*Thank you to Dr. Brad Lubben, Randy Pryor, and Austin Duerfeldt for their review of this information*
This blog post shares screenshots to help you work through the Kansas State, Texas A&M, and Illinois farm bill decision tools. If you’re not interested in running the decision tools, consider using this ARC-CO calculation instead. Crop insurance and marketing are ultimately a huge chunk of risk management too. Ultimately, the decision is up to you and no one can predict prices/yields. This information is just shared as a way to hopefully help with your decision making.
Background: Ultimately, PLC offers price protection. If your MYA price is less than the reference price ($3.70 for corn; $8.40 for soy; $3.95 for sorghum; $5.50 for wheat), a PLC payment is triggered. ARC-CO is a revenue safety net with price and yield protection, and it takes into account a 5-year Olympic average of prices and yields (for this 2021 decision it looks at 2015-2019).
We’ve had good market prices recently. However, remember ARC-CO is based on a 5-year Olympic average where the high and low are thrown out. This average is based on 2015-2019 (2020 doesn’t come into the picture until the 2022 decision. And, if it’s the high, it gets thrown out then…so it may take a couple years of high prices). And, the reality is that PLC corn price of $3.70 may also not trigger depending on the MYA price. Another consideration for the 2021 election is county yields for ARC-CO payments (looking at years 2015-2019 where the high and low are thrown out).
So as things set today, it’s possible there will be no ARC-CO nor PLC payment for corn or soybean for 2021. Corn tends to favor a PLC decision. Wheat favors PLC. Sorghum traditionally has favored PLC. Soybean could be selected either way, particularly depending on if the county has irrigated/non-irrigated split or not. What can impact this is if we see major yield or price losses from current expectations. Because different weather events hit portions of counties, and because some counties have separate payments for irrigated and non-irrigated acres, it’s important to look at your individual county data to make decisions.
You will need your FSA156EZ form (or your Notification of your 2020 program election, shown above) which can be obtained from your local FSA Office. It will show you farm numbers, base acres, PLC yields for each of your farms. A Historical Irrigated Percentage (HIP) is listed for counties that have split irrigated and non-irrigated yields for specific crops, if ARC-CO had been selected in a recent election. For counties that had combined irrigated and non-irrigated yields, or if PLC was elected in the recent past, there will be no HIP (as shown on this form). You will need to add a HIP for the Texas A&M Farm Bill Decision Aid. If one isn’t listed on your FSA156EZ or if your HIP has changed the past 5 years, use your best estimate.
The Texas A&M tool uses a default price of $3.91 for corn and $10.40 for soybean and runs 500 possible scenarios using the data inputted. The Illinois “What If” tool uses a default price of $4.00 for corn and $11.00 for soybean and provides one potential payment based on the data inputted. Both tools provide input into the ARC-CO and PLC decision. The Illinois tool also provides input into ARC-IC if you are considering that option.
Kansas State Spreadsheet
This spreadsheet can be found at: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20212022-arc-and-plc. I’m not going to share additional details on this one as they have done a great job of explaining this spreadsheet already at the link above. You will see a video when you go to this website that explains the tool and then a link to a spreadsheet is found below the video. Personally, I’m finding this tool to be a lot easier for growers to understand as it’s so visual. It clearly shows what has to happen with county average yields and market year average prices for ARC-CO to trigger.
Quick way to view how county average yields and MYA price can impact ARC-CO or PLC decisions. With Olympic average county corn yield of 234.24 for York County, for this irrigated farm, at the PLC reference price of $3.70 for a MYA price, it would take county average yields falling to 190 before ARC-CO could trigger. The MYA price (based at this county yield of 234.24) would need to be $3.18 before ARC-CO would trigger.For this Seward county non-irrigated corn field example, it shows Olympic county-average yield is 175.07 bu/ac. At the $3.70 PLC reference price as the MYA price, it would take a county average yield loss of around 30 bu/ac in order for ARC-CO to trigger. It would take a MYA price of $3.18 (based on county-average yield of 175.07 bu/ac) for ARC-CO to trigger.For this York Co. irrigated soybean example, the decision can go either way. Olympic county average yield is 72.33 bu/ac. At PLC reference price of $8.40, county average yields would have to drop to around 65 bu/ac for ARC-CO to trigger. MYA price would have to drop to $7.70 for ARC-CO to trigger. Reality is that most likely, barring no major yield or price changes, neither program may trigger for soybeans.
Texas A&M Tool
For the Texas A&M decision tool, go to: https://www.afpc.tamu.edu/tools/farm/farmbill/2018/. You will need to login using the username/password you’ve used in the past. If you’ve never used one before, you can create one on the login page. If you forgot your login info., please email info@afpc.tamu.edu or call 979-845-5913. It’s a good idea to keep your login with your farm bill paperwork. Upon logging in, I found some of my data was here from the past, so hopefully yours was saved too. If it’s not there (or if you have new farm numbers), you will need to click on “new farm”. Upon clicking “new farm”, the above screen will appear. Enter your FSA Farm Number, State, County, and one crop for that farm number. Then click “Save”.If you have more than one crop associated with that farm number, click on “add another crop” and repeat the steps until all crops are added for the farm number. Once all your crops are entered for the farm number, click on “expected payments tool”. You will then see a screen which allows you to enter the base acres, PLC yield, and HIP from your FSA156EZ form. If the form didn’t list a HIP, you need to enter your best estimation of % irrigated acres on the field. If you put a “0”, it assumes completely non-irrigated. You can then put in an expected price. To begin with, I just click the “Use These” button to get a feel where the calculations start. Then click “Calculate”. The tool will provide numbers that you can click on to obtain additional information. You can continue to recalculate playing with price if you wish. At this time, I’m not using the “Advanced Settings” option. Explanation on payment numbers from the website, “This decision aid characterizes probabilities of different levels of expected FSA payments. These characterizations are based on 500 possible future realizations of market prices and county yields. The expected payments are an average across these many possibilities. Values displayed in the results will not match the payments you might calculate using single specific price and yield realizations. To see the likelihoods of different levels of payments, click on an individual expected payment in the results table.” So when you click on a payment number, for example PLC, each percentile shows the maximum potential payment based on the numbers inputted into the tool. In this example, there’s a 75% chance of a payment $11,200 or less and a 90% chance of a payment $21,442 or less. (NOTE: please don’t get too excited about this as they clearly state the values displayed won’t match payments calculated using single specific price and yield realizations). You can then go back to “Home” at the top of your screen and repeat by inputting the base acres, PLC yield, and HIP for other crops within the same farm number. (NOTE: always be sure to check the crop on the upper part of the screen, as for some reason, it seems to default to soybean). You can then repeat all of this for every farm number you have.This example gives you an idea what soybean looks like using the Texas A&M tool. It’s favoring PLC for soybean as well. Again, explanation on payment numbers from the website, “This decision aid characterizes probabilities of different levels of expected FSA payments. These characterizations are based on 500 possible future realizations of market prices and county yields. The expected payments are an average across these many possibilities. Values displayed in the results will not match the payments you might calculate using single specific price and yield realizations. To see the likelihoods of different levels of payments, click on an individual expected payment in the results table.”Upon clicking on PLC in the soybean example, you can see it’s showing a mean potential payment of $531. (NOTE: please don’t get too excited about this as they clearly state the values displayed won’t match payments calculated using single specific price and yield realizations). The reality is if the MYA price is above $8.40, no PLC payment will be triggered. It’s very possible there will be no PLC nor ARC-CO payment for soybeans in 2021.
Illinois “What If” Tool
When you go to https://farmdoc.illinois.edu/policy-toolbox, you will see two tools are available. I recommend using the option on the right called “What If” as it allows you to look at yearly elections. My computers haven’t allowed me to download the tool, but they have accepted the spreadsheet option, so I choose to download the spreadsheet. The spreadsheet was just updated this past week, so it’s up to date.Once the excel spreadsheet is downloaded, open it up. At the top of the screen you will see a yellow bar with a button that says “Enable Macros”. Go ahead and do that. You may have to do this once more until it allows you to input numbers. You then input state, county, crop, base acres, PLC yields into the yellow boxes. The election year is 2021. The default price is $4.00 in this tool. For comparison to the Texas A&M tool in this blog, I inputted $3.91. This tool shows results based on single calculations. So, with these specific numbers, it shows no potential payment for either PLC or ARC-CO for York Co. Irrigated Corn. It also does a really nice job of explaining the payment equations (PLC shown in this picture…although it doesn’t look like this specific explanation was updated for years). Because we’re assuming a higher MYA price than the reference price of $3.70, a PLC payment wasn’t triggered in this example.The ARC-CO info. is often confusing, so the tool does a great job visually showing how the numbers are determined. In this case, you can see the 2015 and 2016 yields were removed as the highest and lowest with 2017-2019 used for the Benchmark Yield of 234.24. The Olympic average will differ based on county. Some counties also have separate irrigated and non-irrigated yields for various crops, which can provide separate triggers.The tool does the same in showing the calculation for ARC-CO Benchmark Prices. It uses the higher of the MYA price or Effective Reference price. With lower corn prices for several years, the Effective Reference Price has been higher and that’s what is used to calculate revenues.This is an example looking at soybeans using the Illinois tool. I used the same yield and price as Texas A&M tool for comparison. Notice with these prices and yields, it shows no PLC nor ARC-CO payment for York County soybeans. For counties like York that have combined irrigated and non-irrigated yields, you will need to default to ‘irrigated’ for your PLC yield that is inputted.
JenREESources's Extension Blog 
Leave a comment
Comments 0