Farmers have short window to sign up for ARC, PLC in 2021
Here’s an early New Year’s resolution suggestion:
After the holidays, contact your Farm Service Agency office about making an election of farm programs for your crop base acres in 2021. You’ll be making a choice, or choices, between Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). ARC has two versions, a little-used individual-farm-level ARC-IC and the widely used ARC-CO, which is based on county-level revenue.
Even if you don’t change anything, you’ll still need to enroll in the farm program for that crop year or you won’t be eligible for payments.
The March 15 deadline could sneak up on you.
“This is the first time ever we’ve had such a short window,” says Kevin McClure, chief agriculture program specialist at the Iowa state office of the Farm Service Agency (FSA).
Sign-up began last October, but only a tenth of producers had made an election by year’s end, McClure says.
“That’s why we’re trying to get the ball rolling,” says McClure. Although his agency has been functioning well during the COVID-19 pandemic, the process won’t be as easy as just driving over to your local FSA office and getting help from the staff.
“What we’ve got with COVID, the office doors are locked to the public but we’re still functioning and open for business,” McClure says.
That means you can sign up either online or through email – the most widely used approach. After calling the office, and FSA staffer can email you the forms you need to sign. You’ll have to print them, sign them, and scan the signed copies to email back to the office.
“That scanned signature is just as good as any signature in the office,” McClure says.
So far, this process has worked well, with few computer problems for FSA, he adds. “The counties have just done an outstanding job of working with producers,” he says.
However, “there’s always the potential for computer issues,” he says, adding another reason not to crowd the deadline.
USDA moved both the enrollment and election deadline up this year to coincide with the March 15 deadline for making changes in crop insurance coverage, McClure says.
Under the 2018 Farm Bill, the first election between ARC and PLC began in the fall of 2019 and was for two crop years — both 2019 and 2020. Even with 2020 program choices locked in, you still had to enroll by last June 30 or you wouldn’t be eligible for 2020 crop payments.
Any advantages you had in 2019 for trying to outguess potential payments from PLC or ARC are gone. For 2019 and 2020 programs you had until mid-March, 2020, to make elections. That meant that for 2019 crops, at least, producers were well into the marketing year used to determine prices for calculating potential PLC and ARC payments.
That won’t be the case for the 2021 crop year, says Steve Johnson, Iowa State University Extension retired farm management specialist.
The first USDA projections of 2021-22 marketing year average cash prices won’t be out until the May Supply and Demand report — well after the March 15 election deadline. The final marketing year average cash prices won’t be known until the fall of 2022.
With that much uncertainty, there’s not much point in overstudying your options.
“I think this might be the easiest ARC-PLC decision in recent years,” Johnson says.
A quick review of both programs is in order. PLC is pretty straightforward. If the national average marketing year cash price falls below a USDA “effective reference price” for the program crop you’ve chosen, you get a payment. PLC is offered on more than 20 commodities. Key reference prices are:
Corn - $3.70 a bushel
Soybeans - $8.40 a bushel
Wheat - $5.50 a bushel
Last fall, the 2019 marketing year price for corn came in at $3.56 per bushel. So producers who elected PLC on corn base acres for 2019 got 14¢ a bushel.
ARC is a revenue-based safety net program. The most used version is ARC-County (ARC-CO). Payments are triggered if the actual revenue for a county where the farm’s base is located falls below a benchmark revenue guarantee. ARC is similar to revenue protection crop insurance, except for not getting paid until a year after harvest, the same as with PLC payments. However, the way ARC is calculated differs a lot from crop insurance.
Figuring ARC-CO starts with a county-level benchmark revenue. That’s the five-year Olympic average of the county’s yield multiplied by the five-year Olympic average of the national marketing year average cash price. (The Olympic average throws out the high and low years and averages the other three.) Then you multiply that revenue by 86% to get your county’s benchmark guarantee. If your county’s actual average revenue falls below that guarantee, ARC-CO triggers a payment.
ISU’s Steve Johnson thinks it’s likely that the derecho windstorm and drought conditions last summer will trigger 2020 ARC payments for the few farms with corn base acres in ARC-CO. He expects no PLC payments for corn and soybeans in 2020, with national average cash prices above reference prices.
For 2021, choosing ARC or PLC is a process of elimination – eliminating PLC if market prices seem too far above the Farm Bill’s reference prices.
USDA isn’t yet projecting 2021-22 marketing year cash price averages other than some dated baseline prices, but private analysts are. They have corn at $4.00 a bushel and soybeans at $10.25 a bushel.
Those bean prices are far above the $8.40 soybean reference price, so Johnson would opt for ARC-CO on soybean base acres to help protect against potential revenue declines.
“I think beans are a slam dunk,” he says. The choice for corn isn’t so clear, but it looks like corn base acres wouldn’t trigger a PLC payment, either, with a $3.70 reference price.
You could split your election, choosing ARC for soybeans and PLC for corn base acres, Johnson says. Or, if you’re going to elect on more than one farm number with corn base acres, you might put half of your farms in PLC and half in ARC.