PLC & ARC Protection: Safety Net Options for Nebraska Farmers & Ranchers
As a reminder, the sign-up period for PLC (Price Loss Coverage) and ARC (Agriculture Risk Coverage) is March 15, 2024. Nearly every year, current and prospective NOIA clients are conflicted on whether to add ARC, PLC, or neither coverage to their existing policies. Because crop insurance is put in place to keep operations whole—through weather, financial exposure, and/or yield concerns to name a few—our goal is to educate our clients and prospective clients on what makes sense for them individually. After all, your coverage should be catered specifically to fit your needs.
With an extension of the 2018 Farm Bill, Nebraska farmers and ranchers are influenced by different circumstances in 2024 than they were in 2018. All of this to say: let’s break down PLC and ARC coverage—everything from how it works, why you may consider one or the other, and statistics/real life examples to help you decide what is best for you and your operation.
Watch the University of Nebraska “Market Journal” YouTube page to learn more about ARC & PLC Enrollment with Brad Luben.
What is PLC in Nebraska?
PLC— or Price Loss Coverage— is a risk management program offered by the USDA as part of the 2014 Farm Bill.
PLC is a low national price assistance program, where low is defined as prices below a reference price set by Congress. It is the latest version of programs designed to protect farmers from the financial consequences of low prices, an objective dating to farm programs initiated during the Great Depression of the 1930s. Assistance was initially provided by putting a floor under market price operationalized by moving market supplies into public stocks. Assistance is now provided as cash payments to farmers based on the difference between market year price and reference price.
In short, it provides payments to producers when the national price for a covered commodity falls below its reference price. In Nebraska, crops like corn, soybeans, and wheat are commonly covered under PLC.
Analysis of PLC in Nebraska
Positives of PLC for Nebraska Farmers & Ranchers
PLC provides a safety net for producers when commodity prices drop below certain levels, helping to mitigate income volatility.
PLC offers a straightforward mechanism for compensation based on price declines, which can be particularly beneficial during periods of market downturns.
Negatives of PLC for Nebraska Farmers & Ranchers
PLC payments may not adequately reflect localized or individual farm-level risks.
Payments are based solely on price declines, potentially neglecting other factors such as yield losses due to weather events or pest infestations.
Statistics and Real-Life Examples of PLC in Nebraska
in Nebraska, PLC payments might be appealing to farmers during years of low commodity prices. For example, in 2020, the average PLC payment per acre for corn in Nebraska was $32.20, providing a crucial income buffer for many producers during a challenging economic climate.
What is ARC in Nebraska?
ARC is another risk management program established by the USDA under the 2014 Farm Bill. It operates in two forms: ARC-County (ARC-CO) and ARC-Individual (ARC-IC). ARC-CO provides revenue support at the county level, while ARC-IC offers support at the individual farm level.
Analysis of ARC in Nebraska
Positives of ARC for Nebraska Farmers & Ranchers
ARC offers a revenue-based safety net, considering both price and yield variations, which can better reflect the actual risks faced by producers. ARC-CO accounts for county-level revenue fluctuations, providing more localized support compared to PLC. ARC-IC offers individualized coverage, potentially better-suited for farms with unique risk profiles.
Negatives of ARC for Nebraska Farmers & Ranchers
ARC payments may vary significantly from year to year, making it difficult for producers to predict income stability. ARC-CO payments are based on county-level data, which might not accurately represent individual farm circumstances. ARC-IC requires more extensive paperwork and data reporting, increasing administrative burdens for producers.
Statistics and Real-life Example of ARC in Nebraska
In Nebraska, ARC payments have also been significant. For example, in 2019, the average ARC-CO payment per acre for soybeans in Nebraska was $32.59, providing crucial support to producers during a year of trade disputes and market uncertainties.
Bottom-line…
Ultimately, the choice between PLC and ARC in Nebraska depends on various factors such as commodity prices, yield variability, and individual farm characteristics. Producers should carefully evaluate their risk exposure and consider which program aligns best with their specific needs and circumstances.
For a FREE, no-obligation analysis of your current crop insurance policy, click here.