Set price expectations and evaluate your options
By March 15, you have an important risk management decision to make. Should you enroll in Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) for 2021?
For a quick review, income support for the ARC-County (CO) program is tied to historical base acres, not current production. ARC-CO payments are issued when the actual county crop revenue is less than the ARC-CO commodity guarantee for the covered.
PLC program payments are issued when the national cash price of a covered commodity is less than the respective effective reference price for that commodity.
For 2021, those reference prices are $3.70 per bushel for corn, $8.40 per bushel for soybeans and $5.50 per bushel for wheat.
Study Price Outlooks
The national average cash prices for the 2021/22 marketing year won’t be set until late September 2022, explains Steve Johnson, Iowa State University Extension retired farm management specialist.
“Most analysts expect those national cash price projections to be roughly $4 per bushel for corn and $10 per bushel for soybeans based on larger U.S. planted acres, normal growing conditions and strong U.S. export demand,” Johnson says. “Since these projected prices are above the effective reference prices for soybeans especially and possibly corn, PLC payments would not be triggered for the 2021 crop year.”
If prices are in that range, ARC-CO would have a greater likelihood of triggering payments.
Of course, prices can change. Consider your own price expectations for 2021, suggests Gary Schnitkey, University of Illinois ag economist. “Ask yourself: How likely will corn prices, for example, be below $3.70 per bushel?”
If you think prices will be below that level, Schnitkey says PLC would be the choice for corn.
For soybeans, Schnitkey says, $8.40 per bushel is a relatively low reference price. “I’d lean toward ARC-CO for soybeans since the benchmark price is higher,” he says.
Start the Process Now
Election changes for 2021 are optional, but enrollment is required for each year of the program.
“Rather than waiting until the March 15 deadline, producers are encouraged to work with their local FSA office to make their election early,” Johnson says. “This will help spread out the workload for your FSA office and allow more time to focus on any crop insurance changes for your 2021 crops.” FJ
