ARC and PLC Reauthorized with Changes to Calculations

ARC and PLCARC and PLC Reauthorized with Changes to CalculationsThe bill reauthorizes the two agricultural business income entitlement programs created in the 2014 farm bill.

Agriculture,  | Quick Take
Apr 13, 2018  | 4 min read | Print Article

SEC. 1116 PRICE LOSS COVERAGE AND SECTION 1117 AGRICULTURE RISK COVERAGE

The bill reauthorizes the two agricultural business income entitlement programs created in the 2014 farm bill. Producers with base acreage, that is land that for the last few farm bills has been deemed eligible for commodity program subsidies and which is still in agricultural production, including haying and grazing, once again get to choose to enroll in ARC or PLC for each tract of farmland they control. This one-time election is binding for 2019-2023 (the years that ARC/PLC are re-authorized). There is no fee charged for an agricultural business to elect to participate in ARC or PLC.  

PLC is a target price program that makes payments to agricultural businesses when the national average price of a particular crop falls below a price set in the Farm Bill. Payments under PLC are calculated by multiplying the difference between the national average price and the reference price times the average yield times 85 percent of eligible base acres times.

ARC is a revenue guarantee program. Payments are triggered when calculated “actual revenue” for a covered commodity falls short of a guaranteed level. Actual revenue for a county is calculated by multiplying the average yield in a county by the national average price. The revenue guarantee is 86 percent of a benchmark level. The benchmark is the 5 year Olympic average county yield times the 5 year Olympic average national price. Payments can’t exceed 10 percent of the benchmark revenue.

The bill does not reauthorize the ARC-Individual option. Under this program the revenue from all covered commodities on a farm was compared to a national benchmark revenue. There was very little participation in ARC-IC.

Besides the potential significant increase in reference prices and the addition of cotton back into ARC and PLC, the biggest changes to these entitlements appears to be in calculating the average county yield for a crop. Currently, average county yields are obtained through an annual survey conducted by the National Agricultural Statistics Service and sent to farming and ranching businesses. Low response rates in some counties and disparate experiences between counties have led to ARC payments occurring in one county with adjoining counties receiving much lower or higher payments or even no payment at all. This “disparate outcome” has been seen as a problem. The 2018 Farm Bill allows the Secretary of Agriculture to replace the NASS derived benchmark county yield with yield data obtained from crop insurance contracts or, if that data is not sufficient, “other sources of yield information, as determined by the Secretary,” or “the yield history of representative farms in the State, region, or crop reporting district, as determined by the Secretary”. In other words, work the equation until you find the data source that gets agricultural businesses the fattest check.

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Common Sense Savings in Crop Insurance Program

The bill also requires separate actual revenue and revenue guarantees for a crop when it is irrigated and when it is not irrigated. That makes sense seeing as, for example, an irrigated corn field is much more likely to produce an average yield during a drought than a non-irrigated field of corn. Triumph of common sense.

 

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