Changes in the 2018 Farm Bill allow farmers to choose between Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) when enrollment opens. Previous Farm Bills had a one-time four-year commitment to either PLC or ARC. This year, farmers can select either ARC or PLC for the 2019 and 2020 crop years. After 2020, farmers will be able to make an annual election through 2023.
Knowing how the two programs are implemented is important to making the right decision. According to the USDA, the PLC program payments are issued when the effective price of a covered commodity is less than the respective price for that commodity. The effective price equals the higher of the market year average (MYA) price or the national average loan rate for the covered commodity.
The PLC payment amount for a covered commodity is equal to 85 percent times the base attributable to the covered commodity, times the payment rate for the covered commodity. The base attributed to the covered commodity is the covered commodity base plus the generic base attributed to the covered commodity. The payment rate for the covered commodity is the difference between the reference price and the effective price. PLC payments are not dependent on the crops planted and/or considered planted (except for generic base acres as noted above) for the current crop year.
ARC program provides coverage for revenue losses at the county level. ARC payments are issued when the actual county crop revenue of a covered commodity is less than the ARC guarantee for the covered commodity.
The ARC guarantee equals 86 percent of the previous five-year national MYA price, excluding the years with the highest and lowest prices (the ARC guarantee price), multiplied by the average historical county yield (the ARC county guarantee yield), excluding the years with the highest and lowest yields. (A substitute yield is used in any year when the ARC county yield is below 70 percent of the transitional yield for the applicable crop and county.) The ARC payment is equal to 85 percent of the base acres of the covered commodity times the difference between the county guarantee and the actual county crop revenue for the covered commodity. Payments may not exceed 10 percent of the ARC guarantee price multiplied by the ARC guarantee yield. For ARC payment purposes, any covered commodity planted on generic base is attributed to the planted covered commodity.
Determining the best selection for individual farms requires calculation of each program based on the farm’s number of base acres, farm yields and ARC yields. GreenStone crop insurance specialists can run individual farm numbers to project the best choice for the farm. These numbers will give the farm a projection based on past performance and anticipated prices to help them make the best decision. Sign-up for the program will be throughout September at local Farm Service Agency (FSA) offices.
“Given the current cropping situation in Michigan and Wisconsin, we are encouraging all of our crop insurance customers to visit with their specialist to have their individual projections analyzed,” says Ben Mahlich, vice president of crop insurance for GreenStone. “Customers can also visit greenstonefcs.com/yieldreport to submit their yields and receive their projections. We are hopeful we can provide the information our customers need to make this important determination.”
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