and crop payments.
"In the short term, they'll need help to get over these rough years right now," Olson said, "and in the long term farmers should sign up just like they should buy crop insurance — because it protects that downside risk."
Tom Meersman • 612-673-7388