ARC vs. PLC - What's Right For You?
January 27, 2020
Following the implementation of the 2018 Farm Bill, multiple decisions must be made to choose the appropriate payment structure for your crop insurance policies.
Choose which framework is right for you – Agricultural Risk Coverage at the county level (ARC-CO), Agricultural Risk Coverage at the individual level (ARC-IC), or Price Loss Coverage (PLC) – by March 15 for 2019 coverage and June 30 for 2020 coverage. Both 2019 and 2020 coverage must be identical and can be elected at the same time. Beginning in 2021, elections can be made annually through the expiration of the current Farm Bill in 2023.
When first introduced in the 2014 Farm Bill, farmers had to make a five-year decision, and many chose ARC-CO following projections from industry experts that it would pay out faster than PLC. This yielded success for some farm businesses, but left others disappointed with the results. A quick check of the USDA website will display the results of the two programs in your county and provide context for your decision.
ARC uses two factors in determination of payments – yield and price. ARC-CO revenue guarantees are established with an Olympic average of RMA county yields and national commodity prices. Olympic averages remove outlier years from the calculation. ARC-IC uses each farmer’s actual yields, rather than the county average.
PLC only uses price to determine payments. If the covered commodity’s national marketing year average price falls below the crop’s respective reference price, farmers receive a payment.
If any marketing year’s average price is below the PLC reference price, the reference price is substituted into the indemnity calculation. For example, if a year’s average was $3.36 and the reference price was $3.70, $3.70 would be used instead of $3.36.
2020 Program Decisions
Elections for PLC and ARC-CO can be made on a crop-by-crop and farm serial number basis. Farmers may decide to diversify their coverage types, choosing PLC for one crop and ARC-CO for another. If electing ARC-IC, the program applies to all covered commodity base acres on a farm.
If not specifically elected by March 15, 2020, your 2019 and 2020 coverage will default to a continuation of the program selected for the 2014 Farm Bill. Additionally, farmers will not be eligible for a 2019 payment.
Yield Submission in 2020
Farmers will have a one-time opportunity to potentially raise their guarantee by updating PLC program yields in 2020, regardless of program election. Updated yields will use the average yield per planted acre from 2013-2017. Landowners must sign-off on submitted yields.
Annual Decisions Beginning in 2021
Beginning in 2021, farmers can choose between ARC-CO, ARC-IC, and PLC annually through 2023.
Although more decisions must be made, the added flexibility allows farmers to strategically select the option for their operation’s bottom line. Contact your FCI crop insurance agent to discuss how each program could work in your farm’s risk management plan.