What’s The Right Choice This Year?

By Jack Criss

With time running out to enroll in two important coverage programs, many farmers are wondering what the best decision is to make between them, especially in today’s uncertain economic climate.

Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) provide financial protections to farmers due to substantial drops in crop prices or revenues. During this pandemic, they are both seen as critical financial safety nets for American farms. 

Farmers should contact their Farm Service Agency office about making an election of farm programs for their crop base acres in 2021. A choice, or choices, can be made between Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). ARC has two versions: a little-used individual-farm-level ARC-IC and the widely used ARC-CO, which is based on county-level revenue. Experts say that even if you don’t change anything, you’ll still need to enroll in the farm program for that crop year or you won’t be eligible for payments.

The deadline this year is March 15, a shorter window than in previous years. Sign-up began last October, but farmers need to act as soon as possible. With COVID ongoing, experts warn that the process won’t be as simple as going over to a local FSA office.  You can sign up either online or through email–the most widely used approach.  After calling an office, an FSA staffer can email  forms you need to sign. You’ll have to print them, sign them, and scan the signed copies to email back to the office.

USDA moved both the enrollment and election deadline up this year to coincide with the March 15 deadline for making changes in crop insurance coverage.

Under the 2018 Farm Bill, the first election between ARC and PLC began in the fall of 2019 and was for two crop years–both 2019 and 2020. Even with 2020 program choices locked in, enrollment still had to be made by last June 30 or you wouldn’t be eligible for 2020 crop payments. 

The first USDA projections of 2021-22 marketing year average cash prices won’t be out until the May Supply and Demand report, after the March 15 election deadline. The final marketing year average cash prices won’t be known until the fall of 2022.

PLC is pretty straightforward, experts say, and is a simpler program. If the national average marketing year cash price falls below a USDA “effective reference price” for the program crop you’ve chosen, you get a payment. PLC is offered on more than twenty commodities. Last fall, for example, the 2019 marketing year price for corn came in at $3.56 per bushel. So, producers who elected PLC on corn base acres for 2019 got 14¢ a bushel. 

ARC is a revenue-based safety net program. The most used version is ARC-County (ARC-CO). 

Culled from various sources, here is further information: “Payments are triggered if the actual revenue for a county where the farm’s base is located falls below a benchmark revenue guarantee. ARC is similar to revenue protection crop insurance, except for not getting paid until a year after harvest, the same as with PLC payments. However, the way ARC is calculated differs a lot from crop insurance.

Figuring ARC-CO starts with a county-level benchmark revenue. That’s the five-year Olympic average of the county’s yield multiplied by the five-year Olympic average of the national marketing year average cash price. (The Olympic average throws out the high and low years and averages the other three.) Then you multiply that revenue by 86% to get your county’s benchmark guarantee. If your county’s actual average revenue falls below that guarantee, ARC-CO triggers a payment.”