ARC / PLC Elections
We had a reader send the following questions to us:
“I’m finding very little about the content of the new farm bill. I talked to our FSA office just before they started the shut down and they were under the impression that a new bill hadn’t yet passed. Specifically, for 2019 can a wheat farm elect to switch to PLC from ARC, and under PLC the target price has been $5.50 will that change? It sounds like after a couple of years into the new bill a farmer can switch each year between ARC and PLC. Some details if you have them would be nice.”
The good news is that the 2018 Farm Bill actually did go into law in 2018. Farmers will have the option to elect either ARC or PLC for the 2019 and 2020 crop (locked in for those two years). Starting in 2021 and through 2023, the farmer has the ability to switch elections if they so choose.
The reference price remains at $5.50. There is an mechanism that can adjust the reference price up a maximum of 15% during the five year period. It is based on an Olympic moving average and for wheat, there is almost no chance of it changing from $5.50.
Almost all farmers will likely change their ARC election to PLC for at least the 2019-2020 crop years. There may be some specialty crops that may want to stay with ARC, but those will be very few.
The farmer is allowed to update their payment yields for PLC. Also, if the farmer did not plant a crop that is eligible for ARC or PLC from 2014-2018 they will be unable to collect any ARC or PLC payments under the 2018 Farm Bill.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
What about corn/soybean farmers? Should they be looking at changing from ARC to PLC for 2019-2020 crop years?