2021 is the first year in which producers will be able to choose ARC or PLC on an annual basis. Today, a tool that will help producers with the fast-approaching decision.
Dates and Deadlines
3/9/2021 – March WASDE
3/19/2021 – Cattle on Feed
3/23/2021 – Perryton Farmland Leasing Workshop
4/9/2021 – *New* QLA Application Deadline4/13,15,20,22/2021 – Developing a Drought Management Plan for the Ranch Webinar Series
What I’m Reading
Cotton Spin: Keeping up with the Joneses – Southwest Farm Press
Congress again looks to improve cattle market woes – Feedstuffs
I’ve heard the joke recently that, “The only thing worse than not getting to choose between ARC and PLC each year is getting to choose ARC and PLC each year.” For the uninitiated, this is a reference to the provision that allows producers to choose between ARC and PLC on an annual basis, where previously the choice extended the life of a given farm bill. The deadline to make this now annual choice is March 15.
Normally, this is the part of the blog where I would break down a management decision on a case by case basis, discuss the merits of each program, and some potential outcomes. However, in such a diverse area with such complicated base acreage makeup, that breakdown really isn’t possible in a short-form/quick read blog publication. Instead, today I’ll briefly highlight one or two things to think about, and provide access to a couple of tools that will help you make the ARC/PLC choice yourself.
Quick Policy Reminders
As a brief refresher, ARC and PLC were developed under the 2014 Farm Bill as risk management tools for producers under the federal farm safety net.
Historical base acres drive the payments in the ARC program. ARC-County payments are provided when actual county crop revenue is less than that commodities guarantee for the covered crop.
PLC payments are triggered when the national cash price of a covered crop (determined by USDA) is less than the effective reference price for that commodity. The effective references prices are included in the statute.
AFPC provides access to a free tool that allows producers to evaluate the expected outcomes of enrollment in either ARC or PLC. Previously, we only interacted with this tool every few years. Now that the decision is annual, adding your data and working with the tool will save you time each year. If you haven’t used it before, I highly recommend checking it out. The link above directs you to the online tool. The faculty and staff of AFPC are willing to help with data entry and interpreting the results. You can reach them at 979.845.5913.
The Decision Tool is designed to help with the ARC-CO/PLC decision. There is also an ARC-Individual Coverage program available with different provisions. The program is more complex than ARC-CO. The good news is the folks at AFPC have also developed an ARC-IC decision aid, which you can find at their website.
STAX vs. ARC/PLC
For the last several years the questions about ARC/PLC and STAX rolled in regularly. The overlap can be a bit confusing if you are unfamiliar with the concept of base. Dr. Bart Fischer recently provided an example during Master Marketer that I think illuminates the possible combinations of ARC/PLC and STAX.
In his scenario, a producer may plant 150 acres of cotton on a farm with base made up of 50 acres of wheat base, 50 acres of peanut base, and 40 acres of seed cotton base, and 10 acres of unassigned base. One policy option here is that the producer could purchase STAX on 150 acres of cotton AND enroll all 100 acres of wheat and peanut base in ARC/PLC.
Note, the provision here is that a farm shall not be eligible for STAX for upland cotton for a crop year for which the farm is enrolled in coverage for seed cotton under PLC or ARC. Takeaway; you cannot enroll seed cotton base acres in ARC/PLC and STAX, but you may take out STAX coverage and enroll in ARC/PLC on your base acres of other crops.
Safety Net Rules of Thumb
During his presentation at Master Marketer, Dr. Fischer also provided some rules of thumb for this year’s safety net decisions. As the policy specialist and co-director of AFPC, I thought it valuable to share his thoughts on the matter.
- ARC and PLC are less likely to pay. That’s okay! Most producers tell us they would rather get their income from the market rather than the government anyway. The silver lining: you now get to make an ARC/PLC election annually.
- Rather than focusing on expected ARC/PLC payments (in a situation where it doesn’t look like either will trigger), consider instead where you are most vulnerable. Is it lower prices due to trade disruptions or slow economic recovery? Is it lower yields due to persistent drought?
- Talk to your crop insurance agent to make sure you’ve evaluated all yield enhancement options (e.g. Yield Exclusion) and unit structures.
- With current price elections on crop insurance, perhaps now is the time to focus more on area-wide tools like STAX, SCO, and ECO.
- You can have STAX on a farm as long as the seed cotton base on the farm is not enrolled in ARC/PLC.
- SCO for a crop is available on a farm as long as it’s not enrolled in ARC.
- You can purchase ECO on the farm regardless of ARC/PLC enrollment.
- At a minimum, on farms without seed cotton base, be sure to take a close look at area-wide policies like STAX.
- If your APH is relatively higher than the county average yields, then be sure to compare STAX against both SCO and ECO.