The Results Are In: PLC is the 2019 Program of Choice

American Farm Bureau Federation

A Review of the 2019 ARC and PLC Enrollment Decisions

The deadline for farmers with base acres eligible for Title I commodity safety net programs was March 16. Farmers had the opportunity to make a one-time election to enroll base acres on a commodity-by-commodity basis in either Agricultural Risk Coverage-County Option or Price Loss Coverage for the 2019/20 and 2020/21 crop years (What’s in Title I of the 2018 Farm Bill for Field Crops? and ARC-County, A Bird in The Hand for Some in 2019). If a farmer chooses Agricultural Risk Coverage-Individual, all base acres on the farm, regardless of commodity, are enrolled in ARC-IC. Farmers will not be able to change their choice of enrollment until 2022, e.g., Reviewing ARC, PLC and SCO Commodity Safety Net Programs. This article reviews the base-acre elections made by farmers for the 2019/20 crop year compared to 2018 enrolled base acres.

U.S. Base Acres Enrolled in Farm Programs for 2019
Farmers enrolled a total of 253 million acres in Title I commodity safety net programs in 2019. Of that total, 177 million acres, or 70%, are covered under PLC. There are 66.5 million acres, or 26%, enrolled in ARC-CO and 9.8 million acres enrolled in ARC-IC, which is 4% of the total acres. Figure 1 displays the breakdown of all U.S. base acres enrolled by each program.

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When divvied up by major commodity, 72 million acres of corn were enrolled in PLC, while 17.7 million acres were put in ARC-CO and 5.6 million acres were put into ARC-IC. Soybeans led the way in enrollment for ARC-CO, with 43 million acres enrolled. Farmers put only 7.6 million acres of soybeans into PLC and 3.3 million acres into ARC-IC. Wheat base acres accounted for 59 million PLC acres and 3.7 million acres of ARC-CO enrollments, but only about 661,000 acres of wheat were combined into ARC-IC. Of seed cotton base acres, 12.8 million acres were enrolled in PLC, with small portions put into ARC-CO and ARC-IC. A majority of grain sorghum and barley acres went into PLC, 8.1 million and 5.1 million, respectively, but small portions were put into ARC-CO, 515,000 and 300,000, respectively. Almost all peanut and long-grain rice acres were put into PLC. Figure 2 breaks down program enrollment by acres for select commodities.

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Farm Program of Choice by Commodity
PLC proved to be the program of choice for commodities in 2019. PLC program payments are made on 85% of the farm’s base acres multiplied by the farm’s PLC program yield. The PLC program delivers a payment when the price of a commodity falls below a specific price floor. For corn, a dramatic shift occurred as producers moved from selecting ARC-CO coverage during the 2014 farm bill to selecting PLC during the most recent sign-up. Corn producers put 76% of the base acres into PLC, compared to only 7% in PLC during 2018. The effective reference price of corn is $3.70. If the market year average price of corn falls below $3.70, the PLC payment rate is triggered, and the base acres of corn enrolled in PLC will receive a program payment of the difference per bushel. With an enrollment of over 93% or more of total base acres, PLC was also the program of choice for farmers growing wheat, seed cotton, grain sorghum, barley, long-grain rice and peanuts. Figure 3 displays the percent of base acres enrolled in PLC during the 2018 and 2019 program years.

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Agriculture Risk Coverage at an Impasse
Agriculture Risk Coverage is an income support program that triggers a payment when actual county-level crop revenue falls below 86% of the benchmark revenue and is based on the five-year Olympic moving average of county yields and the marketing year average price. ARC-CO program payments are capped at 10% of the ARC-CO benchmark revenue and are paid on 85% of a farm’s base acres for each covered commodity. For ARC-CO, soybean base acres were the only commodity for which a majority of the base acres were enrolled in the program.

Of the total 2019 soybean base acres, 80% were enrolled in ARC-CO. Corn had the next highest amount, with 19% of base acres selecting ARC-CO in 2019. About 6% each of wheat, grain sorghum and barley base acres were enrolled in ARC-CO. About 1% of cotton seed base acres were enrolled in ARC-CO, while fewer than 1% of base acres for peanuts and long-grain rice were enrolled. Figure 4 shows the percent of base acres enrolled in ARC-CO during the 2018 and 2019 program years.

 





 

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The ARC-IC operates similarly to ARC-CO but applies only to 65% of the base acres enrolled and enrollment is not on a commodity-by-commodity basis. ARC-IC is a whole farm program that groups all covered commodity base acres together and utilizes the individual farm’s yields. An ARC-IC payment is triggered when the actual crop revenue for all covered commodities planted on the farm is less than 86% of the benchmark revenue and is capped at 10% of the individual weighted benchmark revenue. Corn and soybean base acres led 2019 ARC-IC enrollment with 6% of each commodity’s total base acres. Additionally, about 1% of wheat base acres and 1% of grain sorghum acres were enrolled in ARC-IC for 2019. The other select commodities had less than 1% of total base acres entered in the whole-farm-style safety net program. Figure 5 shows the percent of base acres enrolled in ARC-CO during the 2018 and 2019 program years.

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Summary
The Title I PLC safety net program was the program of choice for farmers in the 2019/20 program year. Because farmers cannot change their election until 2022, it will also be the program farmers are enrolled in for the 2020/21 marketing year. Before mid-March, expectations for the marketing year average price were mixed as farmers were looking at the possibility of increased demand with finalized trade deals, and analysts were predicting a year of record production for many crop supplies.

Many of the expectations impacting prices have changed as a result of the uncertainty brought on by COVID-19. As the coronavirus sends crop and livestock prices into a tailspin, time will tell whether or not program decisions provide farmers the necessary safety net needed to carry them into the next year.

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