ARC for Low Yields – PLC for High Yields

• January 29, 2015
• Paul Neiffer

Many farmers will not elect 100% ARC or PLC.  Even if ARC-CO will make a large 2014-crop corn payments, most will try elect some PLC on acres just in case substantially lower prices might occur in 2015-2018.  In those cases, the firm rule of thumb is to elect PLC on your highest yielding farms first, elect ARC-CO on your lowest yielding farms and the work up or down from there.  The difference in total payments can be dramatic.

Let’s review an example:

Farmer Jameson grows corn in a county with an Olympic average yield of 180 bushels per acre.  However, his farms have a large variability in yields with farm # 1 yielding an average of 90 bushels per acre, farm # 2 yielding 130 bushels per acre, farm #3 yielding 180 bushels per acre and farm #4 yielding 240 bushels per acre.  These are all payment yield numbers for purposes of PLC.

Let’s figure out the payment per acre for PLC on each of these farms.  For this example, a payment of 40 cents per bushel will be earned (MYA price of $3.30).  Farm number one will receive $30.60 (90 X $.40 X 85%).  Farm #2 will get $44.20, Farm #3 will get $61.20 and finally, Farm #4 will receive $81.60.

If the County-ARC payment is $65, each of the farms will receive $65 per acre.  Remember, PLC pays based on the updated yield, but yields during 2014-2018 have no bearing on PLC payment.  ARC payments are based upon the county yield, so individual farm yields have absolutely no bearing on ARC-CO payments.

So in this case, Farmer Jameson would likely pick Farm #4 for PLC and Farm #1 and #2 for ARC-CO and then need to run some numbers on #3.

If he had done the opposite, he would cost himself over $50 on Farm #4 versus #1 and about $37 on #2.

Therefore, it always pay to elect PLC on highest yielding farms and ARC-CO on the lowest yielding farms.

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