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Compare ARC/PLC Options To Maximize Safety Net

(Progressive Farmer image by Greg Latza)

In 2014, the choice between the Agricultural Risk Coverage (ARC) program and the Price Loss Coverage (PLC) program was simple. High corn and soybean prices translated to high benchmark revenues, which in turn, front-loaded ARC-County payments and made it an obvious choice.

At the time, many producers saw program payments as icing on the cake.

"Making this decision now is a totally different mindset than five years ago, when we had such good prices," says Kansas State University extension associate Robin Reid. "These farm program payments could make the difference in the farm making it through another year. It is a very critical piece of the management decisions on the operation."

Farmers need to make their elections by March 15, or they'll be enrolled in their prior choice under the 2014 bill and be ineligible for payments in 2019.

COMPARE PROGRAMS

Jim Mintert, director of the Center for Commercial Agriculture at Purdue University, encourages farmers to make an appointment with their FSA office first then sit down to consider the economics of their decision farm by farm.

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He thinks they'll find that the PLC program is much more competitive, particularly for corn and wheat, in 2019 and 2020, while the ARC-County program will likely make the most sense for soybeans. But, that's not universally the case, and Mintert advises it's important to compare the economics for each FSA farm.

Producers who suffered a 20% reduction or more in production in 2019 because of lower yields and/or prevented planting may even find that the ARC-Individual program could provide the highest payment. Mintert says he still expects that election to be rare, but there's no way to know for sure until you do the math.

ANNUAL EVALUATIONS

Farmers need to get in the mindset of evaluating their safety net program choice every year since the 2018 farm bill changed the frequency of elections. Instead of one choice covering five years, farmers will need to make a choice for the 2019 and 2020 crop years, then make an annual election for the remaining life of the farm bill.

The 2018 farm bill also gives farmers a one-time opportunity to update their PLC program yield.

"Historically, if you have had a chance to update yields, you just do it," Mintert says. But, between the way it's calculated and a couple of low-yielding years in the sample period, the adjustment might not be higher than the old PLC yield. He explains one producer went through his farm and only updated yields on about 10% of his farms.

"You won't know until you do the calculations. We encourage people to do it on every single farm and crunch through the numbers," Mintert explains.

> Read Katie's business blog at about.dtnpf.com/business.

> You may email Katie at katie.dehlinger@dtn.com, or visit @KatieD_DTN on Twitter.

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