Projected ARC/PLC payments in 2020
Iowa corn and soybean farmers are projected to receive about $212 million in total from the Agricultural Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs in October 2020 for the 2019 marketing year. About 80% of the payments will go to corn base acres and 20% to soybean base acres. Farms located the northern third of the state will receive about 45% of the payments, while farms in the southern third of the state will receive about 14% of the payments.
Big swings from ARC to PLC
The 2018 Farm Bill introduced multiple changes to the formulas used in the calculation of the ARC and the PLC programs, and eliminated the restriction that producers had to stick with one program for the life of the Farm Bill.
In the spring of 2020, the prospect of average 2019/20 and 2020/21 marketing year corn prices below $3.70 (the reference price in PLC), convinced many farmers to switch corn base acres from ARC-County (ARC-CO) to PLC. At the national level, the share of corn base acres in ARC-CO dropped from 91% in 2014-2018 to 19% in 2019-2020.
At the same time, the share of corn base acres in PLC increased from 9% in 2014-2018 to 75% in 2019-2020, and ARC-Individual (ARC-IC) increased from 0% to 6%. ARC-IC became an interesting option for farms that suffered flooding in 2019 or that expected floods in 2020.
Although farmers also switched soybean base acres from ARC-CO into PLC in the spring of 2020, the drop in the share of ARC-CO acres was not as substantial as with corn: from 96% in 2014-2018 to 80% in 2019-2020 nationally. The relatively smaller reallocation of acres across programs for soybeans can be traced back to expected soybean prices at the time of program election staying above the $8.40 per bushel used as the reference price in PLC.
ARC-CO payments per base acre
We project ARC-CO payments in October 2020 to range from $0 to $49 per corn and soybean base acres on non-irrigated farms (Figures 1 and 2).
The estimated payments assume a 6.8% sequestration. Four counties will receive ARC-CO payments for both corn and soybean base acres, three counties will receive payments for corn base acres only, and 36 counties will receive payments for soybean base acres only (highlighted in bold in Table 1).
Another change introduced by the 2018 Farm Bill was to differentiate between irrigated and non-irrigated farms. Twenty- four counties in Iowa have irrigated corn or soybean base acres approved for ARC-CO. For irrigated farms, the projected ARC-CO payments in October 2020 range from $0 to $50 per base acre, after sequestration. Two counties will receive ARC-CO payments for irrigated soybean and corn acres, one county will receive payments only for irrigated corn acres, and five counties will receive payments only for irrigated soybean base acres (highlighted in bold in Table 2).
Payments are calculated by comparing the 2019/20 projected county crop revenues against the ARC-CO benchmark revenues. The 2019/20 projected county crop revenues are obtained as the product of the 2019 final area yields for the Supplemental Coverage Option (SCO) published by the USDA Risk Management Agency (RMA) and the projected 2019/20 marketing year average prices from the August 2020 USDA WASDE report. Benchmark revenues are calculated using the 2013/14-2017/18 trend-adjusted yields from RMA and marketing- year average prices from the USDA Farm Service Agency (FSA).
PLC payments per base acre
PLC payments are triggered when the marketing- year average price is lower than the PLC reference price: $3.70 per bushel of corn, and $8.40 per bushel of soybeans. As of August, the projected marketing- year average corn and soybean prices are $3.60 and $8.55, respectively, and only the former is below its reference price. Based on average county PLC yields published by FSA, we project PLC payments in October 2020 for the 2019 marketing year will range from $7.80 to $13.80 per corn base acre, and average
$12 across the 99 counties.
Total payments by county
In Iowa, 97% of the corn base acres and 98% of the soybean base acres were enrolled in ARC-CO over the 2014-2018 period. As of the date when this article is being written, no official statistics on the total number of acres enrolled in each program for 2019-2020 are publicly available. The following simulation provides a rough estimate of projected total payments by program and county for non- irrigated acres based on the following assumptions:
- Corn base acres in 2019-20: 90% in PLC, 7% in ARC-CO, 3% in ARC-IC
- Soybean base acres in 2019-20: 90% in ARC-CO, 7% in PLC, and 3% in ARC-IC
The simulated payments reported in Tables 3 and 4 exclude ARC-IC and irrigated base acres, due to insufficient data. Although enrollment in ARC-IC might be higher in counties bordering the Missouri or the Mississippi rivers than in the central corridor of the state, the same percentages were applied to all counties for simplicity of exposition.
Statewide ARC-CO payments on corn are projected at $790,040, with 82% of the payments going to Crop Reporting District (CRD) 9 in the southeast corner of the state and 9% going to CRD 7 in the southwest corner of the state.
Statewide ARC-CO payments on soybeans are projected at $42,676,191, with 49% of the payments going to CRD 1 (northwest), 28% going to CRD 5 (central), and 10% going to CRD 2 (north central).
While total ARC-CO payments are projected at $43,466,231, PLC payments for corn based acres are projected to accrue in all counties and total $168,088,804. The geographical shares of PLC payments are similar across the northern and central regions (between 11% and 15% of the state total), and much lower for the southern regions (averaging 6%).
These simulated payments highlight the regional disparities in ARC-CO, and the typically lower but more widespread payments triggered by PLC for corn base acres. Soybean prices have not triggered a single PLC payment since 2014/15, and 2021 would not be the exception if the marketing-year average price for 2020/21 is $8.50 per bushel, as suggested by the August 2020 WASDE report. If corn prices in 2020/21 average $3.35 per bushel, as suggested by WASDE, PLC payments in 2021 could average $40 per corn base acre. The information needed to project ARC-CO payments in 2021 for 2020/21 crops is still not publicly available.
Iowa State University Extension and Outreach maintains a suite of Farm Bill Tools in the Ag Decision Maker website. You can calculate your expected ARC-CO and PLC payments for irrigated and non-irrigated acres using Decision Tool File A1-33, or see a map of payments across counties, commodities, and years, using the online visual tool ARC/PLC Payments per Base Acre in Iowa.
Alejandro Plastina, extension economist, 515-294-6160, firstname.lastname@example.org