By Combest Sell & Associates

The 2023 ARC/PLC election deadline is March 15. Producers will have the option to choose between Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) for the 2023 crop year.

The PLC effective reference price will be $3.70 for 2023, meaning 2023 MYA prices would need to dip below $3.70 to trigger a payment. With current corn prices sitting in the mid to upper $6 range, a PLC payment seems unlikely.

ARC will use a slightly higher price in the calculation at $3.98. The 2023 MYA price multiplied by the actual yield for a county would need to fall below 86% of the 5-year Olympic average yield for the county multiplied by $3.98 to trigger a payment. If the 2023 MYA price ended up being $6.50, a county with a historical yield of 175 bushels would need to fall to 92 bushels before triggering a payment. At a $6 MYA price, yield would still need to fall below 100 bushels to trigger a payment.

Overall, neither ARC nor PLC are likely to trigger a payment for the 2023 crop year for corn. However, the election between ARC and PLC can still be an important decision as it pertains to Supplemental Coverage Option (SCO). SCO is a crop insurance option that provides additional area wide coverage on top of your underlying individual farm level crop insurance coverage. SCO must be purchased as an endorsement to an underlying yield or revenue policy. The idea is to close a producer’s deductible using a combination of both individual and area-wide coverage. However, if a producer chooses ARC, he or she cannot purchase SCO coverage. SCO coverage works in a very similar manner to ARC triggering on a county level rather than on an individual loss basis. SCO, however, has a distinct advantage over ARC because it uses the crop insurance election price rather than a historical average price as in the case of ARC.

A producer’s best option for risk management for the 2023 crop year is crop insurance, which sets up a discussion in the 2023 Farm Bill debate over how to improve the safety net under the Farm Bill’s Commodity Title to be more relevant to producers.

Visit the USDA website for more information on ARC and PLC.

MCGA is a client of Combest Sell & Associates