ARC Versus PLC

March 22, 2019 09:27 AM
 
Should you switch your program election?

While the 2018 farm bill has been described as more “evolutionary than revolutionary,” it will be the first time farmers are able to switch programs since they were created by the 2014 farm bill.

Early predictions suggest many farmers currently participating in Agriculture Risk Coverage (ARC) will switch to Price Loss Coverage (PLC) for better protection against low prices. After running some numbers, Paul Neiffer, principal and CPA with CliftonLarsonAllen, isn’t quite sure which program will be the better option. Neither will pay like ARC did under the 2014 farm bill, he says.

Enrollment is scheduled to open Sept. 1. Under the new farm bill, farmers will decide between ARC or PLC for each of their eligible commodities and that decision will remain in effect for the 2019 and 2020 crop years. After that, it’s an annual election through 2023.

Starting with 2020 crops, producers have a one-time option to update PLC yields to 90% of the average yield for the 2013 through 2017 crop years. The formula includes a second step that’s a bit more complicated, so visit your FSA office for details.
While the PLC reference prices were unchanged in the 2018 farm bill ($3.70 per bushel for corn and $8.40 per bushel for soybeans, for example), the option to update yields can make a difference.

“It makes sense for a producer to update PLC yields if their 2013 through 2017 average exceeds the existing program yield,” explains Washington analyst Jim Wiesemeyer.

Switching to the ARC program, coverage will be based on the county where an FSA farm unit is located, rather than the county the producer chose as the administrative office. USDA will use a yield plug of 80% (up from 70%) of the transitional yield and will calculate a trend-adjusted yield (similar to crop insurance) to use for benchmark calculations.

“The 2018 farm bill calls for USDA to publish payment and guarantee rates in a more timely manner to boost producer certainty when deciding between programs,” Wiesemeyer adds.

In terms of corn, yields would need to drop and prices would need to be at the $3 level for ARC to even equal PLC, Neiffer explains. “It’s still likely  changing to PLC is the prudent option for corn. Only if yields look really low at the end of August would you consider switching back to ARC.

“For soybeans, check estimated yields for your county before sign-up to make your decision,” he says.

Read more from Paul Neiffer about choosing between ARC and PLC for corn and soybeans here and wheat and cotton seed here.

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