ARC-CO and PLC Payment Indicator Using August WASDE U.S. Yield and Price
by Carl Zulauf, The Ohio State University & Gary Schnitkey, University of Illinois
The 2014 farm bill gives Farm Service Agency (FSA) farm owners the option to choose their crop program for the 2014 through 2018 crop years. A factor, perhaps key factor that will influence this decision is the payment by the program choices for the 2014 crop year. This article uses the just released U.S. yield and price estimates in the August 2014 World Agricultural Supply and Demand Estimates (WASDE) to calculate an indicator of potential payments by the Agriculture Revenue Coverage - county program (ARC-CO) and the Price Loss Coverage (PLC) program. The indicator estimates are for the 2014 crop year for barley, corn, oats, long grain rice, medium (and short) grain rice, sorghum, soybeans, and wheat. These are indicator estimates because they use U.S. yield not county yield or farm payment yield, as ARC-CO and PLC use, respectively. AR-CO payments, for example, will vary across counties, with some counties having no payments due to high yields and some counties having large payments due to low yields. Thus, this article is not estimating payments that an individual FSA farm owner would receive. Nevertheless, the indicator estimates using U.S. yields should help frame questions and perspectives for FSA farm owners regarding program choices.
Calculation of Estimated Program Payments
ARC-CO makes payments when county revenue for the crop year is less than 86% of the county's benchmark revenue. ARC-CO pays when actual revenue is between 76% and 86% of benchmark revenue. PLC makes payments when the U.S. crop year average price is less than the crop's reference price. The reference price is