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ARC and PLC 2021 decision deadline of March 15 approaches

by Megan Roberts, Extension educator

If you have not already made your 2021 Farm Bill Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) decision, now is the time to sign-up. U.S. Department of Agriculture’s (USDA) Farm Service Agency (FSA) is currently accepting applications for ARC/PLC enrollment through March 15, 2021. The 2018 Farm Bill allows producers to make annual changes to their ARC/PLC enrollment beginning with crop year 2021. Producers can elect coverage and enroll in crop-by-crop ARC-County or PLC, or ARC-Individual for the entire farm. Although election changes for 2021 are optional, enrollment (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.

The ARC and PLC programs provide financial protections to farmers from substantial drops in crop prices or revenues and are vital economic safety nets for most American farms. Covered commodities with established base acres are eligible for participation in ARC and PLC sign-up. The 22 covered commodities nationwide include wheat, oats, barley, corn, grain sorghum, rice, soybeans, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, seed cotton, dry peas, lentils, small chickpeas, large chickpeas, and peanuts. Farm Service Agency recognizes 13 covered commodities in Minnesota. PLC and ARC-CO (county) cover 85 percent of base acres, while ARC-IC (individual) covers only 65 percent of base acres. 

If you are looking for a virtual refresher on Farm Bill program specifics and decision factors, University of Minnesota Extension partnered with Minnesota FSA to hold a webinar on ARC and PLC on January 12. A recording of the webinar, along with all materials and county specific calculations comparing PLC and ARC-CO for corn, beans, and wheat, is available on our Extension Farm Bill website. To view the webinar recording, make sure to scroll down and click on the tab that says "January 21 presentations" and hit play on the embedded YouTube or view directly on YouTube. The webinar highlights program information, reviews coverage options, summarizes 2019 payments by county, and walks farmers through projected 2021 yield and price scenarios. 

ARC-CO and PLC scenarios for your county

Many farmers find it helpful to look at information specific to their county when making their decision. For each Minnesota county with FSA data available, the University of Minnesota has prepared a comparison graph to compare and contrast possible payments based on potential 2021 prices and yields. You can select your county from the list of files available here. Most counties have a corn, soybean and wheat graph posted as a three page PDF. 

The first thing you will notice at the top of the county graph is the historical average ARC-CO yield and an estimated typical PLC yield. Each farm has their own individual PLC yield for each commodity based on actual production history (APH) multiplied by 90 percent and multiplied again by a PLC update factor. We estimated PLC yield by taking the county average yield and multiplying by the PLC factors. The PLC yields in this graph are simply estimates and may not match your farm specific PLC yields.

The next thing to notice is the far left column labeled MYA Price. MYA is marketing year average. Prices to determine MYA for 2021 will be collected between September 1, 2021 to August 31, 2022 for corn and soybeans. For wheat, the MYA for 2021 will be collected June 1, 2021 to May 31, 2022. MYA is based on national cash crop prices and is weighted by monthly sales volume.

The red line in the MYA column shows the effective reference price for PLC, meaning any MYA price below that will begin triggering PLC payments. PLC payments per acre are highlighted yellow and enclosed in a red box. If the 2021 MYA price doesn't drop below the reference, no PLC payments will be issued regardless of low yields.  For example, unless soybeans drop below $8.40 for the 2021 MYA, no PLC payments will be issued. 

The green highlighted cells show projected combinations of county yield and MYA prices that produce ARC-CO payments. The average county yield column for ARC-CO shows the MYA needed for a payment trigger when ARC-CO yield is average. In contrast to PLC, ARC-CO may trigger payments even when MYA prices are above the reference price. For corn and soybeans, this occurs when yield drops below normal. For example, in Blue Earth County a 43 bushel average county yield in soybeans triggers an ARC-CO payment at the current USDA 2021 price estimate of $11.15 per bushel.

At average yields, prices must fall significantly lower than current projected prices to trigger ARC-CO payments under corn and soybeans. For wheat, current price projections are below the price needed to trigger both ARC-CO and PLC. The payment using the highest price possible while still triggering ARC-CO when yield is average is enclosed in a red box. 

As referenced above, the far right text on the graph lists the estimated yield that would produce an ARC-CO payment at current USDA Worldwide Agricultural Supply and Demand Estimate (WASDE) outlook prices as of January 12, 2021. On February 9, 2021, the USDA updated WASDE corn price up 10 cents to $4.30 per bushel, held soybean price stagnant at $11.15 per bushel, and updated wheat price up 15 cents to $5.00 per bushel. As our sensitivity graphs were hypothetical to begin with, we are leaving the January estimates in the graphs. Remember, as MYA prices increase, the average county wide yield needed to trigger an ARC-CO payment decreases. Therefore, for corn and wheat if 2021 MYA prices are higher as the WASDE now predicts, the average yield to trigger a payment would be slightly lower than listed on our graphs. Remember, PLC payment triggers are never dependent on yield in the year of election.

These sensitivity graphs are visual representations of price estimates. Payments, if triggered, would be issued after October 1, 2022. Prices may change significantly over the next year and a half. When looking at the graphs you may wish to ask yourself, do you think a drop in yield is more important to protect (i.e. pick ARC-CO) or a significant drop in price (i.e. pick PLC)? There is no right or wrong answer. Each farmer's approach to risk management is a little different, and your ARC/PLC approach may vary from farm number to farm number and commodity to commodity. It's about determining what works best for you.

A final consideration is whether you wish to participate in Supplemental Coverage Option (SCO) crop insurance via Risk Management Agency. SCO is sold as a supplemental crop insurance product via local crop insurance agents and is not a product of FSA. However, it ties to your Farm Bill ARC/PLC decision. SCO is not available under ARC-CO or ARC-IC. In you wish to purchase SCO, you must pick PLC on those acres.

Summary

To learn more about ARC/PLC, you can also visit farmers.gov/arc-plc. The University of Illinois FarmDoc program has several decision tools, including a helpful What If Calculator.  

Although it may be tempting to wait, FSA encourages producers to sign-up now. If a year from now you don't like you 2021 decision, don't worry. You will get the opportunity to make new PLC or ARC election in 2022 and 2023!

Note: This blog post contains information and direct text composed and provided by FSA. Thank you to Daniel Mahoney, Outreach and Public Affairs Coordinator for the Minnesota State Office, USDA - Farm Service Agency. We greatly appreciate his assistance in providing Farm Bill education to Minnesota farmers. For questions about the FSA portion of the webinar or any other FSA specific information, you may contact Daniel at daniel.mahoney@usda.gov or 651-602-7710. To make your program election and enrollment, contact your local USDA Service Center

The county-specific ARC vs PLC graphs were made with assistance from Rachel Purdy, Extension Economist, Center for Farm Financial Management. Thank you to Rachel for her expertise and assistance. 

This post is are educational in nature and is not intended to project 2021 payments.


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