The not so tough choice
Farmers have a choice to make for their FSA election: Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC). Growers can only choose one and must select by March 15th. While either program is going to provide some protection, the overwhelming consensus is to select ARC.
What is PLC
Price Loss Coverage (PLC) is a safety net for farmers that provides financial protection against sharp drops in market prices for covered commodities. The PLC program is designed to help farmers when market prices fall below a certain level, known as the reference price. If the market price for a covered commodity drops below the reference price, PLC will provide a payment to the farmer to help cover the loss. The reference price for each commodity is determined by the USDA and is based on historical market data.
The PLC program provides a consistent safety net for farmers, regardless of where they live or what the weather conditions are like in their area. This means that producers who enroll in PLC will receive payments if market prices fall below the reference price, even if there are no weather-related losses in their area.
What is ARC
County Agriculture Risk Coverage (ARC-CO) is a different type of crop insurance program that provides financial protection against both commodity price drops and natural disasters. This is different from PLC, which only provides payments when commodity prices fall below the PLC Reference Prices. ARC-CO provides payments when either the county average revenue falls below a certain level, or when there are weather-related losses in the county.
ARC-CO is determined by county revenue levels. This means a grower’s personal operation does not determine if a loss payment will be received.
Why Most Growers are choosing ARC
Current commodity prices (MYA) are well above the PLC reference prices. The projected prices are being set now but are currently at these levels as of January 2023. With the commodity prices at much higher levels than the PLC Reference Price, the overwhelming selection for growers has been ARC. PLC has become less attractive with such a large gap between the commodity price and the reference price. To trigger a PLC loss the Marketing Year Average (MYA) would have to fall below the PLC reference price. Currently, not a single commodity is projected to provide a PLC payment.
While this data points to electing to choose ARC, this is a choice that each operation needs to consider. Every operation has different needs and risks. Talk to your Risk Management Advisor to see which election is best for you.