*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.
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.