ARC Versus PLC: Make A Smart Choice

04:06PM Jan 29, 2020
ARC Versus PLC
In the next few weeks, you have a key decision to make.
( Farm Journal )

In the next few weeks, you have a key decision to make. Should you choose Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC)? Your choice lasts through 2021, and sign-up ends March 15, 2020. 

Evaluate changes to the programs

For review, income support for ARC-County (CO) is tied to historical base acres. You receive payments when the actual county crop revenue is less than the guarantee.

You receive PLC payments when a commodity’s effective price is less than the reference price. The effective price equals the higher of the market year average (MYA) price or the national average loan rate.

The 2018 farm bill changed the calculation for benchmark revenue and now uses actual county revenue. Yield data now comes from Risk Management Agency.

Review 2014: What program did you use? How did it go?

In 2014, when you last chose between ARC and PLC, high prices were in the rearview mirror, says David Widmar, economist at Agriculture Economic Insights. “Those strong prices, which led to ARC’s high benchmark price in 2014 and 2015, helped influence that decision, and we saw more than 90% of producers enroll corn and soybean acres into ARC-CO.”

Wheat received PLC payments nearly every year. Corn was trickier because ARC-CO did generate payments, but many counties saw larger PLC payments. Soybeans never received a PLC payment. Review the past five years as you make your decision.

Set expectations for 2019 and 2020

What is the probability MYA prices for 2019, 2020 and 2021 will end up less than $3.70 for corn, $5.50 for wheat and $8.40 for soybeans?

For PLC, prices mean everything. For ARC-CO, prices are just an important factor in the equation.

Know what it will take to trigger a payment on your fields.

“This is going to be an important decision in this ag economy,“ says Brent Gloy, economist at Agriculture Economic Insights. ”It’s critical we all make good decisions and not leave any dollars on the table.”

An Option for Flooded Acres

ARC-Individual (I) could help farms with weather catastrophe. If you have 100% prevent plant, you’re covered. If just a few fields are prevent plant, those don’t count toward revenue calculations. Look at past years’ data to see if this option works for you, says Scott Gerlt, FAPRI, University of Missouri.