It’s time for ARC and PLC signups. The deadline is March 16, a week from this upcoming Monday. Today we review your policy options and a tool that will help you analyze the decision.
Upcoming Dates:
March 9 – Corn Marketing Meeting, Follett Methodist Church, 1:30 pm
March 10 – Importance of Estate Planning, Gray County
March 10 – WASDE, ERS
March 10 – Crop Production, NASS
March 16 – ARC/PLC Sign Up Deadline
March 24 – Organic Workshop, Canyon
March 31 – Ogallala Aquifer Summit
Farm Bill Program Signups
March 16 is the deadline to sign up for the 2019 and 2020 crop year Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. The ARC and PLC programs were authorized by the 2014 and 2018 Farm Bills, and provide risk protection to producers. The Agriculture and Food Policy Center, part of Texas A&M AgriLife Extension, has a tool that will analyze the outcomes of each program using producer-specific information, here.
The ARC-CO program provides income support tied to historical base acres, not current production, of covered commodities. ARC-CO payments are issued when the actual county crop revenue of a covered commodity is less than the ARC-CO guarantee for the covered commodity. PLC program payments are issued when the effective price of a covered commodity is less than the respective reference price for that commodity. The effective price equals the higher of the market year average price (MYA) or the national average loan rate for the covered commodity.
This year, producers have the opportunity to make two significant decisions; (1) to update PLC payment yield and (2) to choose between the ARC and PLC programs.
PLC Payment Yield Update
A payment yield provides producers the opportunity to update yield to a level that better reflects their recent production history, and therefore provides better risk protection. Yield updates are calculated through a specific formula, which differs slightly by crop.
Updated Yield = 90% X Average 2013-2017 yield per planted acre X Yield Update Factor
Each producer’s 2013-2017 yield per planted acre will differ based on their production. Yield’s are available on crop insurance documents or through the FSA. The yield update factor is a nationally set value that differs by crop.
Yield Update Factor = (2008-2012 National average yield per planted acre)/(2013-2017 National average yield per planted acre)
The yield update factor is ‘cupped’ and ‘capped’ i.e. has a floor and ceiling of 0.9 and 1. The value of the ratio cannot fall outside of the 0.9-1 range. Table 1 is a list of the yield update factors for select commodities; the final value is the one listed in the Cup/Cap column.
Table 1. Yield Update Factors for Select Commodities
So how would you calculate a yield update? Let’s go through an example. Let’s assume your corn yields for 2013-2017 were 175, 180, 165, 171, and 166 bu/acre. Your average yield from 2013-2017 would therefore be 171.4 bu/acre. Keep in mind that if you did not plant corn one year that yield would not be included, and the average would be a division by four instead of five years. Using this average yield of 171.4 bu/acre, your yield update calculation would be:
Updated Yield = 90% X 171.4 bu/acre X .9 = 138.8 bu/acre
If your 2014 Farm Bill payment yield was greater than 138.8 bu/acre, you’d be better off keeping your 2014 Farm Bill program yield. However, if your 2014 Farm Bill payment yield was less than 138.8 bu/acre a yield update would provide a higher net return from the PLC program. The AFPC decision aid has a tool embedded that will help you through the yield update decision. All you need is your historic yield and irrigation practice. However, keep in mind that this yield update only applies to the 2020 crop year forward. Your 2019 yield will be your 2014 Farm Bill payment yield.
ARC/PLC Decision
There were some administrative changes to ARC and PLC from 2014 to 2018. First, the decision between ARC and PLC doesn’t cover the life of the farm bill. Instead, this signup will cover the 2019-2020 crop years. Afterwards, each crop year will require a new sign up. Remember, the 2019 yield and 2020 yield could be different based on the update decision, so it is possible that you could have two different payment yields for PLC in 2019 and 2020. The Statutory Reference Price can also increase up to 15%. If 85% of the previous 5-year Olympic average of prices is greater than the Statutory Reference Price (SRP), the SRP can change. This new price is called the Effective Reference Price. There were also administrative changes to ARC. Payments for a farm number are now going to be based on the farm’s physical location rather than the farm’s administrative county.
The decision between ARC and PLC requires your input of base acres, yield (which will carry over from the yield update tool), and irrigation percentage. The decision aid will incorporate these data points and provide a summation of potential payments over 2019 and 2020. Users also have the ability to accept forecast prices, or to try their own prices. Changing prices to a high level and low level will provide a range of outcomes. For instance, if the decision aid indicates that PLC provides the highest net returns under both $3/bu and $4.50/bu corn, there is a high level of confidence that PLC is the best options over a large range of prices.
If you would like help with the decision aid, feel free to contact me at benavidezjustin@tamu.edu, DeDe Jones at dljones@ag.tamu.edu, or call the Agriculture & Food Policy Center at 979.845.5913
Chart Challenge
This is not so much a chart challenge, as a map mystery. However, if you look closely there is a clue that helps identify the crop, if not the actual statistic mapped. Good luck!
