Source: Gary Schnitkey, Krista Swanson, Nick Paulson, Jonathan Coppess, Univ. of Illinois; Carl Zulauf, OSU
The Farm Service Agency recently released 2018 payment rates for both Agricultural Risk Coverage at the County Level (ARC-CO) and Price Loss Coverage (PLC). With this release, yearly payments for 2014 to 2018 are available so that average payments from ARC-CO and PLC can be compared over the entire length of the 2014 Farm Bill. These comparisons are made in this article across counties for corn, soybeans, and wheat. For corn, ARC-CO paid more than PLC for many counties in the U.S., with notable exceptions in southern Iowa, Missouri, and central Illinois. By default, ARC-CO made higher payments for soybeans because PLC did not make payments. For wheat, most counties had higher PLC payments.
Under the 2014 Farm Bill, farmers and land owners had a one-time decision to choose between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) commodity title programs for the years from 2014 to 2018. While an individual coverage option was available under ARC, most choose ARC at the County level (ARC-CO).
In this article, we determine whether ARC-CO or PLC made the largest payments across corn, soybeans, and wheat for all U.S. counties with available data. We do this by first calculating average ARC-CO payments and average PLC payments for each county for which complete data exist. These are average payments for the five years from 2014 through 2018. Then, ARC-CO-Minus-PLC payments are calculated for each county. An ARC-CO-minus-PLC payment for a county/crop combination equals the average ARC-CO payment for that county minus average PLC payment for that county. A positive ARC-CO-minus-PLC payment indicates that ARC-CO made larger payments than PLC. A negative value indicates that PLC made a higher average payment.
Several notes about the above calculation:
- ARC-CO is a county revenue program that makes payments when county revenue is below a guarantee. Every farm in a county receives the same ARC-CO payment per base acre.
- PLC is a price program that makes payments when the Market Year Average (MYA) price is below the reference price. Each farm in a county has a PLC yield. When the MYA price was below the reference price, the farm’s PLC yield was multiplied by the difference between the MYA price and reference price when arriving at a payment. Farms with higher PLC yields will receive higher payments. Averages presented in this article use the PLC yield equal to the average county yield from 2008 through 2012 multiplied by 90%, a yield updating option under the 2014 Farm Bill. This procedure results in PLC yields close to the county average.
- All values are stated on a per base acre basis (payment acres = 85% of base acres). A 6.8% sequester is deducted from all payments.