Enrollment Period for ARC and PLC Now Open

The USDA has announced that eligible producers may now officially enroll in Agricultural Price Coverage (ARC) or Price Loss Coverage (PLC) programs for the 2014 and 2015 crop years.  Enrollment officially begins tomorrow, June 17, 2015 and runs through September 31, 2015.

Nationally, 96% of soybean farms, 91% of corn farms,  and 66% of wheat farms elected ARC-County coverage.  In Nebraska:

  • 53% of barley farms elected PLC, whereas 47% elected ARC-County;
  • 5% of corn farms elected PLC, whereas 95% elected ARC-County;
  • 31% of grain sorghum farms elected PLC, whereas 69% elected ARC-County;
  • 16% of oat farms elected PLC, whereas 84% elected ARC-County;
  • 3% of soybean farms elected PLC, whereas 97% elected ARC-County; and
  • 34% of wheat farms elected PLC, whereas 65% elected ARC-County.

The link also contains information about canola, dry peas, flax, lentils, large chickpeas, mustard, peanuts, safflower, small chickpeas, and sunflowers if those crops of are interest to you.

 

Deadline Extension For Updating Basis and Yield

A quick note that serves as an addendum to yesterday’s post.  The USDA has announced a one-time extension to update basis and yield due to the implementation of ARC and PLC safety-net programs.

The deadline to update basis and yield is extended from February 28, 2015 to March 31, 2015.  This is the same date for producers to elect between ARC and PLC coverage.

If no updates are made to basis and/or yield, the farm’s current base and yield will be used.  Additionally, if no election between PLC and ARC is made by March 31, 2015, the farm will automatically be enrolled for PLC coverage through the 2018 crop year  and no payments for the 2014 crop year will be made.

In short:  make the time to study the choices, use the online decision-tools and head over to your local FSA office with questions and to make elections if so desired.

ARC versus PLC decision required soon

As many readers of this blog are aware, there are looming deadlines for the ARC and PLC programs.  Landowners must decide whether to update their program payment yields and whether to reallocate their program base acreage by February 27, 2015.  Additionally, producers must decide between ARC and PLC coverage by March 31, 2015.

The latest issue of Cornhusker Economics discusses the above decisions from an economic standpoint that will likely be very helpful to Nebraska landowners and producers.  The article is well worth the read; below, I highlight some interesting bits of information but I cannot stress enough — read the entire article as it is worth your time.

First, yield updates.  Landowners can choose between keeping their current counter-cyclical payment yields or updating their payment yields based upon actual average yields per planted acre from 2008 to 2012.  Producers can choose between keeping their current payment yield or updating their payment yield on a crop-by-crop, farm-by-farm basis.

Next base acreage updates.  This is, as the article notes, an all-or-nothing decision.  The crux of the decision for landowners is, on a farm-by-farm basis, whether to keep current program base acreage or reallocating according to the average mix of planted and prevented-planted acres of program commodities from 2009 to 2012.

We then turn to the big decision: ARC versus PLC.  Note that it is the producer, not the landowner, who makes the ARC or PLC decision.  The decision is a one-time decision that is binding for the 2014 to 2018 crops years.  If no decision is made, the default is PLC coverage that cannot be changed at a later date.

The remainder of the article discusses the economic decision-making behind the choice of ARC and PLC.  The decision between ARC and PLC is dependent upon the program crops grown in your operation, projected prices for commodity crops, and your comfort with the possible outcomes.

Again, check out the article.  It provides a bevy of charts and graphs to explain the decision-making that producers and landowners must undertake if they wish to update yields and base acres, as well as the decision by producers between ARC and PLC.  And remember, the deadlines are looming so take the time to analyze the best path forward for you!

 

USDA releases decision-making tools for ARC and PLC coverage

The USDA has released two new decision tool to assist farmers in selecting ARC or PLC coverage.  The first decision tool is led by Texas A&M and the University of Missouri.  The second decision tool is from the University of Illinois.

The USDA also announced key dates farmers need to know as ARC and PLC are ushered in:

September 29, 2014 to February 27, 2015 — Land owners may visit their local FSA office to update yield history and/or reallocate base acres

November 17, 2014 to March 31, 2015 — Producers make a one-time election of either ARC or PLC for the 2014 to 2018 crop years

Mid-April 2015 through summer 2015 — Producers sign contracts for 2014 and 2015 crop year

October 2015 — Payments for 2014 crop year, if needed

 

Commodity programs update

As you likely know, there are many changes afoot in the commodity programs.  Direct payments and ACRE are being replaced by two new programs: price loss coverage (PLC) and agricultural risk coverage (ARC).  Note that ARC can be a county revenue program (county ARC) or an individual farm revenue program (individual ARC) and differences between the two will be discussed more fully below.

You have a one-time opportunity to make an election in 2014.  The election will cover the 2014 through 2018 crop years.  If an election is not made, a producer will be automatically enrolled in PLC.

This post will discuss some commonalities between the programs and then the differences.

Commonalities:

Base acres are used for PLC, county ARC, and individual ARC.  Producers will have a one-time opportunity to retain current base acres or reallocate their base acres based upon production from 2009 to 2012.  If reallocation is selected, base acres will be in proportion to the four-year average of acres planted to the covered commodity, including prevented planting acres.  However, reallocation cannot result in an overall increase in base acres.

Differences:

Price Loss Coverage:

Price Loss Coverage (PLC) is, at its heart, a price program.  If an election is not made, a producer will automatically be enrolled in PLC.

PLC is coverage on a crop-by-crop basis.  Payments will be made if the U.S. average market price for the crop year is less than the crop’s reference price.  Relevant reference prices include:

  • Wheat: $5.50/bushel
  • Corn: $3.70/bushel
  • Grain Sorghum: $3.95/bushel
  • Barley: $4.95/bushel
  • Oats: $2.40/bushel
  • Soybeans: $8.40/bushel

Payments are 85% of the farm’s base acres for the covered commodity.  Finally, the payment yield may be updated to 90% of the farm’s average planted yield over the 2008 to 2012 crop years.

County ARC:

Like PLC, county ARC is on a crop-by-crop basis.  Payments occur when the actual crop revenue is below the ARC revenue guarantee for a crop year.  The revenue guarantee is calculated by multiplying the average county yield for the commodity in the current crop year by the higher of the marketing year average for the commodity or the commodity’s loan rate.

Payments are made on 85% of base acres.   How is the revenue guarantee calculated?  First, the county Olympic average for the past five crop years.  This means the high and low averages for the past five years are dropped and the remaining county yield averages for the past five years are averaged.  If a crop yield is below 70% of the transitional yield for crop insurance, the county yield for that crop year is replaced with 70% of the transitional yield.

Second, the 5-year Olympic average for national marketing year average prices for the commodity is made.  If any of the five years has a national price average below the PLC reference price, the reference price is used in calculating the 5-year Olympic average.

Third, the 5-year county Olympic average of county yields is multiplied by the 5-year national Olympic average to determine benchmark revenue.  The County ARC revenue guarantee then equals 86 percent of the calculated benchmark revenue.  If actual revenue falls below the guarantee, County ARC triggers a payment rate equal to the difference.  The payment rate is capped at 10 percent of the benchmark, setting coverage from 86 percent to 76 percent of the benchmark county revenue.

Individual ARC:

Unlike PLC and county ARC, individual ARC applies to the entire farm and not on a crop-to-crop basis.  As such, individual ARC is based upon the average covered commodity experience on the farm.

Payments are made when actual revenue falls below the revenue guarantee.  However, the payment is for 65% of the sum of the farm’s total base acres.

How are payments calculated?  Actual revenue uses a weighted average of the actual revenues for each covered commodity.  The weights used to compute the average reflect the amount of acreage planted to each crop in the given crop year.  Actual revenue for each individual commodity equals the yield for that commodity multiplied by the price, which is the higher of the commodity’s marketing year average and loan rate.

Benchmark revenue is calculated using the revenue for each commodity for the 5 most recent crop years; the revenue is calculated by multiplying the yield and national average price for each year.  Just like County ARC, low yields in individual years are replaced by 70 percent of the transitional yield and the PLC reference price will replace any actual prices falling below that level.

Once the revenue for each year is calculated, the 5-year Olympic average of that commodity’s revenues is calculated. The Individual ARC Benchmark Revenue then uses the crop-specific Olympic averages to compute a weighted average whole-farm revenue, where the weights are based on planted acreage for each commodity.  The Individual ARC Revenue Guarantee is set at 86 percent of that benchmark revenue.  Like county ARC, the payment rate is the difference between the revenue guarantee and the actual revenue, but capped at 10 percent of the benchmark revenue resulting in coverage between 86 percent and 76 percent of the benchmark.

Other Issues:

Payment limitations remain for commodity payments.  For a person or entity, the payment limitation is $125,000.  For a person and spouse, the payment limitation is $250,000.  Additionally, the USDA is charged with drafting new regulations for “active engagement in farming”.