Your decision to enroll in Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) needs to be completed by March 15th with your local Farm Service Agency (FSA) office. We make this decision every year, and some years are harder than others.
This year, I hope you aren’t spending a lot of time analyzing this decision. When we look at the numbers, I really hope neither one of these pay out. I know these programs are floors established by FSA for your operation, but the floors are well below helping anyone break even.
Let’s look at examples. If you have PLC, payments are triggered when the national average (MYA) price falls below the effective reference price for a given crop. These effective reference prices are:
- Corn - $3.70
- Soybeans - $8.40
- Wheat - $5.50
While we don’t have an estimate for the 2023 crop yet, our current futures prices are trading well above these levels.
Looking at ARC, we have two options – county or individual. In the past the majority who have chosen ARC went with county-based coverage (ARC-Co). This coverage uses an Olympic average price and yield to establish the county’s expected revenue, then establishes a guarantee at 86% of that. While each county has a different yield, they use the same prices:
- Corn - $3.98
- Soybeans - $9.57
- Wheat - $5.50
Once again, these are much lower than our current futures prices available today.
When making this decision I feel it’s more important to look at how Supplemental Coverage Option (SCO) may fit in your operation first. If you want SCO, you must sign up for PLC on those acres. Like ARC-Co, SCO provides protection for you at 86% of expected county revenue, but uses different yield and prices. Your SCO policy would use current futures traded in February and a Risk Management Agency (RMA) expected yield. The yields I have looked at are close to the ARC yields, but the futures prices are much higher. At the time of this writing, our averages are:
- Corn - $5.96
- Soybeans - $13.72
- Spring wheat - $8.93
If you decided SCO is not for you, then let’s take a quick look at PLC vs ARC as a standalone risk management plan. With PLC we only have price as a factor, and ARC will use yield and price. While both have a very slim chance of paying, ARC at least has two factors affecting it making it a little more likely (still not a great chance) to pay for most crops.
One item to note is that our PLC prices can increase if 85% of the Olympic Average is higher than the established reference price. For our area, the only crop this has affected is large chickpeas and mustard seed. The large chickpeas effective reference price is now $0.2233, up from $0.2154. Mustard seed is also up to $0.2317 from $0.2015.
If you need help looking at SCO to assist with your farm bill decision, please contact one of our AgCountry insurance specialists who will be happy to do so.