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Sequestration and the Effect on Farm Program Payments

Sequestration will likely affect farm program payments that are to be received by producers this fall. At this time, an ARC-CO payment, on corn base acres, will be $50 or more across Minnesota counties, for eligible producers. ARC-CO payments on soybean base acres are much more variable. Payments on these base acres will range from $0 to approximately $45, depending on the Minnesota County where a producer farms. But, all of these payments will likely be reduced due to sequestration.

Many producers are currently asking what sequestration is. Sequestration is a piece of 2011 legislation passed by Congress that is aimed at reducing the Federal budget deficit. Most Federal programs are affected by this reduction and USDA farm programs are no different. (Federal Crop Insurance and Conservation Reserve Payments are both exempt from sequestration though.)

The Federal Office of Management and Budget (OMB) administers sequestration and determines the annual level of reduction. It is expected that OMB will require USDA to reduce 2014 farm program payments between 6.8 and 7.3 percent. Officials believe 2014 and 2015 farm program payments will likely be reduced by 7.2 or 7.3 percent. This expected reduction will equate to approximately $4 or $5 per MN corn base acre enrolled in ARC-CO. Soybean ARC-CO payment reductions due to sequestration will be much more variable, and will range from $0 to approximately $3.50 per base acre. Producers eligible for a farm program payment of $50,000, will see this reduced to approximately $46,400, if a 7.2% sequestration is enacted.

FSA is waiting to hear from the White House and OMB as to what the actual farm program payment reduction level will be. Producers will then be informed as to the final sequestration level. At this time though, producers need to visit their county FSA office to finalize enrollment in the farm program they selected for 2014 and 2015. This paperwork needs to be completed with FSA by Sept. 30 to be eligible for any FSA related payments this fall.