ARC/PLC deadline for 2024 approaches

An update from Combest, Sell & Associates

The 2024 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 2024 crop year. The PLC effective reference price will be $4.01 for 2024, meaning 2024 MYA prices would need to dip below $4.01 to trigger a payment. With current corn prices sitting in the low $4 range a PLC payment is possible. ARC will use a higher price in the calculation, at $4.85. The 2024 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 $4.85 in order to trigger a payment. If the 2024 MYA price ended up being $4.25, a county with a historical yield of 175 bushels would need to fall to 172 bushels before triggering a payment. At a $4 MYA price yield a historical yield would only need to fall below 183 bushels to trigger a payment. Overall, both ARC and PLC have a chance to trigger a payment for the 2024 crop year for corn. ARC is a little more likely to trigger, with average yields triggering a payment when prices are below $4.17 compared to PLC triggering when prices fall below $4.01.

However, the election between ARC and PLC can be an important decision as it pertains to the 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 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, 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 2024 crop year is definitely crop insurance, which sets up a discussion in the farm bill debate over how to improve the safety net under the Farm Bill’s Commodity Title in order to be more relevant to producers.

MCGA is a client of Combest, Sell & Associates