Final FSA Yields More Likely to be Under NASS Yields?
There is a lot of chatter regarding the lack of ARC-CO payments for the 2014 crop year due to yields coming in higher than what farmers might have expected for their county. When we were doing Farm Bill analysis about two years ago, we had taken a look at how final FSA yields compared to the initial yield provided by NASS.
In almost all cases, the difference in yield related primarily due to rounding. NASS yields were to the nearest tenth of a bushel while FSA rounded to the nearest bushel. Our analysis looked at the 2011 crop year for the states of Iowa, Illinois and Indiana. This comprises about 268 counties with NASS and FSA yields. In almost exactly 200 counties the yield difference only related to rounding.
In the other 70 or so counties, in no cases did final FSA yields end up being higher than NASS yields. About 40 of the counties the difference was a reduction of less than 2%. In the remaining 30 or so counties, the difference ranged from about a 3% reduction down to a 14.41% negative reduction in Fremont County, Iowa. Only 7 counties had a greater than 5% reduction.
Therefore, the history (at least for one year) is that FSA rarely increases yields over NASS yields, but rather, is more likely to reduce yields. A reduction in yields would increase the ARC-CO payment for any one crop year (however, it would then reduce the potential payout for the next year if that yield was included in the Olympic Average Yield). Now, this was only one year and for three states that have a fair amount of reporting by farmers. Additional data would be required to determine how much the differences were for other years and whether the final 2014 numbers were materially different from prior years. If someone is interested in doing this research, we would love to see the results.
Paul Neiffer, CPA