Crop Insurance Under the 2014 Farm Bill: ARC vs. PLC

Crop Insurance Under the 2014 Farm Bill: ARC vs. PLC

14:40 24 January in Crop, Insurance

The Agricultural Act of 2014, also known as the 2014 United States Farm Bill, is the principal policy tool for food and agricultural programs in the country. It is updated every five years and deals with agricultural issues, such as crop insurance. After the Farm Bill was enacted last year, there have been changes made to the federal crop insurance programs. There are two options for federal crop insurance, Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC).

Agriculture Risk Coverage
Agriculture Risk Coverage is similar to the ACRE program. Its major difference from the PLC option is that it incurs losses on either a county or individual level. Under the 2014 Farm Bill ARC insurance assures that payment will be made if the individual or county’s crop revenue is less than the guaranteed amount. Crop revenue is equal to the yield multiplied by the national market year price. Payments may not exceed 10 percent of the ARC-CO benchmark county revenue.

Price Loss Coverage
The second crop insurance option under the new farm bill, Price Loss Coverage, is similar to the target price program. Payment is received when the U.S. market price for a specific crop price falls below the target amount, minus the loan rate. The reference crop prices for the Price Loss Coverage plan under the 2014 Farm Bill are: $3.70 per bushel for corn, $8.40 per bushel soybeans and $5.50 per bushel for wheat. The Market Year Average is the average price of a crop from the beginning of the marketing year on Sept. 1 through Aug. 31.

For both options, payment acres for a crop are 85% of the farm’s base acres for the crop plus any generic base acres planted to the crop.

Deciding which of these coverage options to check in light of the new farm bill is not an easy task. It is a one time, irrevocable decision that remains in effect until 2018. Be sure to check the projected crop prices that are applied to either option. If you would like more information please visit http://www.fsa.usda.gov/FSA/webapp?area=home&subject=arpl&topic=landing.