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Farm Bill 2023 Elections

Feb 19

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During our on-farm research meeting last Wednesday, several farmers received text message reminders to make their ARC/PLC enrollment/election by March 15, 2023, and were asking about this after the meeting. Regardless of whether you choose to make a new election or not, a new enrollment (contract) is required, so please contact the FSA office to take care of that. You can view the UNL/FSA farm bill webinar at: https://go.unl.edu/mbhy. No need to run simulations. You can download the spreadsheet from K-State that shows price/yield options for PLC/ARC-Co triggers: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc.  

Bottom Line: For 2023, neither ARC-Co nor PLC would be anticipated to trigger for corn, soybean, wheat, sorghum with current USDA projected prices. If you’re concerned about price decline and want to protect that downside, PLC can be selected. If you think high prices will remain, ARC-Co provides a better likelihood of payment in the event of disasters such as drought and hail impacting county average yields. These are risk management tools, and ultimately, crop insurance will be important again in 2023. Different election decisions (ARC-Co or PLC) can be made for crops in different FSA farm numbers if you’d like to spread risk. Fields with higher PLC yields could be more favorable for your PLC decisions.

But how do you choose between PLC and ARC? ARC-CO would only be anticipated to pay with a catastrophic yield loss, such as county-wide hail and/or drought.

PLC Reference Prices are: $3.70 for corn, $3.95 for milo, $8.40 for soybean, and $5.50 for wheat. Because market year average prices are much higher than these reference prices at this time, barring any major disaster causing price reduction, PLC payments wouldn’t be anticipated for any of these crops in 2023. Reasons to consider PLC: if you feel prices have the potential to decline or if you choose to use Supplemental Coverage Option (SCO) through crop insurance. Both the UNL and K-State webinar links on my blog go into more detail about SCO.

The following patterns hold true for every county I ran for both irrigated and non-irrigated. If you feel prices will stay high, then ARC-Co will only trigger if county average yields decline. If you feel prices will decline, PLC will mostly only trigger before ARC-Co. at county average yields. I think most of us would prefer good crops and decent prices to having either of these programs trigger. I’ve shared additional photos with explanations and reference links at my blog: jenreesources.com if seeing this explanation is helpful.

Corn: at county average yields, price would have to fall to $3.33 to trigger an ARC-Co. payment while it will trigger PLC payment at $3.70. When county average yields decline, ARC-Co triggers before PLC.

Soybean: at county average yields, price of $8.11 would trigger ARC-Co compared to $8.40 for PLC. When county average yields decline, ARC-Co. triggers before PLC.

Wheat: at county average yields, price of $4.60 would trigger ARC-Co compared to $5.50 for PLC. It takes more reduction in county average yields for ARC-Co to trigger before PLC. Please run these for yourself if you’re looking at wheat.

Milo (Sorghum): at county average yields, a $3.68 price would trigger ARC-Co compared to $3.95 for PLC. When county average yields decline, ARC-Co triggers before PLC.

For ARC-IC (individual), if any of us knew we’d get the hail damage we did last year, it may have been a great decision for last year’s election for those hardest hit with all/majority of fields. Because we can’t make this decision looking backward, ARC-IC tends to be more favorable for those with diversified crops or situations where yields wouldn’t reflect county average yields.

References:

For corn, seeing this same pattern regardless of county and regardless of if irrigated or non-irrigated. When you download the spreadsheet from: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc, the county average yield is the yield that is bolded. When you follow the payment potentials down that column, you will see that the PLC reference price of $3.70 will trigger before an ARC-Co payment at with county-average yields of $3.33. However, with a county-average yield reduction to 215 bu/ac (in this case), both ARC-Co and PLC would trigger at a $3.70 price and ARC-Co payments trigger at higher prices with further county average yield declines.
For soybean, seeing this same pattern in different counties and in irrigated or non-irrigated. When you download the spreadsheet from: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc, the county average yield is the yield that is bolded. When you follow the payment potentials down that column, you will see that the PLC reference price of $8.40 will trigger before an ARC-Co payment at with county-average yields of $8.11. However, with a county-average yield reduction to 65 bu/ac (in this case), ARC-Co triggers at a higher price than PLC (and with greater county average yield reductions, ARC-Co will always trigger before PLC at higher prices).
For milo, seeing this same pattern in different counties and in irrigated or non-irrigated. When you download the spreadsheet from: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc, the county average yield is the yield that is bolded. When you follow the payment potentials down that column, you will see that the PLC reference price of $3.95 will trigger before an ARC-Co payment at $3.68 with county-average yields. With county average yield reduction to 122 bu/ac, both PLC and ARC-Co will trigger at $3.95 and ARC-Co triggers with further yield reductions at higher prices.
For wheat, seeing this same pattern in different counties and in irrigated or non-irrigated. When you download the spreadsheet from: https://www.agmanager.info/ag-policy/2018-farm-bill/tradeoff-between-20222023-arc-and-plc, the county average yield is the yield that is bolded. When you follow the payment potentials down that column, you will see that the PLC reference price of $5.50 will trigger before an ARC-Co payment at $4.60 with county-average yields. The pattern for wheat is different than the other commodities, though. Yield has to be reduced at least two columns (the specific yields differ based on county and whether irrigated/non-irrigated), in which ARC-Co then triggers before PLC with those county average yield reductions and higher prices.
The “Understanding the Soil Microbiome” featuring Dr. Rhae Drijber is rescheduled to Friday, March 3 from 10 a.m.-Noon.

Posted in Farm Bill, JenREES Columns

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