One Year Lag in ARC Olympic Average Revenue

• September 17, 2019
• Paul Neiffer

In our post yesterday we mentioned that the final Olympic Revenue calculation was dependent on the final 2018 crop yields.  However, one of the changes in the new farm bill that we missed is that Olympic Revenues calculations are now based one year in arrears.  For example, the 2019 Olympic Revenue will be based on yields for 2013-2017 which makes it easier to determine your revenue base and guarantee (86% of Olympic Revenue).

That is the easy part.  The hard part is that this may reduce your guarantee since the 2018 yields for most parts of the corn belt were much higher than 2013 yields even on a trend-adjusted basis. The new Farm Bill calls for trend-adjusted yields, therefore, it is likely that all yields will be trend-adjusted so that a 2013 yield will be adjusted upwards to be comparable to 2014-2017 yields. 

We did an analysis of all of the counties reported by FSA for corn.  We assumed that 2013 yields would be “trended” up 10 bushels to be comparable to 2018 yields (some would be more, some less).  We then assumed that 2018 yields would be at least equal to the highest yield over the last five years (on a non-trend adjusted basis).  We then calculated what the reduction in the guarantee would be for one county from each of the five largest corn producing states.  The table below summarizes these findings:

State	County	2014	2018	Bu. Diff.	Guarantee
Illinois	McLean	220	212	8	$29.60
Indiana	Grant	179	177	2	$7.40
Iowa	Buchanan	206	188	18	$66.60
Minnesota	Dodge	207	196	11	$40.70
Nebraska	York	209	205	4	$14.80

Final trend-adjusted numbers should be forthcoming from FSA soon since all of that data should have been processed by now.  Once that data is available, we can rerun these calculations and see how much difference the new Farm Bill calculations are compared to the prior Farm Bill.  We are guessing that there will be a difference and it can be major in some cases.

The intent was to make it easier to calculate Olympic Revenue.  The unintended consequence is that the revenue for 2019 may be lower than expected.  However, it is likely that most farmers will sign up for PLC anyway and this may not matter.

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