Ag Policy Blog

Election options and sign up continues for the 2022 Agricultural Risk Coverage/Price Loss Coverage (ARC/PLC) options but a University of Nebraska agricultural economist notes it would take a hard fall in prices or yield for either program to kick in for corn or soybean farmers.

Brad Lubben, an Extension specialist and associate professor, held a webinar Thursday on farm program election and sign up, highlighting some of the ARC/PLC dynamics heading into the 2022 crop year.

"We're talking specifically about farm programs that fit under that legal component, but they also obviously have very important consideration for us in terms of managing production risk, market risk and financial risk as well," Lubben said.

Looking specifically at ARC/PLC, farmers in 2021 started getting the choice to change their farm enrollment annually in the programs. It requires some forward thinking because producers are basically looking at which option has the greater likelihood of paying at the end of the marketing year. For the 2022 crop, a payment would not be generated until October 2023.

"Its difficult to predict losses looking forward," Lubben said. "It's really difficult to predict yields and anything other than benchmarks, which are the benchmark yields incorporated into the ARC guarantee."

Still, Lubben noted the decision on farm programs also affects decisions on crop insurance and marketing as well. For instance, producers who sign up for the ARC program are not eligible to buy the Supplemental Coverage Option (SCO) for additional crop insurance coverage. However, producers could select the new Enhanced Coverage Option (ECO) regardless of whether they are enrolled in ARC or PLC.

Looking at the 2020 crop year, corn, sorghum and soybeans did not generate a 2020 payment last fall under PLC because market year price was higher than the reference price. Wheat was exception with $5.05 average marketing year price that ended up generating a 45-cent PLC payment.

In Nebraska, and nationally, there were a small number of counties that triggered ARC payments, but that often required large yield losses to generate those payments.

For the current 2021 crop year, projected prices also far above the reference prices. USDA right now forecasts corn and sorghum prices for the crop year at $5.45 a bushel; soybeans at $12.60 a bushel; and wheat at $7.15 a bushel.

"They are far above the effective reference price that may kick in with a PLC payments," Lubben noted. He added, "It would take a substantial price loss to trigger a PLC payment."

Much is the same for ARC as well. Projected corn yields would need to show a 42% fall for an ARC payment, and soybeans would need to fall 39%. Wheat would need to fall 34%.

The same can be said for 2022 right now as well. USDA's long-term projected prices right now put corn at $4.80 a bushel, meaning it would need a 23% price decline for a PLC payment on the 2022 crop, or a 30% change in the ARC benchmark, or a 34% yield loss -- though ARC yields are scored on the county level, which adds more complication to that projection. Soybeans, with a long-term price projected at $10.50 a bushel, would need a 20% decline in price for a PLC payment, or a 19% decline in the ARC benchmark price, or a 25% decline in yield.

On ARC, Lubben noted, "It's possible that some combination of price and yield expectations could fall from here, and that combined, there are actually situations where it would trigger," Lubben said. "But the expectations are very small and the probabilities are very small."

It should be noted that price projections for the 2022 spring crops will be updated on Feb. 24 when USDA releases its first forecasts for crop acreage, prices and farm income at the USDA Outlook Forum. The event is on-line and registration is free. https://www.usda.gov/…

The lack of price protection under ARC/PLC has been noted by farm groups as they look ahead to the 2023 farm bill. The American Farm Bureau Federation at its annual convention earlier this month in Atlanta changed its policy to support higher reference prices because of concerns regarding just how far prices would have to fall before the commodity safety net kicks in.

For producers, March 15 deadline to sign up for ARC/PLC for 2022. Producers can choose to make a new program selection and enroll in a new annual contract. Farm Service Agency staff noted that any change to the program selection also must be a unanimous decision for everyone enrolled for payments on that farm. Regardless of whether the farm chooses to elect a new program, a new enrollment contract must be signed.

March 15 also is the deadline to sign up for the Noninsured Crop Disaster Assistance Program (NAP) as well.

Crop insurance sign ups in a big part of the corn and soybean states also have a March 15 deadline, but the price protection expectations for corn and soybeans won't be known until at the end of February.

To watch the full UNL webinar, you can go to https://cap.unl.edu/…

Other UNL archived webinars can be viewed at UNL's Center for Agricultural Profitability https://cap.unl.edu/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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