ARC or PLC? Farm Bill Options Explained
Published: Friday, December 13, 2019
Area crop producers need to make important farm bill enrollment decisions by the deadline of March 15. That's when they need to lock in their choice of a program—ARC-County or PLC—for corn, soybeans and wheat for the 2019 and 2020 crop years. There is also a signup for producers who had 100 percent prevented planting in 2019.
For dairy producers, a more urgent deadline of Dec. 13 has been set for them to enroll in the Dairy Margin Coverage Program.
Experts with Purdue University Extension and the Farm Service Agency were on hand last Friday in Goshen to walk producers through the decisionmaking process for ARC-County and PLC.
Claire Larson, executive director of the Elkhart County FSA office, said the ARC program, which stands for Agriculture Risk Coverage, is a revenue-based program. The PLC program, which stands for Price Loss Coverage, is a price-based program.
Choosing the right program for your farm depends on the crop price and average yield. Payments are issued on 85 percent of base acres (not planted acres), and there is a payment limit of $125,000 per farm.
According to Larson, payments for the ARC-County program are issued when the actual crop revenue falls below the revenue guarantee for a crop year. Payments are capped at 10 percent of benchmark revenue (based on Olympic average of crop yields and average prices).
For the PLC program, payments are triggered when the U.S. average market price for the crop year is less than the crop's "reference price." For 2019, the reference prices are $3.70 for corn, $8.40 for soybeans and $5.50 for wheat.
Michael Langemeier of Purdue University Extension said the enrollment decisions may differ for each crop. For 2019 and 2020, he said the PLC program "looks good" for corn and wheat, while the ARC-County program appears to be the best fit for soybeans.
"For soybeans, I would actually look at ARC-County as the initial choice and then do scenarios to see under what situations you would get a payment on PLC," he said, adding, "Make sure you think about updating yields. That's extremely important on the PLC in corn."
The deadline for updating yields is Sept. 30, 2020, Larson said.
These recommendations are based on USDA's World Agricultural Supply and Demand Estimates for November 2019. The average price in the 2018-19 marketing year is $3.61 per bushel for corn and $8.48 per bushel for soybeans. For 2019-20 marketing year, the average price is projected to be $3.85 per bushel for corn and $9 per bushel for soybeans.
These price projections could change, especially as farmers decide what to do with the 11 million acres that went unplanted this year due to a wet spring. Langemeier said there's an outside chance (25 percent) that a large increase in corn acres could drive down prices.
"That's the scenario where you get to $3.10 corn, is if we plant mostly corn on those prevent plant acres," he said.
However, he said it's more likely that those 11 million acres will be split evenly between corn and beans.
An online tool is available to help producers determine which program is best for their farm. The web site is https://farmdoc.illinois.edu/fast-tools/arc-co-plc-model from the University of Illinois. Langemeier suggested producers input their information (state, county, crop, yield, marketing year average price, etc.) and see which farm bill program is best for each crop they produce.
Michigan State University also has an online ARC/PLC calculator that can be found at https://www.canr.msu.edu/farm_management/.
Langemeier added that, with new yield and price information, the choices which producers make under the 2018 Farm Bill could be different from the ones they chose under the 2014 Farm Bill.
Under the old farm bill, the ARC-County payments were larger than PLC payment due to strong prices for corn and soybeans from 2014 through 2016. This created a high benchmark for revenues and resulted in no ARC payments being issued in 2017 and 2018.
According to Larson, the deadline for enrolling your crops in the 2018 Farm Bill is March 15. Producers will need to update their yields, elect which program(s) they want and then enroll in that program(s).
The enrollment decision applies to the 2019 and 2020 crop years. However, beginning in 2021, producers can change their choice of program each year.
Also, producers who took prevented planting on 100 percent of their acres can enroll in ARC-IC and receive some revenue.
For dairy producers, the deadline for enrolling in the 2020 Dairy Margin Coverage Program is Dec. 13. This insurance program offers protection to dairy producers when the difference between the all milk price and the average feed price (the margin) falls below a certain dollar amount selected by the producer. Applicants will have to pay a $100 administrative fee when they sign up.
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