Tag: ARC

Making 2021 ARC/PLC Decisions

Ann Johanns

Contributed by Steve Johnson, retired Extension Farm Management Field Specialist

Steven Johnson

Enrollment for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) program for the 2021 crop year is underway at your local USDA Farm Service Agency (FSA) office. That decision is by FSA farm number and the historical base acres of crops on that farm and tract. The signup period runs through March 15, 2021.

ARC/PLC is one of the USDA farm safety-net programs that can help producers with fluctuations in either revenue or price for certain commodity crops. These include barley, canola, large and small chickpeas, corn, crambe, flaxseed, grain sorghum, lentils, mustard seed, oats, peanuts, dry peas, rapeseed, long grain rice, medium and short-grain rice, safflower seed, seed cotton, sesame, soybeans, sunflower seed, and wheat.

Local FSA offices are encouraging producers to take time over the next few months to evaluate their program elections and enroll for the 2021 crop year. ARC provides income support payments on historical base acres when actual crop revenue declines below a specified guaranteed level. PLC provides income support payments on historical base acres when the final national average cash price for a covered commodity falls below its effective reference price. For 2021, that’s at $3.70 per bushel for corn and $8.40 per bushel for soybeans, respectively.

2021 election and enrollment

Producers can elect coverage for the 2021 crop year and enroll in crop-by-crop ARC-County (ARC-CO) or PLC. Another choice is to enroll the entire farm in the ARC-Individual (ARC-IC) program. Although election changes for 2021 are optional, enrollment (a signed contract) is required for each year of the program. If a producer has a multi-year contract on the farm and makes an election change for 2021, it will be necessary to sign a new contract.

Key to this decision will be the national average cash price outlook for the 2021-22 marketing year. That is because the final national average cash price by crop will not be known until late September 2022. It must fall below the effective reference price for a PLC payment to be triggered. Most analysts expect those national cash price projections to be roughly $4.00 per bushel for corn and $10.00 per bushel for soybeans based on larger US planted acres, normal growing conditions, and strong US export demand. Since these projected prices are above the effective reference prices, then PLC payments would not be triggered for the 2021 crop year. Based on these current projections, most producers will likely elect and enroll both their corn and soybean base acres in the ARC-CO program to increase the likelihood of triggering a payment.

ARC-CO program payments are triggered when the actual county crop revenue of a covered commodity is less than the ARC-CO guarantee for the crop. The actual county revenue and the revenue guarantee are based on county-level yield data for the base acres’ physical location of the farm and tract. ARC-CO payments are not dependent upon the planting of a covered commodity or planting of the applicable base crop on the farm. Some producers could elect the ARC-IC program that combines the entire farm’s crop base acres, perhaps noting a higher risk of yield loss for 2021. ARC-IC farm eligibility is contingent on the planting of a covered commodity.

Signup deadline is March 15

If your ARC/PLC decision is not submitted to your local FSA office by March 15, 2021, the election defaults to the current election for crops on the farm from the prior crop year. For each crop year 2022 and 2023, you can make new elections annually during those sign up periods that end March 15. Farm owners can’t enroll in either program unless they have a shared interest in the crops on their farm.

Rather than waiting until the March 15 deadline, producers are encouraged to work with their local FSA office to make their election and enrollment decisions early. 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. 

New crop insurance product

A new county-based crop insurance product called Enhanced Coverage Option (ECO) can be added to your traditional multi-peril crop insurance coverage beginning in 2021. Note that ECO can be purchased regardless of your base acres having been enrolled in the ARC or PLC program. The Supplemental Coverage Option (SCO) product can not be purchased unless the base acres on that farm were enrolled in the PLC program.

The ECO offers producers a choice of 90% or 95% trigger levels of county-based coverage for a portion of the underlying crop insurance policy. If you choose revenue protection, then ECO covers revenue losses. ECO provides a band of coverage between these elected levels and 86%. Expect most producers interested in buying ECO in 2021, may plan to enroll in either ARC or PLC and then buy-up their farm-level revenue protection to the 80% or 85% levels. That’s because of the subsidy levels and premiums to be paid for the underlying crop insurance products.

Educational programs on the 2021 Farm Bill sign-up decision will be offered virtually in early 2021 from ISU Extension and Outreach. Watch the Ag Decision Maker Farm Bill page for details.

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ARC/PLC Decision Deadlines Loom

Ann Johanns
Steve Johnson, headshot

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu

Iowa producers on row crop farms have until March 15 to make a 2-year election and then enroll by commodity crop and USDA Farm Service Agency (FSA) farm number. There really is no reason to delay, as no ARC-CO/PLC payments are projected for the 2019 crops. Besides, many FSA offices could be swamped as the deadline approaches.

Undecided producers should start by understanding the importance of the effective reference prices of $3.70 per bushel for corn and $8.40 per bushel for soybeans. In order to trigger a PLC payment, the final national cash for the entire marketing year must be below these levels. The national cash price projections for the 2019 crop as of January 10, 2020 are $3.85 per bushel for corn and $9.00 per bushel for soybeans, respectively. Thus, no PLC payments are expected for corn and/or soybean base acres that are elected and enrolled in the PLC program.

If there are 2019 ARC-CO or PLC payments, it will likely be in a county with exceptionally low 2019 final yields. These final county yield numbers from the USDA Risk Management Agency (RMA) will not be known until later this year. The 2019 Iowa yields from the USDA National Agricultural Statistics Service (NASS) January report were estimated to be 198 bushels per acre corn and 55 bushels per acre for soybeans. Such levels indicate that most final county yields are likely too high to trigger a 2019 ARC-CO payment.

If there is a 2019 payment, it will likely be under the ARC-Individual (ARC-IC) program. The producer probably has a farm with poor 2019 yields and possibly prevented planting acres. That producer should consider electing and enrolling all crops by FSA farm number in the ARC-Individual (ARC-IC) program if a likely payment will be generated. It will require further examination and production evidence for each commodity crop produced on that farm since the 2013 crop year.

It’s actually for 2020, that an ARC/PLC payment seems more likely. Corn and soybean planted acres are expected to increase by roughly 11 to 12 million total planted acres for both crops as a result of the large prevented planting acres in 2019. Two sources of 2020 price projections released last fall are the USDA Outlook and the Food Agricultural Policy Research Institute (FAPRI) at the University of Missouri. Both sources project an increase in 2020 US corn planted acres by 2.5 to 4.5 million acres and use 30-year trendline yields assuming normal production. Those 2020 crop cash price projections for corn are $3.40 and $3.53 per bushel, respectively. Thus, the likelihood of a 2020 PLC payment for corn that would be received in October 2021, as the final cash price would fall below the reference price of $3.70 per bushel.

Using those same two sources for 2020 soybean cash price projections, US soybean planted acres would increase between 7.5 and 8.5 million acres as compared to 2019.  Again, they use 30-year trendline yields and normal production. Those 2020 crop cash price projections for soybeans are $8.54 and $8.85 per bushel, respectively. Thus, no 2020 PLC payment for soybean base acres is expected as the final cash price is not below the effective reference price of $8.40 per bushel. However, the lower national cash price improves the chances of ARC-CO payments for soybean base acres depending on the final county yields.

Producers will also have a one-time chance to update their PLC Farm Yields starting with the 2020 crop. Even if a producer elects the ARC-CO or ARC-IC program option, the PLC yield can be updated and becomes the public record of the farm’s yield. Supporting evidence for the PLC Yield Update will likely come from a producer’s crop insurance records if a program crop was produced in the 2013 thru 2017 crop years. In some cases, the yields for a crop insurance unit might not match with the FSA farm number and will need to be averaged. Note the farmland owner on cash rent farms will need to approve this PLC Yield Update and sign the form CCC-867 unless a power of attorney form is on file.

Use the ISU Ag Decision Maker ARC/PLC Payment Estimator and PLC Yield Update Tools to provide your analysis. More Information on the 2018 Farm Bill, including web casts on various pieces of the program, can be found on the Ag Decision Maker Farm Bill page.

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USDA Unveils Key New Programs to Help Farmers Manage Risk

Ann Johanns

End of Direct Payments Represents One of the Most Significant Farm Policy Reforms in Decades

USDA Launches Education Efforts to Help Producers Choose New Program Right for Them

WASHINGTON, Sept. 25, 2014 – U.S. Department of Agriculture (USDA) Secretary Tom Vilsack today unveiled highly anticipated new programs to help farmers better manage risk, ushering in one of the most significant reforms to U.S. farm programs in decades.

Vilsack also announced that new tools are now available to help provide farmers the information they need to choose the new safety net program that is right for their business.

“The 2014 Farm Bill represented some of the largest farm policy reforms in decades. One of the Farm Bill’s most significant reforms is finally taking effect,” said Vilsack. “Farming is one of the riskiest businesses in the world. These new programs help ensure that risk can be effectively managed so that families don’t lose farms that have been passed down through generations because of events beyond their control. But unlike the old direct payment program, which paid farmers in good years and bad, these new initiatives are based on market forces and include county – and individual – coverage options. These reforms provide a much more rational approach to helping farmers manage risk.”

The new programs, Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), are cornerstones of the commodity farm safety net programs in the 2014 Farm Bill, legislation that ended direct payments. Both programs offer farmers protection when market forces cause substantial drops in crop prices and/or revenues. Producers will have through early spring of 2015 to select which program works best for their businesses.

To help farmers choose between ARC and PLC, USDA helped create online tools that allow farmers to enter information about their operation and see projections about what each program will mean for them under possible future scenarios. The new tools are now available at www.fsa.usda.gov/arc-plc. USDA provided $3 million to the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri and the Agricultural and Food Policy Center (AFPC) at Texas A&M (co-leads for the National Association of Agricultural and Food Policy), along with the University of Illinois (lead for the National Coalition for Producer Education) to develop the new programs.

“We’re committed to giving farmers as much information as we can so they can make an informed decision between these programs,” said Vilsack. “These resources will help farm owners and producers boil the information down, understand what their options are, and ultimately make the best decision on which choice is right for them. We are very grateful to our partners for their phenomenal work in developing these new tools within a very short time frame.”

Starting Monday, Sept. 29, 2014, farm owners may begin visiting their local Farm Service Agency (FSA) offices if they want to update their yield history and/or reallocate base acres, the first step before choosing which new program best serves their risk management needs. Letters sent this summer enabled farm owners and producers to analyze their crop planting history in order to decide whether to keep their base acres or reallocate them according to recent plantings.

The next step in USDA’s safety net implementation is scheduled for this winter when all producers on a farm begin making their election, which will remain in effect for 2014-2018 crop years between the options offered by ARC and PLC.

Today’s announcement was made possible through the 2014 Farm Bill, which builds on historic economic gains in rural America over the past five years, while achieving meaningful reform and billions of dollars in savings for the taxpayer. Since enactment, USDA has made significant progress to implement each provision of this critical legislation, including providing disaster relief to farmers and ranchers; strengthening risk management tools; expanding access to rural credit; funding critical research; establishing innovative public-private conservation partnerships; developing new markets for rural-made products; and investing in infrastructure, housing and community facilities to help improve quality of life in rural America. For more information, visit www.usda.gov/farmbill.

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Worksheet Helps Producers Identify Selections for 2014 Farm Bill

Ann Johanns

The Agricultural Act of 2014 is important legislation. It provides farmland owners and operators the opportunity to make a one-time election of a commodity program for 2014 through 2018. The legislation also allows the operator to enroll annually in a chosen program. Iowa State University Extension and Outreach provides several resources to assist in this decision-making process.

“While the Farm Bill of 2014 provides opportunities for farmers to update their farm selections, it is important that they consider several factors before making these decisions,” said Ann Johanns, extension program specialist. Johanns coordinates Ag Decision Maker, an agricultural economics and business website sponsored by Iowa State University Extension and Outreach.

“We have developed several tools, including the Base Acreage Reallocation and Payment Yield Update, to assist owners and operators as they determine what is best for their business and family,” Johanns said.

Alejandro Plastina, an extension economist with Iowa State University Extension and Outreach, developed the Base Acreage Reallocation and Payment Yield Update.

“Opportunities to update base acres and payment yields for commodity programs are few and far between,” Plastina said. “So farmers should seriously consider this opportunity provided by the 2014 Farm Bill.”

“The worksheet is a simple tool to evaluate the convenience of having the payment formulas for some commodity programs updated to better reflect current production patterns on a farm-by-farm basis,” Plastina added. He noted that the decision tool includes multiple worksheets to allow information for up to five farms.

The Base Acreage Reallocation and Payment Yield Update worksheet was designed to help Iowa farmland owners with base acreage reallocation decisions for the Agricultural Risk Coverage-County (ARC-CO) program and the Price Loss Coverage (PLC) program, and with payment yield update decisions for the PLC program. To access this and other online tools, go to www.extension.iastate.edu/agdm.

To further support producers, a series of workshops will be held across Iowa to provide information about the Farm Bill and the impact it has on producers. The meetings will be held once final regulations are set. A complete schedule will be posted on the AgDM Farm Bill Web page at www.extension.iastate.edu/agdm/info/farmbill.html.

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