Last week USDA announced that farmers now can enroll in the Agriculture Risk Coverage and Price Loss Coverage safety net programs for the 2020 crop year, in addition to 2019. Meanwhile, producers in the U.S. who enrolled farms for the 2018 crop year have started receiving more than $1.5 billion for covered commodities for which payments were triggered under such programs.

“These two programs provide income support to help producers manage the ups and downs in revenues and prices,” says Richard Fordyce, administrator of USDA’s Farm Service Agency. “We encourage producers to consider enrolling in one of these programs.”

ARC provides income support payments on historical base acres when actual crop revenue declines below a specific level. PLC provides support payments when the effective price falls below its reference point.

The 2018 Farm Bill reauthorized and updated both programs. Iowa State University Extension in cooperation with Iowa FSA will hold meetings for farmers to attend after harvest, explaining more details on these programs to help individual farmers figure out which program may be best for them in 2019 and 2020.

Deadlines for 2019, 2020 programs

Sign-up for the 2019 crop year closes March 15, and the 2020 crop year sign-up closes June 30. Producers who have not yet enrolled for 2019 can enroll for both 2019 and 2020 during the same visit to an FSA county office.

ARC and PLC have options for the farm operator who is actively farming the land, as well as the owner of the land, says Amanda DeJong, state executive director for FSA in Iowa. Farm owners also have a one-time opportunity to update PLC payment yields beginning with crop year 2020. If the farm owner and producer visit the FSA county office together, FSA can also update yield information during that visit.

Covered commodities include barley, canola, large and small chickpeas, corn, crambe, flaxseed, grain sorghum, lentils, mustard seed, oats, peanuts, dry peas, rapeseed, long grain rice, medium- and short-grain rice, safflower seed, seed cotton, sesame, soybeans, sunflower seed, and wheat.

FSA began processing payments last week for 2018 ARC-County (ARC-CO) and PLC on covered commodities that met payment triggers on enrolled farms in the 2018 crop year. In addition to the $1.5 billion now in process, FSA anticipates it will issue another $1 billion in November once USDA’s National Ag Statistics Service publishes additional commodity prices for the 2018 crop.

Producers who had 2018 covered commodities enrolled in ARC-CO can visit fsa.usda.gov/arc-plc for payment rates applicable to their county and each covered commodity. For farms and covered commodities enrolled in 2018 PLC, the following crops met payment triggers: barley, canola, corn, dry peas, grain sorghum, lentils, peanuts and wheat. Oats and soybeans did not meet 2018 PLC payment triggers.

Changes in program

ISU Extension farm management specialist Steve Johnson has interviewed FSA personnel and provides the following explanation of the changes in the ARC and PLC programs and how this will work for 2019 and 2020.

Under the 2014 Farm Bill, payments for ARC-CO declined over time for significant crops as prices fell after the 2013 crop year. Payments for PLC, which were nonexistent for corn and soybeans at the beginning of the 2014 and 2015, increased during the latter part of the farm bill. Thus, Congress added the option for the 2018 Farm Bill for producers to switch programs annually, starting in 2021.

Congress also changed the program by moving to trend-adjusted yields reported by producers to crop insurance agents. This USDA Risk Management Agency data will be used for ARC-CO. A provision was also provided that allows FSA to divide some of the largest counties in the country into smaller units for determining county trend-adjusted yields.

Another program change is if prices move higher over the next few years, then the reference price for ARC and PLC can increase as well. Reference prices have changed to use a five-year Olympic average that would allow reference prices to grow as much as 15% for commodity crops. Current reference prices for corn ($3.70 a bushel), soybeans ($8.40) and wheat ($5.50), and reference prices for other commodities remain the same as the 2014 Farm Bill.

USDA reminds producers that enrolling in ARC and PLC can affect eligibility for the Supplemental Coverage Option insurance program. Producers who sign up for ARC are ineligible for SCO on those planted acres, but producers who enroll in PLC can still buy SCO policies through their crop insurance agent.

Determining potential payments

The key to making the ARC or PLC decision will be the final Marketing Year Average (MYA) national cash price. The University of Missouri Food & Agricultural Policy Institute released its 2019 Baseline in August that provides a framework for evaluating the choice to elect and enroll in PLC for 2019 and 2020.

Its 2019-20 MYA national cash price for corn is $3.59 per bushel and $8.43 per bushel for soybeans, respectively. These final prices won’t be known until late September 2020, and potential payments would then be made in October 2020 on the 2019 crop.

If realized, this MYA national cash price for corn would fall below the $3.70 per bushel reference price. However, the $8.43 per bushel is higher than the $8.40 reference price, and that would eliminate a PLC payment on soybeans in 2019.

Now, look at the projected prices for the 2020-21 marketing year. Based on assumptions for a slight increase in both corn and soybean planted acres and trendline yields, the national cash prices would decline to $3.39 per bushel for corn and $7.94 per bushel for soybeans. These final prices, if realized, would trigger potential PLC payments that would then be made in October 2021.

Decision tools available

To help producers decide the best program for their acres, USDA has partnered with the University of Illinois and Texas A&M University to develop a pair of web-based tools. Also, Iowa State University Extension will be developing an Iowa ARC-PLC Payment Analyzer and conducting up to 65 public meetings with county FSA staff during November and December.